EQUITABLE MORTGAGE. Where a borrower gives to a lender, as security, the title deeds of his property, without any document of charge, or the deeds with a memorandum of deposit, or even a memo randum of charge without the deeds, it is an equitable mortgage. An equitable mort gage does not convey the legal estate to the lender, as does a legal mortgage, but in the memorandum which usually accompanies the deposit of deeds, the borrower, as a rule, promises to grant a legal mortgage when requested to do so.
Where a legal mortgage has been granted upon a property and the borrower raises further money by a second or a third mort gage, those subsequent charges, whether by deed or otherwise, are merely equitable mortgages.
Where a person has only an equitable estate in land as, for example, where the legal estate is vested in a trustee for his benefit, any charge that he gives upon that estate will only be an equitable mortgage.
An equitable charge may he created by a written agreement to grant a mortgage, or by sending the deeds to a party for the purpose of having a legal mortgage prepared, or by a written promise to lodge certain deeds as security.
An equitable mortgagee by deposit of title deeds, when he desires to realise his security, requires to go to the Courts for power to sell, or to appoint a receiver or to foreclose, or to enter into possession. If, however, he obtains a legal mortgage be has power to sell or put in a receiver without applying to the Courts.
Where there are two equitable mortgages on the same property, priority will be given to a second equitable mortgagee who holds the title deeds, if the first equitable mort gagee was negligent in not retaining posses sion of the title deeds. But if there has not been negligence, priority in order of time prevails. If a second equitable mortgagee made his advance, without knowledge of the prior equitable charge, he may, in most cases, secure priority by obtaining a legal mortgage.
Instead of an order for foreclosure the Court may, if it thinks fit d rect a sale of the mortgaged property ; and in an action for re 'emption the mortgagor may have an order for sale, or for sale or redemption in the alternative. (See Section 25 of the Con veyancing and Law of Property Act, 1881. under LEGAL 111 ORTGAG E.) For the purposes of the Stamp Act, 1891, " equitable mortgage " means an agreement or memorandum, under hand only. relating to the deposit of any title deeds or instruments constituting or being evidence of the title to any property whatever (other than stock or marketable security), or creating a charge on such property. (Section 86, s.s. 2. See MORTGAGE.) Mortgages subse quent to the first legal mortgage, are, legally, equitable mortgages, but it should be noted that these equitable mortgages are not included in the definition of " equitable mortgage " under the Stamp Act.
A F.econd mortgage by deed. (The duty is the
A memorandum of deposit I under seal M RIGAGE).
A memorandum of deposit of For deeds under hand (whether tonal part of a principal security or col- I fantinotf lateral security) . . . . cured. It.
The stamp on a memorandum of deposit of certificates is sixpence for any amount.
If a power of sale is included in a memoran dum under hand it requires to be stamped the same as a mortgage.
A letter or memorandum of deposit must be stamped within thirty days of its date, or, if received from abroad, within thirty days of its receipt in this country.
By an Inland Revenue Circular : The instruments given to banks to secure overdrafts are almost invariably worded as securities for all sums due or to become due. In the case of equitable mortgages, every security, whether primary or collateral, is chargeable with the duty of Is. per cent. on the highest amount at any one time due in respect of the indebtedness secured to the bank up to date (i.e., within thirty days) and with additional duty from time to time, if the indebtedness should subsequently reach, at any one time, a higher total. In no case can the value of the security deposited be taken as the basis of assessment for mortgage duty. (See copy of the Circular under MORTGAGE.) For instance, if the several different properties are lodged as security, with a separate memorandum for each to cover the overdraft, each memorandum requires to be (according to the above Circular of the Inland Revenue) stamped to cover the full amount secured.
A memorandum, unless a fixed amount has been inserted in it, may be further stamped to cover an additional overdraft. but the Stamp Authorities may, before stamping it with the extra stamp, require the banker to state what has been the highest amount of overdraft and the date when it occurred. It must be stamped for the additional amount within thirty days of the extra overdraft being taken.
If a fixed amount is inserted in the memorandum of deposit, the security cannot be made available for any greater amount than that stated in the document. If the property is to form a security for more than that amount, a fresh memorandum must be taken.
If a memorandum of deposit is unstamped or insufficiently stamped, it cannot be accepted as evidence in a Court of Law or Equity. An instrument which has not been stamped within the prescribed time may be stamped at any time afterwards under a penalty of Neglect to stamp a memor andum does not affect the validity of it.
In Scotland, a deposit of title deeds, either with, or without, a memorandum of deposit, does not create an equitable mortgage, as in England. If, therefore, a banker in England advances against real property in Scotland, the form of charge must conform to the law of Scotland. (See DISPOSITION ABSOLUTE, MORTGAGE, TITLE DEEDS.)