There may be exceptional cases in which a borrower desires to give a charge upon a property which is included in a conveyance containing other properties in mortgage, say to Brown. If the property to be charged to the bank is not included in Brown's mortgage, the difficulty may be overcome, if thought desirable, by the deeds being placed in the hands of a trusted party to hold on behalf of Brown as regards the property in mortgage to him, and on behalf of the banker for the portion upon which he has a charge.
Some bankers accept deeds as security and do not take any document of charge, but, as a rule, a banker takes either a legal mortgage (q.v.) or a memorandum of deposit (q.v.). Where the security consists of houses there should be a fire insurance policy and the banker should see, by obtaining the receipts, that the premiums are duly paid.
It has been held that a deposit of title deeds for the purpose of securing a debt, without any document of charge whatever, is an equitable mortgage. The deeds, how ever, must have been deposited expressly as a security in order to give the banker a charge upon the property represented by the deeds. If a borrower should contend that the deeds were left with the banker for some other reason than for security, he may have much trouble to defend his claim. whereas if a memorandum of deposit is taken no such contention could be maintained.
If the principal deeds of a property are deposited it may suffice to create an equi table mortgage on the property, but a banker should not rely upon an imperfect security, and should, as a rule, obtain possession of all the deeds in the customer's possession. An equitable lien may also be created by a written agreement to grant a mortgage.
It should be borne in mind that if, say, Brown deposits title deeds and has already contracted with Jones for the sale of the property to him, Jones has thereby an equit able charge in the property which may rank before the bank's equitable charge, even if the bank had no notice of the sale to Jones.
A vendor has a lien upon the property for any part of the purchase money which remains unpaid, even if the conveyance says it has been paid, but if the purchaser has lodged the deeds with his banker for, an advance the banker's charge will not be disturbed by the vendor's lien.
Deeds may be lodged as security by a person who has only a life interest in the property, and in such a case he can charge the property only to the extent of his life interest (see LIFE TENANT), or they may be lodged by an executor for his own private account when he has a beneficial interest in the property, but the charge is limited to the extent of that interest. (See EXECUTOR.) Upon the death of an owner of leasehold property the legal estate vests in his personal representatives (executors or administrators). Upon the death of an owner of freehold property, since January I, I S9S (by the Land Transfer Act, 1S97), the legal estate vests also in the personal representatives. I f, therefore, title deeds are offered as security by the person to whom the property has been devised by the deceased's will, or, if no will, by the heir-at-law, until the formal assent of the personal representatives has been received, the devisee or heir has only an equitable title. The assent may be given as soon as the representatives are satisfied that the property is not required in con nection with the administration of the estate. But at the expiration of one year
from the death, the heir or devisee may apply to the Court to compel a conveyance of the property to be made to him. (See EXECUTOR.) In the case of copyhold property, where admission is necessary, the title does not vest in the personal representatives.
Where an agent is authorised to deposit title deeds as security, and he exceeds his authority and borrows more than he was empowered to borrow, the principal will be liable for the full amount borrowed, pro vided that the banker was not aware of the extent of the agent's power to borrow. As a rule, however, a banker would require clear evidence of an agent's authority to borrow and of the limits of that authority.
Where a deed is executed under a power of attorney, the power, or an attested copy thereof, should accompany the deed. The death of the donor of a power of attorney revokes it, therefore there should be evidence that the donor was alive when the deed was signed.
By Section 8 of the Real Property Limita tion Act, 1S74, it is provided that no action or suit or other proceeding shall be brought to recover any sum of money secured by any mortgage, judgment, or lien, or otherwise charged upon or payable out of any land or rent, at law or in equity, or any legacy, but within twelve years next after a present right to receive the same shall have accrued to some person capable of giving a discharge for or release of the same, unless in the mean time some part of the principal money, or some interest thereon, shall have been paid, or some acknowledgment of the right thereto shall have been given in writing, signed by the person by whom the same shall be pay able, or his agent, to the person entitled thereto or his agent ; and in such case no such action or suit or proceeding shall be brought but within twelve years after such payment or acknowledgment, or the last of such payments or acknowledgments, if more than one, was given. A mortgagee must, therefore, take action with regard to his security within the twelve years, as ex plained in that Section, or he may lose his right of action altogether. It has been held that an action on the covenant to repay the mortgage debt contained in the mortgage deed must also be brought within the twelve Years.
Where deeds are to be lent to a solicitor, the customer's written authority to lend them should be obtained, and the solicitor should give his undertaking to return them in the same condition.
If the customer desires that the deeds be given up to a solicitor against payment to his credit of a certain sum, or repayment of the overdraft, the authority and undertaking should be worded accordingly.
When the title deeds of a company's property are given as security, whether mortgaged or lodged under a memorandum of deposit, or without any document of charge, the charge so created must be regis tered. (See COMPANIES REGISTRATION OF MORTGAGES AND CHARGES.) 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, an advance is granted by a banker in England upon heritable (real) property in Scotland, the form of charge must conform to the law of Scotland. (See DISPOSITION ABSOLUTE.) (See VALUATION.)