In equity, the mortgagor is protected by equity
of redemption. The mortgagor has a statutory right of redemption – known
as the ‘equity of redemption’ which is distinguishable from the equitable right
to redeem. On creation of the mortgage, the mortgagee becomes the legal owner
of the land subject to the mortgagor’s equitable interest. The equity of
redemption is the mortgagor’s equitable interest in the property which is the
sum total of the mortgagor’s rights in relation to the land (including the
right to redeem). The equity of redemption is therefore an interest in land and
can be dealt with like any other equitable interest. The equity of redemption
comprises of a number of rights discussed in the next few paragraphs.
Firstly, there should be no clogs or fetters to
the equity of redemption. The mortgagee must not attempt to exclude the right
to redeem as equity will not permit an option to purchase the mortgaged
property in the mortgage deed, even if the option constitutes “a perfectly fair
option to purchase the mortgages property may be valid if granted after the
mortgage because there is little likelihood of unconscionable conduct.2
Secondly, there should be no unreasonable postponement
of the right to redeem. Equity will prevent the mortgagee from gaining an
unfair advantage. The case of Fairclough
v Swan Brewery Co Ltd3
concerned a term in the mortgage agreement on a long lease of a public house
that was challenged because it postponed the right to redemption until six
weeks before the end of the lease. It was held that the clause was void. However,
if the parties are two competent parties that are acting under expert advice,
the agreement will stand, as evidenced in the case of Knightsbridge Estates Trust Ltd v Byrne4
in which it was held that a term postponing redemption may be upheld where the
arrangement is of a commercial nature.
1 Samuel v Jarrah Timber and Wood Paving Corp Ltd 1904 1904
AC 323, 1904 UKHL 2.
2 Reeve v Lisle
1902 AC 461.
4 1940 AC 613.