The English Mortgage courtesy of Professor Gary Watt

“…The English mortgage is a work of fiction, and it’s a fiction of the dishonest kind. This was most apparent in the days when the mortgage operated by conveying the borrower’s (mortgagor’s) fee simple to the creditor (mortgagee) until repayment of the debt, at which point the fee simple was redeemed by reconveyance back to the borrower.

The ‘conveyance’ expressed in the mortgage deed was ‘one long suppressio veri and suggesstio falsi’. Maitland attributed the falsehood to the ‘action of equity’, but the legal deed of the mortgage was inherently dishonest, for it pretended to convey legal ownership when the parties merely intended to create security for the loan. Equity tried to give effect to the true substance of the arrangement by introducing a supplemental fiction according to which the borrower was deemed to retain a distinct equitable interest in the land, called the ‘equity of redemption’ for so long as the fee simple was held in the name of the creditor.

…”Equity was forced to adopt this false story”…

Equity was forced to adopt this false story to counter the even greater lie told by the legal deed. If this sounds convoluted, it is some comfort to know that even Lord Macnaghten, whom Lord Holdsworth described as ‘the greatest of the equity lawyers who became Lords of Appeal’, admitted that ‘nobody by the light of nature ever understood an English mortgage of real estate’. The traditional mortgage is not elucidated by natural lights – whether conceived in terms of natural law or natural science or enlightenment philosophy – because it is an idea so utterly abstracted from nature. The modern mortgage in English law, which calls itself a ‘charge by way of legal mortgage’, also operates in the world of make-believe.

In legal form it is a quite fabulous creature: nothing less than a charge that professes to be a mortgage but which confers a right to possession on the mortgagee as if he had a lease and (in favour of a first mortgagee) confers a right to possess title documents as if the security were in fact a fee simple. The relevant statutory sections have to be seen to be believed (the most obviously fictive elements have been placed in square brackets):

A mortgage of an estate in fee simple shall … be capable of being effected at law … by a charge by deed [expressed to be by way of] legal mortgage: Provided that a first mortgagee shall have the same right to the possession of documents [as if] his security included the fee simple.

…”Where a legal mortgage of land is created by a charge by deed”…

Where a legal mortgage of land is created by a charge by deed [expressed to be by way of] legal mortgage, the mortgagee shall have the same protection, powers and remedies (including the right to take proceedings to obtain possession from the occupiers and the persons in receipt of rents and profits, or any of them) [as if] … where the mortgage is a mortgage of an estate in fee simple, a mortgage term for three thousand years without impeachment of waste had been thereby created in favour of the mortgagee.

It seems that the legislators are the unacknowledged poets of the world. Strip away the myth surrounding the English mortgage and one discovers that it is essentially hypothecary in nature – the debtor keeps the thing, but the creditor has a charge over the thing. This is the simple reality. I should say that this is the simple legal reality. If one looks even closer one sees that even the legal idea of a charge is a fiction. A charge cannot be defined, except to say in a circular way that it is something to be dis-charged. The nature of the thing is defined by the absence of the thing, because, as with so many elements of property law, there is no actual thing but only a fictional way of conceiving relations with a thing. The very nature of the ‘charge’ is in fact a simple picture or metaphor of ‘carriage’. As a beast burdened by the ‘cargo’ it ‘carries’ on its back, so land is burdened by a charge…” – Gary Watt Professor of Law at the University of Warwick [2009]

 

 

#VOIDMORTGAGE # Professor Gary Watt