mortgagor in possession has, as against every encumbrancer, power to grant any lease of the mortgaged property, provided the lease ls one authorised by the Conveyancing Act, 1881 ; and a like power, as against all prior encumbrancers, is enjoyed by a mortgagee in possession. The leases so authorised by the Act are—(1) An agricultural or occupation lease for any term not exceeding twenty-one years ; and (2) a building lease for any terni not exceeding ninetv-nine years. 13ut every such lease must be made to take effect in possession not later than twelve months after its date ; must reserve the best rent that can reasonably be obtained, regard being had to the circumstances of the case, but without any fine being taken ; and nmst contain a covenant by the lessee for payment of the rent, and a condition of re-entry on the rent not being paid within a time therein specified not exceeding thirty days. A counterpart must also be executed by the lessee and delivered to the lessor. Every building lease granted by a mortgagor or mortgagee in possession is required to be made " in consideration of the lessee, or some person by whose direction the lease is granted, having erected, or agreed to erect within not more than five years from the date of the lease, buildings, new or additional, or agreeing to improve or repair buildings within that time, or having executed, or agreeing to execute, within that time, on the land leased, an improvement for or in connection with building purposes."' In a building lease a peppercorn rent, or a nominal or other rent less than the rent ultimately payable, may be made payable for the first five years, or any less part of the term. In the case of a lease by the mortgagor, he must, within one month after making the lease, deliver to the mort gagee, or, where there are more than one, to the mortgagee first in priority, a counterpart of the lease duly executed by the lessee; but the latter is not concerned to see that this provision is complied with. There is nothing, however, to prevent the mortgage deed from conferring on the mortgagor or mortgagee any further or other powers of leasing.
Powers of power of sale by the mortgagee is not usually expressly contained in the mortgage deed, the parties as a rule relying upon the power of sale attached thereto by statute. And not only is it a power of sale which, apart from any special contract, the Conveyancing Act confers upon a mortgagee. It also confers powers relating to the insurance of the mortgaged premises, the appointment of a receiver, and the cutting of timber. These powers, however, may be varied or extended by the mortgage deed, and have effect subject to the terms of the deed and to the provisions contained therein.
mortgagee's power of sale is thue described by the Con.
veyancing Act, 1881: "A power, when the mortgage money has become due, to sell, or to concur with any other person in selling, the mortgaged property, or any part thereof, either subject to prior charges or not, and either together or in lots, by public auction or by private contract, subject to such conditions respecting title, or evidence of title, or other matter as he (the mortgagee) thinks fit, with power to vary any contract for sale, and to buy in at auction, or to rescind any contract for sale, and to resell, without being answerable for any loss occasioned thereby." But a mortgagee can only exercise this power of sale subject to certain statutory regulations. And it is not exercisable by an equitable mortgagee whose security is not in the form of a deed. The regulations provide that the power of sale shall not be exercisable unless and until—(1) Notice requiring payment of the mortgage money has been served on the mortgagor, or one of several mortgagors, and default has been made in payment of the mortgage money, or of part thereof, for three months after such service ; or (2) some interest under the mortgage is in arrear and unpaid for two mouths after becoming due ; or (3) there has been a breach of some provision contained in the mortgage deed or in the Conveyancing Act, and on the part of the mortgagor or of some person concurring in making the mortgage, to be observed or performed, other than and besides a covenant for payment of the mortgage money or interest thereon. In the case of a mortgage of real property, it is
sufficient if the above-mentioned notice is affixed to or left on the mortgaged property. In other cases the service must be strictly in accordance with the statutory regulations, unless the mortgagee has been wise enough to specially vary them in this respect in the deed of mortgage. The deed could stipulate, for example, that service shall be sufficient if made at a specified address, the mortgagor having power reserved to him to change that address after sufficient notice to the mortgagee. A mortgagee exercising this power of sale has power to convey by deed the property sold ; and the title of the purchaser from him cannot be impeached on the ground that no case had arisen to authorise the sale, or that due notice was not given, or that the power was otherwise improperly or irregularly exercised ; but any person damni fied by an unauthorised, or improper, or irregular exercise of the power will have his remedy in damages against the person exercising the power.
It is very important that both mortgagor and mortgagee should clearly know the manner in which the money arising from a sale should be dealt with. Upon this matter section 21 (3) of the Conveyancing Act, 1881, enacts as follows :—" The money which is received by the mortgagee arising from the sale after discharge of prior encumbrances to which the sale is not made subject, if any, or after payment into Court under this Act of a sum to meet any prior encumbrance, shall be held by him in trust to be applied by him, first, in payment of all costs, charges, and expenses properly incurred by him, as incident to the sale or any attempted sale, or otherwise; and secondly, in discharge of the mortgage money, interest, and costs, and other money, if any, due under the mortgage ; and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorised to give receipts for the proceeds of the sale thereof." It will be seen, therefore, that after the sale of the mortgaged property the mortgagee is a trustee of the proceeds for the discharge of the encumbrances and, finally, for the payment of any balance to the mortgagor. It is also useful to note in this connection that the power of sale can be exercised by any one for the time being entitled to receive and give a discharge for the mortgage money, such as a transferee of the mortgage or an executor of the mortgagee. And the statutory power of sale does not affect the right of foreclosure. Neither a mortgagee, nor his executors, administrators, or assigns, is liable for any involuntary loss happening in or about the exercise or execution of the power of sale, or of any trust connected therewith. As soon as the power of sale becomes exercisable, the mortgagee can recover from any person all the debts and documents relating to the property, or to the title thereto, which a purchaser under a power of sale would be entitled to ; but he cannot of course recover these from any one who has an interest in the mortgaged property in priority to the mortgage. The receipt in writing of a mortgagee is a sufficient discharge for any money or securities arising out of or comprised in his mortgage ; and a person paying or transferring to the mortgagee is not concerned to inquire whether any money remains due under the mortgage.