Luật học - Chapter 10: Property law: Mortgages, leases and licences

This is the prescribed textbook for your course.Available NOW at your campus bookstore!Property law: mortgages, leases and licencesChapter 10Learning objectivesAt the end of this chapter you should understand:the definition of the term ‘mortgage’ and the distinction between old title mortgages and Torrens system mortgagesthe remedies available to a mortgagee if a mortgagor defaultsthe definition of a personal property securitythe statutory provisions for the registration of security interest in goodsthe terms ‘pledge’, ‘pawnbroker’, ‘lien’, ‘guarantee’, and ‘indemnity’Learning objectives (cont.)the term ‘bailment’ and its differences from other legal relationshipsthe difference between a gratuitous bailment and a non-gratuitous bailmentthe duties of bailees and bailors of goodsthe ways that a bailment may be terminatedthe liability of common carriers and innkeepers.IntroductionPeople can hold an interest in real property.Often money is lent and real property is used as security for the loan.The resulting contract is called a mortgage.If personal property is used to secure a loan, a bill of sale is prepared.Alternatively, goods may be held by way of security. Bailment is the transfer of goods from one person to another with the intention that the goods will be returned to the owner at a later date.Distinction between real property and personal propertyReal property Land Items attached to land LeasesPersonal property Chattels that can be (not real property) possessed (tangible objects) Chattels that cannot be possessed (intangible objects) • interest in partnership • copyright • shares • trademarksDistinction between ownership of property and possession of propertyOwnershipPerson has legal rights over the property. Owners are said to have ‘title’ to the property.PossessionPerson has physical control over the property.Real property—attachmentsTestFixtures(part of real property for sale purposes)FittingsManner of attachmentPermanentCan be easily removedPurpose of attachment (intention)For enjoyment of the itemDamage resulting to removeMajor damageMinor damageInterests in landDoctrine of tenureAbsolute ownership is not possible as all land is owned by the Crown.Estates in landFreeholdInterest in land of uncertain durationFee simpleInterest continues, provided owner dies leaving an heirLife estatesCreated for the life of a particular personLeaseholdContract in the form of a lease for a fixed period between two parties:lessor (landowner)lessee (tenant).Native titleTitle enjoyed by descendants of the original inhabitantsFreehold estates Reversion Remainder 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 CLeasehold estates‘Leasehold interest’ in land is created by the formation of a lease.This is a contract between two parties:lessor (landowner) lessee (tenant).Lease gives the lessee exclusive possession of real property for a fixed period in exchange for payment (rent).Regarded as an estate in land.DefinitionsLease: an interest in land given by a landlord to a tenant, for a fixed period of time, granting exclusive possession, e.g. lease of shop, house. Licence: a contractual right to do something on land that would otherwise be illegal, e.g.to agist stock upon a neighbour’s landto regularly set up a market stall on local council land.Comparison of lease and licenceTypes of leaseFixed-term lease—for a fixed period.Periodic tenancy—continues indefinitely from one period to another (ending by notice given by either party). Length of tenancy corresponds to period of payment, e.g. weekly.Tenancy at will—no fixed duration, with the consent of the landlord, requiring no rent repayments (ending by notice given by either party).Tenancy at sufferance—where the tenant remains in possession of premises after the expiry of the previous tenancy, without consent of the landlord, and does not pay rent.Terms of a leaseAgreed upon by the parties to the lease.Terms are described as covenants or conditions.Some leases provide for an assignment of lease.To assign a lease means to transfer it—to substitute one tenant for another.Covenants of landlord and tenantCovenants by tenantTo pay rentTo keep and deliver up the premises to the landlord at the end of the term in a good state of repairPermit landlord to enter to inspectPermit landlord to re-enter if fail to pay rentNot to assign or sublet without landlord’s permissionNot to conduct illegal activity on premisesCovenants by landlordTo allow the tenant quiet possession of premises (without interference)Pay rates and taxes, except those that are expressly the duty of the tenantRepair the premisesTermination of leasesLease: Expiry of term Notice to quit Forfeiture Surrender Repudiation Breach of an essential term (i.e. condition) of a leaseTenancy: Express agreement By tenant By landlord SurrenderComparison of leasesTitle to landOld system land:Title based on the production of all deeds transferring or conveying land from one person to another for the history of the propertyTorrens system land:Title based on transactions recorded on one certificate of title creating indefeasibility of titleState government holds all certificates of title.Indefeasibility of titleMeans 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.Legal and equitable interests in landLegal interestsConcerned with ownership (and controls associated with ownership)Equitable interestsConcerned with those entitled to the benefits of the landRelevance: the holder of an equitable interest cannot enforce their claim against an innocent third party purchasing the legal interest in the land.Examples of legal and equitable interestsCo-ownership of land Land can be owned by a number of persons jointly. The law refers to this as co-ownership. Co-owners can hold land either as:joint tenantstenants in common.Types of co-ownership of land Securities for loans: mortgages A mortgage is a contract in which a borrower (the mortgagor) gives the lender (the mortgagee) his/her real property as security for the repayment of a loan.Mortgages over real propertyOld systemTorrens systemMortgagor transfers title to mortgagee Mortgagee registers on title (can be more than one) Mortgagor redeems land on payment of all mortgage moneys (equity of redemption) Remedies in the event of defaultSue for breach of contractAppoint a receiverPower to foreclosePower of salePower of foreclosureMortgagee can take ownership of the property if the mortgagor defaults if the court so orders.Major requirements:Default of at least 6 monthsFailure to achieve mortgagor’s debt at public auctionShortfall is not recoverable from mortgagorPower of saleThe most commonly exercised remedy for sustained default of mortgage repayments.Mortgagee has the right to sell the property to recoup their losses but must achieve the best possible price for the property.Mortgagor has the right to any excess monies generated by the sale.Personal property securities reformPersonal property, both tangible and intangible, can be used as security for a loan.The intensely complicated and inconsistent state legislation and systems of registration of personal property for loans limited both individuals and businesses.National reform achieved through referral of state powers—purpose to improve ability of individuals and businesses to employ all their property in raising capital.New national personal property security system commenced operation October 2011.Personal Properties Securities Act 2009 (Cwlth)One federal Act applying across Australia provides rules for the creation, extinguishment and enforcement of security interests.Personal property security defined as ‘an interest in personal property that secures a payment or performance obligation’.Provides for a national electronic Personal Property Securities Register (PPSR) which replaces more than 40 existing registers.PPSR to be available at all times, contain all relevant details for use of all relevant parties.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).LiensA 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.Guarantees 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. Indemnity A contract where one party (the indemnifier) undertakes to become liable for another against any loss arising out of a transaction with a third party.Bailment Occurs when possession (not ownership) of goods is transferred from one person (bailor) to another (bailee), e.g. pledge.Duties and liabilities of a baileeDuties of baileeTo return the goods to the bailor at the expiry of the bailmentNot to misuse the goodsTo retain possession of the goodsTo take (reasonable) care of the goodsLiability of baileeBreach of contractTorts:NegligenceConversionDetinueVicarious liabilityDuties of a bailorNot 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.Special types of bailment—common carrierA carrier whose business is to carry goods for any customer requesting this service:AirlinesShipping operatorsRailwaysLiability:For any loss or damage to goods in its possession.Special types of bailment—innkeepersPersons who hold themselves out as providing accommodation for travellers:Hotel keeperMotel keeperLiability:For loss or damage of guests’ property, taken into their possession for safekeeping.