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Paper 1 · Lesson 3 — Interests in Land, Mortgages and Caveats — priorities

Encumbrances and title

Encumbrances on title and the agent's duty to check them; how registration affects an interest.

2 questionsAnswers & explanations includedFree — no sign-up

Question 1

Mr Rajan's house is subject to a registered mortgage in favour of a bank. He sells the house to Madam Chia, who pays the full price at completion. Nothing is done about the mortgage, which remains registered against the title.

Which statement most appropriately describes the position?

  1. A. The mortgage falls away on completion, a purchaser for value taking free of encumbrances.
  2. B. The mortgage should have been discharged on completion so that a clean title passed to her.
  3. C. The mortgage remains and Madam Chia is personally liable, having taken subject to it.
  4. D. The mortgage remains but cannot be enforced against her, she being no party to it.
Show the answer and full explanation

Answer: B

The rule. A registered mortgage must be discharged on completion so that a clean title passes. It does not fall away of itself.

Why B is correct. It should have been discharged.

The other options.

  • A treats the purchaser as taking free.
  • C makes Madam Chia personally liable, confusing the security with the debt.
  • D leaves it registered but unenforceable.

Exam note. The mortgage binds the land, not the person. That is why it must be cleared from the title rather than argued about afterwards.

A registered mortgage must be discharged on completion so that a clean title passes →

Question 2

An owner obtains a copy of his own title for the first time in twenty years and is surprised by what appears on it. There is an easement in favour of the neighbouring plot allowing a pipe to run beneath his garden, a restrictive covenant limiting any building on the land to two storeys, and the mortgage he granted his bank in 2015 and has been paying down since. He had thought of the property as unencumbered because nobody had ever raised any of these with him, and he asks his agent which of the three are properly described as encumbrances.

Which statement is correct?

  1. A. All three are encumbrances, each of them being a burden carried by the title itself.
  2. B. Only the mortgage is an encumbrance, the other two being matters of planning control.
  3. C. Only the easement and the covenant are, a mortgage being a personal obligation of his.
  4. D. None is an encumbrance, one arising only where a caveat has been lodged against the title.
Show the answer and full explanation

Answer: A

The rule. An easement, a restrictive covenant and a mortgage are all encumbrances — burdens registered against the title.

Why A is correct. All three.

The other options.

  • B excludes the easement and covenant as planning matters
  • C excludes the mortgage as personal
  • D ties encumbrance to the existence of a caveat.

Exam note. An encumbrance is anything that burdens the title, whoever benefits from it.

An easement, a restrictive covenant and a mortgage are all encumbrances →

Practise it under exam conditions

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