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Equity of Redemption

land, jones, mortgage, brown, redeem, money and mortgages

EQUITY OF REDEMPTION. The right which a mortgagor has to redeem his pro perty. For example, if John Brown is the absolute owner of a piece of land, and he mortgages the land to John Jones to secure the repayment of a loan which Jones has granted to him, Jones obtains by that deed the legal estate in the land, and if Brown fails to repay the money at the proper time, Jones becomes, according to law, the owner of the land. The Court of Equity, however, • regards Jones' title to the land as being subject to Brown's right to repay the money. Brown is the real owner of the land, and though Jones may, by law, become the full I owner (through Brown's failure to pay at the appointed time), Brown has, by equity, the " equity of redemption " in the land, that is, the right to redeem it upon payment of the money due, with interest and certain charges incurred by Jones in protecting his security. In the case of a legal mortgage, after the date of payment has gone past, unless Jones has demanded re-payment of the money lent, Brown must give six months' notice of his intention to exercise his equity of redemption. In the case of an equitable mortgage Brown can repay at any time without notice.

So long as Brown holds the equity of redemption he may sell the land, or borrow more money upon the land, if the value will admit of it, by means of a further mortgage. If 1.e sells it, the purchaser obtains the land, subject to the mortgage to Jones. If he raises an additional loan from Smith upon mortgage of the land, it is a second mortgage and rinks after the one to Jones ; and if there is sufficient margin of value he may borrow more money in other quarters and grant still further mortgages. It should be noted, however, that the legal estate in the land was conveyed to Jones in the first mortgage, and that any subsequent mort gages convey only an equitable estate in the property. All mortgages .subsequent to the first are called equitable mortgages.

If Blown fails to pay the interest due under the mortgage to Jones, and Jones enters into possession of the land and con tinues in possession for twelve years, without giving any acknowledgment in writing that Brown is still entitled to the equity of redemption, Jones obtains complete owner ship of the land and Brown's right to redeem the land is extinguished.

Brown will also lose his equity of redemp tion if the mortgagee forecloses. (See FORECLOSURE.) if Jones is obliged to sell the land in order to obtain repayment of the debt, Brown thereby loses his equity, though, if the land realises more than is required to satisfy Jones, the balance must be handed to Brown.

By the Conveyancing and Law of Property kct, 1881 Section 15. (1) Where a mortgagor is entitled to redeem, he shall, by virtue of this Act, have power to require the mortgagee, instead of re-conveying, and on the terms on which he would be bound to re convey, to assign the mortgage debt and convey the mortgaged property to any third person, as the mortgagor directs ; and the mortgagee shall, by virtue of this Act, be bound to assign and convey accordingly.

(2) This Section does not apply in the case of a mortgagee being or having been in possession." A mortgagor is entitled, as long as his right to redeem subsists, at his own cost, to inspect and make copies of, or extracts from, the documents of title relating to the mortgaged property. (Section By Section 17 :— • (1) A mortgagor seeking to redeem any one mortgage, shall, by virtue cf this Act, be entitled to do so, without paying any money due under any separate mortgage made by him, or by any person through whom he claims, on property other than that comprised in the mortgage which he seeks to redeem.

" (2) This Section applies only if and as far as a contrary intention is not expressed in the mortgage deeds or one of them." The value of an equity of redemption as a security depends upon the value of the property and the amount of mortgages which are in existence. The margin in some cases between the value and the mortgages may be very considerable, hut in many instances the equity is valueless as a security. (See MORTGAGE, TITLE DEEDS.)