Q&As

Can obligations be protected with a legal charge if there is no monetary value in the obligation being secured?

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Produced in partnership with Desmond Kilcoyne
Published on LexisPSL on 11/04/2018

The following Property Q&A Produced in partnership with Desmond Kilcoyne provides comprehensive and up to date legal information covering:

  • Can obligations be protected with a legal charge if there is no monetary value in the obligation being secured?

In Santley v Wilde, Lindley M.R. stated:

‘…a mortgage is a conveyance of land…as a security for the payment of a debt or the discharge of some other obligation for which it is given. This is the idea of a mortgage: and the security is redeemable on the payment or discharge of such debt or obligation, any provision to the contrary notwithstanding. That, in my opinion, is the law. Any provision inserted to prevent redemption on payment or performance of the debt or obligation for which the security was given is what is meant by a clog or fetter on the equity of redemption and is therefore void…’

There are therefore several fundamental features of mortgage:

  1. a personal ‘obligation’ owed by the mortgagor to the mortgagee

  2. an agreement by the mortgagor to giving ‘security’ to the mortgagee that the obligation will be discharged, and

  3. the creation of a mortgage by the mortgagor in favour of the mortgagee as security

The concept of ‘security’ is therefore central. In this connection, Browne-Wilkinson VC observed in Bristol Airport plc v Powdrill:

‘[It is submitted that]…“security” is created where a person (“the creditor”) to whom an obligation is owed by another (“the debtor”) by statute or contract, in addition to the personal promis

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