PROP T2 A1 Advising on and creating securities notes SA 2022_04_22.doc
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Advising on and creating securities
Mortgages of land
A mortgage over real property is commonly requested by lenders to secure loan money. The
relationship between the lender (mortgagee) and the borrower (mortgagor) is regulated
contractually by the mortgage document.
The essence of a mortgage over property is to give the lender rights over the property in the case of
default by the borrower. Under the terms of the mortgage, the mortgagor agrees to pay the interest
on time, to repay the principal sum on the due date and to comply with other terms. If the mortgagor
defaults, the mortgagee is entitled to enforce the mortgage, usually by claiming possession of the
security property and subsequently selling it.
This unit focuses on mortgages of legal title to real property registered under the
Real Property Act
(SA) (Real Property Act).
Different procedures apply to the mortgage of other forms of legal title, such as old system land and
some types of Crown land.
The parties to a mortgage transaction may be described by different names, at different stages of
At the beginning of the loan advance process:
the owner or purchaser of the property to be mortgaged is referred to as "the borrower"
the lending institution, which may be a bank, building society or private individual, advancing the
money is known as "the lender", and
the property to be mortgaged is called the "security property".
When the mortgage document(s) have been prepared by the mortgagee's solicitor, the borrower
becomes known as the "mortgagor" and the lender the "mortgagee".
The terms of the mortgage are sometimes known as "covenants"
It is important to be familiar with the legislation that applies to mortgages of real property. In South
Australia, this includes:
Law of Property Act 1936
(SA), particularly Pt 4
Real Property Act,
particularly Pt 12
Stamp Duties Act 1923
(SA) Pt 3 Div 10, and
National Credit Code (NCC), contained in
National Consumer Credit Protection Act 2009
The NCC is referred to in Practice Paper P503
Acting in Mortgage Transactions
and Practice Paper
Finance and Securities
. The NCC applies to credit contracts that are provided wholly or
predominantly for personal, domestic or household purposes. Under s 13 of the NCC, if the debtor