Q&As

Does the maxim ‘once a mortgage always a mortgage’, aligned to the equity of redemption principle, apply to prevent the mortgagee from transferring a property (ie an interest in land) to itself or a connected company? Or is the mortgagor’s only protection against this the mortgagee’s duty to get the best value on sale by a mortgagee, as well as the mortgagor’s right to redeem the charge?

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Produced in partnership with Chris Bryden of 4 King’s Bench Walk
Published on LexisPSL on 24/08/2020

The following Property Q&A Produced in partnership with Chris Bryden of 4 King’s Bench Walk provides comprehensive and up to date legal information covering:

  • Does the maxim ‘once a mortgage always a mortgage’, aligned to the equity of redemption principle, apply to prevent the mortgagee from transferring a property (ie an interest in land) to itself or a connected company? Or is the mortgagor’s only protection against this the mortgagee’s duty to get the best value on sale by a mortgagee, as well as the mortgagor’s right to redeem the charge?

The purpose of a mortgage is to provide security to a lender against a loan, meaning that if the borrower defaults the mortgagee can exercise the power of sale to recover their monies. The maxim ‘once a mortgage always a mortgage’ is invoked where a mortgagee rather than enforcing the power of sale seeks to rely upon a term in the mortgage requiring that the borrower on default instead must transfer the property to the mortgagee. A mortgagor is entitled to exercise the equity of redemption, meaning that they are entitled to redeem the property once the debt has been discharged, or to retain the surplus following the exercise of a power of sale. An arrangement whereby the mortgagor in default must transfer the property to the mortgagee is said to be a clog on the equity of redemption.

In Jones v Morgan, it was held that

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