Chapter 10 - Property law: mortgages, leases and licences. At the end of this chapter you should understand: the definition of the term ‘mortgage’ and the distinction between old title mortgages and Torrens system mortgages, the remedies available to a mortgagee if a mortgagor defaults, the definition of a personal property security,...
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by Barron & Fletcher Slides prepared by Kay Fanning
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Property law:
mortgages, leases and
licences
Chapter 10
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by Barron & Fletcher Slides prepared by Kay Fanning 10-3
Definitions
• Ownership: Person has legal rights
over the property.
• Possession: Person has physical
control over the property.
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Property
- Items attached to land
- Leases
(not real property) possessed (tangible objects)
possessed (intangible objects)
» interest in partnership
» copyright
» shares
» trademarks
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Real property - attachments
(part of real property for sale
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Interests in land
• Doctrine of Tenure: Absolute ownership
not possible as all land owned by Crown.
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Contract in the form of a lease for a fixed period
between two parties:
- lessor (landowner)
- lessee (tenant)
Native title to land
Title enjoyed by descendants of the original inhabitants.
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Estate in land – freehold
A (Fee simple of land) A (Fee simple of land)
on B’s death
B (Life estate of land) B (Life estate of land)
on B’s death
C
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Definitions
• Lease: An interest in land given by a
landlord to a tenant, for a fixed period of time, granting exclusive possession.
eg lease of shop, house
• Licence: A contractual right (unable to be
revoked) to do something on land that
would otherwise be illegal.
e.g sell alcohol
manufacture a product under patent
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Comparison of lease
and licence
LEASE LICENCE Can be registered on
title Cannot be registered on title For a set period Can be revoked at any
time Right to sublet, assign
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Types of lease
• Fixed term lease is for a fixed period.
• Periodic tenancy continues indefinitely
from one period to another (ending by
notice given by either party).
• Tenancy at will is without any fixed
duration with the consent of the landlord, requiring no rent repayments (ending by
notice given by either party).
• Tenancy at sufferance occurs where the
tenant remains in possession of premises after the expiry of the previous tenancy,
without the consent of the landlord, and
does not pay rent.
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Covenants of landlord
and tenant
Covenants by the
tenant
• To pay the rent
• To keep and deliver up the
premises to the landlord at
the end of the term in a
good state of repair
• Permit landlord to enter to
inspect
• Permit landlord to re-enter
if fail to pay rent
• Not to assign or sublet
• To allow the tenant quiet possession of premises (without interference)
• Pay rates and taxes except those expressly the duty of the tenant
• Repair the premises
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Comparison of leases
COMMERCIAL LEASE RESIDENTIAL LEASE (TENANCY)
Usually longer duration Duration usually 6-12 months
Extended leases may be
registered on title Not registered on title
Provision for rent escalation Bond lodged with rental bond
authority Purpose of lease specified Residential purpose only
Rates and taxes may be paid by
tenant Standard form lease agreement
May have option to renew lease Residential Tenancy Tribunal settles
dispute Procedure for recovery of
possession of premises Documentation
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Land title
• Old system land: Title based on the
production of all deeds transferring or conveying land from one person to
another.
• Torrens title: Title based on
transactions recorded on one
certificate of title creating
indefeasibility of title.
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Indefeasibility of title
• Means that the person who is
registered on the title as owner has
an indefeasible or unquestionable
title to the land.
(State guarantees the correctness of information contained on the title and provides compensation under an
assurance fund.)
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Interests in land
• Legal Interests: Concerned with
ownership (and controls associated with
ownership).
• Equitable Interests: Concerned with those
entitled to the benefits of the land.
(Relevance: The holder of an equitable
interest cannot enforce their claim against
an innocent third party purchasing the legal interest in the land.)
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Examples of legal and
equitable interests
LEGAL
with trustee Beneficiary who is to receive the
benefits
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Co-ownership of land
Unity of possession
Each person has interest over the
whole of the land, but not to the
exclusion of other owners
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Types of tenancy
COMMON POSSESSION Unity of Possession Unity of Possession
TITLE Unity of Title (i.e one document) Varied
INTEREST Unity of Interest (i.e same type of
interest in land)
eg fee simple
Distinct and fixed
DISPOSAL All parties dispose of property at once
or Right of Survivorship (when one party dies, interest reverts to other parties)
Any party can dispose of his/her share during life or,
on death, via a will, independent of other parties
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Securities for loans
• A mortgage is a contract in which a
borrower (the mortgagor) gives the lender (the mortgagee) his/her real
property as security for a loan.
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Mortgages over real property
Mortgagor transfers
title to mortgagee Mortgagee registers on title
(Can be more than one)
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Remedies in the event of
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Power of foreclosure
Mortgagee can take over the property if mortgagor defaults.
Major requirements:
• Default of at least six months
• Failure to achieve mortgagor’s debt at public auction
• Shortfall is not recoverable from
mortgagor.
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Common law duties
Common law duties of a mortgagee
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Bill of sale
• A contract allowing personal property
to be used by the grantee (borrower)
as security for a loan from the grantor
(of the bill of sale).
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Security interests
• A pledge is a transfer of possession
(not ownership) of a chattel, giving
the lender (pledgee) the right to sell
the pledged goods if the borrower
(pledgor) defaults by the stipulated
date, or within a reasonable time (if no date stipulated).
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Security interests
• A lien gives a creditor a right to possess the debtor’s property
until the debt is paid.
• A particular possessory lien is the right of one person to
retain possession of goods of another until the debt associated with those goods is paid.
• A general possessory lien is the right of one person to retain
possession of goods (lawfully obtained) of another until the debt owing is paid.
• An equitable lien is the right to have the property of another
utilised to ensure payment of a debt, without possession of the property.
• Maritime liens are specifically binding on a ship and its cargo
and freight
• Statutory liens are created by an Act of Parliament.
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Guarantee
• A contract where one party (the
guarantor) promises another party
(the creditor) to carry out the
obligations to another (the debtor),
should the debtor default on their
obligations
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Indemnity
• A contract where one party (the
indemnifier) undertakes to become
liable to another against any loss
arising out of a transaction with a
third party.
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Bailment
• Occurs when possession (not
ownership) of goods is transferred
from one person (bailor) to another (bailee), e.g pledge.
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Duties and liabilities of a bailee
Duties of a bailee
• To return the goods to the bailor at the expiry of the
bailment
• Not to misuse the goods
• To retain possession of the goods
• To take (reasonable) care of the goods
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Duties of a bailor
• Not to interfere with possession of
goods that the bailee has, for the
duration of the bailment
• To ensure quality and fitness of goods for a particular purpose
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For loss or damage of guests’
property, taken into their possession for safekeeping
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Common carrier
A carrier whose business is to carry
goods for any customer requesting this service: