Legal mortgages and legal charges

The following Property practice note provides comprehensive and up to date legal information covering:

  • Legal mortgages and legal charges
  • Legal mortgages
  • Legal mortgage by demise
  • Cesser of term and reconveyance
  • Registered land
  • Legal charges

Legal mortgages and legal charges

The terms ‘mortgage’ and ‘charge’ are often used as though they are interchangeable. Strictly speaking, they are not. Both are security for the payment of a debt or other obligation. However, while a mortgage confers an interest in property, a charge is the appropriation of property without giving the creditor either a general or special interest in, or possession of, the subject of the security. The classic description of a mortgage is ‘a conveyance of land…for the payment of a debt or the discharge of some other obligation for which it is given’.

The difference between the two is blurred by the reference to a 'charge by way of legal mortgage' in the Law of Property Act 1925. The Law Commission has acknowledged that the area of law is too complex and made recommendations for all existing methods of mortgaging and charging land to be abolished and two new forms of mortgage (formal and informal) to be introduced, but this has not, as yet, been acted on.

Legal mortgages

A legal mortgage of land or an interest in land must be created by:

  1. demise for a term of years absolute, subject to a provision for cesser on redemption, or

  2. charge by deed expressed to be by way of legal

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