CREATION OF SUCCESSIVE LEGAL MORTGAGES USING THE SAME PROPERTY AS SECURITY

This occurs when the same property is mortgaged twice or more in security transactions. The possibility of creating successive legal mortgages over the same property depends on where the property is located.

(a)In the Conveyancing Act States: successive legal mortgages cannot be created over the same property. This is because in the CA States, the applicable law for the creation of legal mortgage is the common law, and at Common Law successive legal mortgages could not be created overt the same property. The rational behind this is that where a mortgagor creates a legal mortgage, he transfers his legal title in the property to the mortgagee and what he has left is mere equity of redemption, which can at best only be used to create an equitable (not a legal) mortgage.

(2)In the PCL States: successive legal mortgages can be created over the same
property.

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This is because under the PCL, where the mortgagor creates a legal mortgage by sub-demise, he retains his legal interest, which he may subsequently mortgage to a second mortgagee by executing another legal mortgage. But section 109 (2) (b) provides a qualification to the mortgagor’s right to create successive legal mortgage over the same property thus:

“The term to be taken by a second or subsequent mortgagee shall be one day longer than

the term vested in the first or other mortgagee whose security ranks immediately before that of the second or subsequent mortgagee, if the length of the last-mentioned term permits, and in any case for a term less by one day at least than the term expressed to be assigned”

The arrangement permitted by section 109 (2) (b) PCL would have been legally impossible because it is in conflict with the Common Law doctrine of interesse termini, which states that it is not possible to create a term of years in a property to commence at the expiration of another term of years created in respect of the same property. Section 163, PCL has however abolished the doctrine of interesse termini, hence making creation of successive legal mortgages over the same property possible in the states wherein the PCL applies.

To be continued with DISTINCTION BETWEEN LEGAL MORTGAGE CREATED BY ASSIGNMENT/SUB-DEMISE & ONE CREATED BY A CHARGE BY WAY OF LEGAL MORTGAGE

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