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

A worked RES examination question on encumbrances and title, from our Paper 1 bank — with the rule it turns on, and why each of the four options is right or wrong.

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The question

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.

The answer, and why

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.

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