In the Land Registry Adjudicator case of Bonsu v Flex Mortgages Ltd [2016] the borrower had charged the Property, and any rights they may have relating to it, to the lender with full title guarantee by way of legal mortgage. In the same Clause 3 the borrower agreed “that this mortgage is extended to cover any legal or equitable estate which [they] or any one of [them] own[ed] now or acquire[d] at any time in the future.”
However in the mortgage “Property” was not given any extended definition, to include other or after-acquired land – it’s only meaning was the Ground Floor Flat.
The Adjudicator said Clause 3 of the 2006 Charge created a mortgage over the Ground Floor Flat (both as regards the legal estate and any equitable interest). It did not purport to or actually create a fixed or any other form of charge, legal or equitable, over any other property, whether owned contemporaneously with the 2006 Charge or subsequently acquired by the borrower.
The words ” extended to cover” were inappropriate to create an immediate charge over unidentified property. Moreover such a charge was not a usual or standard term of a normal mortgage. If the lender wished to create such a charge, the words of charge would have to be express and entirely clear.
In fact the additional words had been intended to operate as an “all estate” provision. The ” legal or equitable estate” referred to had to relate to the mortgaged ground floor flat defined as “the Property”.
The clause aimed to subject to the 2006 Charge any lesser or different interest owned by the borrower in that Property. So if, at the date of execution, the borrower had a defective legal estate, but a valid equitable interest in the Property, that interest would automatically become subject to the charge.
Also, if the borrower has a defective legal title at the date of the charge, but subsequently got a valid legal estate, that too would be subjected to the charge.
Any other interpretation was implausible because:
1. The clause did not identify the property in which the borrower had a present or future legal or equitable estate. The only property referred to in clause 3 was the Property as defined.
2. It would otherwise create or purport to create a mortgage not only over all after-acquired property, but over every single asset owned by the borrower at the date of the 2006 Charge. So that interpretation was quite against commercial common sense.
This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.
Original article: Mortgage clause did not sweep up all borrower’s present and future assets.