Property Law Assignment: Mortgage, Possession, Covenants Analysis

This report addresses several key areas of property law. It begins by analyzing the appropriateness of foreclosure as a remedy for a defaulted mortgage, contrasting it with the power of sale, and outlining the procedures involved. The report also examines the rights of mortgagors and mortgagees,...Read More

Question 3(a)
MEMO
TO: MS PAM PERCY
FROM: JOHN WALKER
DATE: 26TH MAY 2018
SUBJECT: ADVICE ON FORECLOSURE AS A REMEDY TO A DEFAULTED
MORTGAGE
In this case scenario, foreclosure is not the appropriate remedy for this particular type of a
defaulted mortgage. The mortgage for loose loans was the second one to be registered. There is
the other lager mortgage for Which Bank which was the first to be registered. Foreclosure
involves the transfer of property title from the mortgagor to mortgagee. Transfer will involve a
lot of conveyancing formalities as opposed to power of sale where the mortgagee just sells the
property in his possession but under the title and ownership of the mortgagor. The mortgagee
first has possession of titles as security but upon default the ownership gets transferred to the
mortgagee. Foreclosure therefore is not the right remedy. I would rather advice the our client the
mortgagee to exercise his statutory power of sale because upon sale by auction the excess value
after payment of our loan will be used to any other mortgages according to order of priority.
Procedure for foreclosure
Upon default for a period of six months, a registered mortgagor, his agent or solicitor may make
an application for foreclosure to the registrar general. The application has to be made through an
approved prescribed form for an order of foreclosure.1
Before the application is made, the mortgagee has to serve the mortgagor with a written notice in
accordance with section 170 of the Conveyancing Act 1919. The written notice must also be
served to all registered mortgagees who are lesser the applicant mortgagee in terms of priority.
Each caveator, though unregistered is also entitled to an interest in the mortgaged property.2
1 Real Property Act 1900 s 61(1)
2Ibid s 61(1A)

The application for a foreclosure order has to state that there has been a default of six months for
total sum due including interest charged. The application will also state that the property is to be
sold through a public auction by the aid of a licensed auctioneer. The application will state that
the money secured at the highest bid after an auction sale was insufficient to cater for the loan
and other accrued expenses arising from the sale of land. The final content of the application will
state that the written notice of the mortgagee to make a foreclosure order has been served
correctly through the specified procedure of service under section 170 of the Conveyancing Act
of 1919.3
The licensed auctioneer who is to carry out the sale of property must attach a certificate to the
application which will be accompanied by other proofs of issues mentioned by the applicant as
required by the Registrar-General.4 All the information provided by the applicant must be
verified through a statutory declaration.5
After the application has been approved by the registrar as having met all the requirements, the
Registrar-General will then issue a foreclosure order to the applicant or direct the applicant to
offer the mortgaged land for sale as directed by the registrar general. The effect of a foreclosure
order issued under by the Registrar-General is that it will vest all the mortgaged property
ownership rights in the mortgagee who applied for the order. The vesting of ownership right in
such a case is free from any interests of a mortgagee who ranks lower than the applicant in terms
of priority or any caveator.
Question (b) (I)
Malcolm and Lulu are entitled to object because for a power of sale to be exercised effectively
there must be a written notice sent in the prescribed form to the mortgagor. Furthermore the
property in this case is to be sold at a value lower than the initial market prices hence the sale
was not made in good faith.
(ii) Where the sale was not to be objected by the mortgagor, Bill will acquire a good title. Under
statutory power of sale, the mortgagee executes and completes all the conveyancing documents
of transfer and passes a valid title to the purchaser as if it was done by the property owner. The
3 Ibid s 61(2)
4 Ibid s 61(3)
5 Ibid s 61(4)

title passed by the mortgagee to the purchaser is therefore valid.6 After purchase the purchaser is
not responsible for any loss or misapplication or distribution of funds to other mortgagees having
interest in the property7
(iii) The proceeds realized from the sale of the property shall be used to first pay for all the
expenses incurred in the course of making the sale. The second part will be paying the amount of
loan due to the mortgagee who has sold the property. Lastly, the money will be used to
compensate other mortgages and charges basing on their order of priority. The surplus amount is
then paid to the property owner who is the mortgagor.8 For this case scenario, loose loans will
deduct their amount then pay Which Bank then the caveator. Where there are any surplus they
will revert back to Malcolm and Lulu.
Question 2
The doctrine of adverse possession as was held by the common law ought to be reformed.
According to the doctrine a trespasser staying on land uninterruptedly and peaceful for a
continuous period of 12 years and more could claim ownership for such land. The law of adverse
possession if left the way it is in the doctrine of common law it could result to unjust enrichment
whereby squatters may tend to grand land from unsuspecting registered owners. In Australia,
states such the Northern Territory and Australian Capital Territory do not have adverse
possession included in their property law. Tasmania is however a notable Australian territory that
has tremendously Codified the doctrine of adverse possession into its laws.9 In Tasmania,
Adverse possession doctrine has been reformed by the statutory provisions and the doctrine
wholly depends on the circumstances provided for in the statutes and not purely under common
law.10
The Limitation Act of New South Wales still has the period for claiming adverse possession as
12 years. The common law doctrine of adverse possession ought to be reformed to avoid cases of
land theft and grabbing. Legislators have to modify the doctrine and codify it into the modern
Torrents system. The reforms will prevent robbing of land from unsuspecting owners. The
6 Real property Act 1900 s 58
7 Ibid s 58(2)
8 Ibid 58(3)
9 Land Titles Act 1980 s 138T
10 Land Tiles Act 1980 s 138V

reforms will also ensure that genuine claimers of land through adverse possession get their
proprietary rights and interests. It is therefore important to modify and codify this doctrine so as
to set standards and more qualifications required for one to succeed under such a claim.
PART C 1
Victorian state is currently undergoing modification and extinguishment of some restrictive
covenants. Most of the restrictive covenants were entered into by private individuals longtime
ago. The need and usage of some covenants is no longer relevant to the beneficiaries under the
current state of Melbourne city. The original purpose of single dwelling restrictive covenants is
increasingly becoming obsolete due to the increasing population density. Most of the single
dwelling restrictive covenants were meant to preserve the neighbourhood character of the areas
where they operate.
In Re Miscamble’s Application11 and Re Pivotel Pty Ltd12 the court in both judgements held that
the requirements of the neighbourhood character will be determined as at the date of the case
hearing in court and not the date when the single dwelling restrictive covenant was entered into.
In the present day’s Melbourne city needs, neighbourhood character based on obsolete original
purpose of the contract is not an enough reason to warrant the court to refuse modification or
extinguishment of a restrictive covenant. The needs of the covenant are the current needs of the
beneficiary and not the obsolete needs of 1920s that were relevant at that time when the covenant
was formed.
The court will also consider other factors in its attempt to extinguish or modify a restrictive
covenant. Other circumstances considered by the court differs from case to case basis. In Re
Robinson13 the court held that other circumstances include the needs of a public contract formed
between the government and civilians such as planning legislations to cater for the increasing
number of Melbourne residents. In this regard, the court will have to factor in the provisions of
the Planning and Environment Act 1987 and any other local or state planning policies. The
increase in the population demands that the state do some residential houses planning which may
11 Re Miscamble’s Application [1966] VR 596 at 597, 601
12 Re Pivotel Pty Ltd [2000] VSC 264 at [29]
13 In Re Robinson [1972] VR 278 at 282

extinguish some restrictive covenants limiting construction of more than one housing unit so as
to allow more citizens get affordable housing.