Mortgage of land — the essentials

A mortgage is a transaction by which a legal interest or an equitable interest in real or personal property is given as security for the repayment of a debt or performance of another obligation.

Some attributes are fundamental to the existence of a mortgage. This guidance note outlines the characteristics of a mortgage of land, and explains the categories of real property mortgages as well as the importance of distinguishing, for example, a legal mortgage from an equitable mortgage.

Legal practitioners should be aware that each Australian jurisdiction has a prescribed form which must be used if a mortgage is to be registered, and the particular requirements in relation to how a mortgage lodged for registration must be signed are also prescribed in each state and territory, as outlined in this guidance note.

This guidance note also provides an overview of the memorandum of common provisions, also known as the mortgage memorandum.

See Mortgage of land — the essentials.

Determining the type of mortgage: registered vs equitable

There are a number of reasons why it is important for legal practitioners to determine whether a mortgage is, or should be drafted as, a legal mortgage or an equitable mortgage, as explained in this guidance note.

With regarding to a legal mortgage, this guidance note includes information that would assist legal practitioners in preparing a mortgage in registrable form each jurisdiction. Also included is commentary regarding the nation mortgage form.

With regards to an equitable mortgage, this guidance note explains, among other things, what is an equitable mortgage, when legal practitioners may encounter it, and possible ways of granting an equitable mortgage.

See Determining the type of mortgage: registered vs equitable.

Selected key provisions in a mortgage memorandum — part one

A mortgagee can register a document containing clauses, which a mortgagee, as a matter of general practice, would require to include in all of its mortgages. This document is called a memorandum of common provisions, or it is more simply referred to as the mortgage memorandum. This enables the bulk, if not all, of the conditions of the mortgage, to be incorporated by reference rather than repeat them in every mortgage.

This guidance note outlines matters relating to a mortgage memorandum that legal practitioners need to be familiar with, and looks at two selected key provisions in a mortgage memorandum by explaining their importance, providing sample wording as reference, and providing practice tips for drafting or reviewing them. The selected two key provisions are the acceleration clause, and the early repayment clause.

See Selected key provisions in a mortgage memorandum — part one.

Selected key provisions in a mortgage memorandum — part two

This guidance note looks at a further four selected key provisions in a mortgage memorandum — the charging clause, the provisions relating to the appointment of a receiver by the mortgagee, the provisions relating to a grant by the mortgagor to the mortgagee of a power of attorney, and the provisions relating to the creation of an equitable mortgage. Sample wording and practice tips are included to assist legal practitioners in their understanding of the concepts and the application in practice.

See Selected key provisions in a mortgage memorandum — part two.

Selected key provisions in a mortgage memorandum — part three

A legal practitioner may be instructed by a mortgagee client to draft a mortgage memorandum, or by a mortgagor (or borrower, or guarantor) client to review a mortgage memorandum. It is useful to be familiar with the key provisions of this document, so of which are set out in this guidance note.

See Selected key provisions in a mortgage memorandum — part three.

Negotiating mortgage terms

The focus of this guidance note is negotiating covenants that may be of concern.

A covenant is an agreement creating an obligation contained in a deed or land title. Generally, promises in a mortgage are referred to as covenants. There are a number of covenants that may be found in the mortgage (or in a collateral document, such as the loan agreement) that may be of particular concern to a mortgagor, and which the mortgagor might seek to have removed before entering into a mortgage transaction.

This guidance note identifies the common examples of such covenants, and assists legal practitioners to negotiate them via the provision of commentary and practice tips.

See Negotiating mortgage terms.

Drafting Code-regulated mortgages

The Nation Credit Code (the Code) and the National Consumer Credit Protection Act 2009 (Cth) which established the Code, heavily regulates the making of loans, and therefore the drafting of the relevant mortgages, governed by the Code.

This guidance notice provides an overview of the Code, and focuses on the Code’s impact on the drafting of mortgages. A number of significate implications are listed for legal practitioners’ reference, including those specific to mortgages. Some of the key requirements with respect to the documentation for Code compliance are provided in summary form which legal practitioners will find relevant and useful.

See Drafting Code-regulated mortgages.

The “all monies” approach to drafting mortgages that secure loans

A common approach to drafting mortgages that secure loans is the “all monies” mortgage approach, which involves the mortgage not specifying a particular debt to be secured, but rather, stating that “all monies owing by the mortgagor to the mortgagee” are secured by the mortgage. Typically, these mortgages have the great majority of their terms contained in a lengthy registered memorandum. Usually, matters such as the amount, term and interest rate for the loan that is being secured by the mortgage will not appear in an “all monies” mortgage, but are left to be dealt with in a separate loan agreement.

Legal practitioners are very likely to encounter “all monies” mortgages in practice. This guidance note considers some practical aspects of using the “all monies” mortgage approach by exploring the pros and cons of “all monies” mortgages, to assist legal practitioners in drafting, reviewing or advising on such mortgages.

See The “all monies” approach to drafting mortgages that secure loans.

Rural mortgages and farm debt mediation

Farms are typically located in rural areas, and most farmers would have, or have had, a mortgage. The most common scenario is that a loan, secured by a mortgage, is needed for funds to purchase the farm, to provide finance for carrying on farming activities, or to purchase livestock or farming equipment.

The ordinary laws of creditor and debtor, and of mortgagee and mortgagor apply to the provision of finance by a bank or other lender to a person engaged in agricultural production. However, some Australian jurisdictions have legislation that sets out certain procedures to be followed where issues arise in relation to a farmer’s inability to meet his or her obligations under a mortgage. For example, in New South Wales, this is the Farm Debt Mediation Act 1994 (NSW), and in Victoria, the relevant legislation is the Farm Debt Mediation Act 2011 (Vic). This guidance note outlines the relevant legislation so legal practitioners can be aware of them when advising on matters relating to rural mortgages.

See Rural mortgages and farm debt mediation.