NSW Assignment in equity

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2 August 2020
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Hello, can someone please advise on the following scenario: A needs money for their business. B agrees to buy part of a mortgage A has over a property for the sum of $50,000. A & B sign a handwritten agreement with those terms and B pays A. No mortgage is executed and no certificate of title is held by B. Is this a valid purchase?
 

Tim W

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A would almost certainly need the consent of their mortgagee
before being able to do a deal like this.
It is all but inconceivable that a mortgagee would give such a consent.

If A did not have the consent of the mortgagee to the transaction,
then any deal between A & B of this type is not likely to be valid.
At best, B has become one of A's (or A's business') unsecured creditors.
At worst, B had become a victim of fraud by A.

Either way, B's fifty grand is gone.
 

Rob Legat - SBPL

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I think Tim W has approached it from the point of view that A is the mortgagor (person who owns the property over which the mortgage is registered) owing money to an unnamed mortgagee (person who holds the mortgage registered over the mortgagor's property). I'm assuming instead that A is the mortgagee holding security over an unnamed other person's property.

I'm also assuming this is not a consumer credit regulated mortgage, which would add a whole bunch of other complexity.

In that case that A is the mortgagee, and its not consumer credit:
- Most mortgages have terms written in allowing a mortgagee to assign their interest without consent. If that's not there, the mortgagor's consent is needed for there to be a valid assignment.
- B would have an equitable interest in the mortgage upon purchase, but not a registered one.
- B could not enforce the mortgage against the mortgagor without notice according to the rules of equity.
- B could not enforce the mortgage against the mortgagor without becoming the registered mortgagee anyway under most (all?) states' titling laws. As far as I am aware, all states and territories in Australia use a Torrens titling system which requires registration to grant indefeasibility (priority of interest). No registration = no indefeasibility.

It's still a valid purchase, it's just only enforceable against A in equity/contract.