Chapter 10 - Property law: mortgages, leases and licenses. At the end of this chapter you should understand: the definition of the term ‘mortgage’ and the distinction between old title mortgages and Torrens system mortgages, the remedies available to a mortgagee if a mortgagor defaults, the definition of a personal property security,...
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Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-1 Property law: mortgages, leases and licences Chapter 10 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-2 Learning objectives At the end of this chapter you should understand: • the definition of the term ‘mortgage’ and the distinction between old title mortgages and Torrens system mortgages • the remedies available to a mortgagee if a mortgagor defaults • the definition of a personal property security • the statutory provisions for the registration of security interest in goods • the terms ‘pledge’, ‘pawnbroker’, ‘lien’, ‘guarantee’, and ‘indemnity’ Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-3 Learning objectives (cont.) • the term ‘bailment’ and its differences from other legal relationships • the difference between a gratuitous bailment and a non-gratuitous bailment • the duties of bailees and bailors of goods • the ways that a bailment may be terminated • the liability of common carriers and innkeepers Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-4 Introduction • People can hold an interest in real property • Often money is lent and real property is used as security for the loan • The resulting contract is called a mortgage • If personal property is used to secure a loan, a bill of sale is prepared • Alternatively, goods may be held by way of security Bailment is the transfer of goods from one person to another with the intention that the goods will be returned to the owner at a later date Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-5 Distinction between real property and personal property Real property Land Items attached to land Leases Personal property (not real property) Chattels that can be possessed (tangible objects) Chattels that cannot be possessed (intangible objects) • interest in partnership • copyright • shares • trademarks Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-6 Distinction between ownership of property and possession of property • Ownership – Person has legal rights over the property Owners are said to have ‘title’ to the property • Possession – Person has physical control over the property Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-7 Real property—attachments Test Fixtures Fittings (part of real property for sale purposes) Manner of attachment Permanent Purpose of attachment (intention) Damage resulting to remove Can be easily removed For enjoyment of the item Major damage Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Minor damage •2-8 Interests in land • Doctrine of tenure – Absolute ownership is not possible as all land is owned by the Crown Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-9 Estates in land Freehold • Interest in land of uncertain duration – Fee simple – Interest continues, provided owner dies leaving an heir – Life estates – Created for the life of a particular person Leasehold • Contract in the form of a lease for a fixed period between two parties: lessor (landowner) lessee (tenant) Native title • Title enjoyed by descendants of the original inhabitants Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-10 Mortgages over real property Old system • Mortgagor transfers title to mortgagee • Mortgagor redeems land on payment of all mortgage moneys (equity of redemption) Torrens system • Mortgagee registers on title (can be more than one) Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-27 Remedies in the event of default • Sue for breach of contract • Appoint a receiver • Power to foreclose ã Power of sale Copyright â 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-28 Power of foreclosure • Mortgagee can take ownership of the property if the mortgagor defaults if the court so orders • Major requirements: – Default of at least months – Failure to achieve mortgagor’s debt at public auction – Shortfall is not recoverable from mortgagor Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-29 Power of sale • The most commonly exercised remedy for sustained default of mortgage repayments • Mortgagee has the right to sell the property to recoup their losses but must achieve the best possible price for the property • Mortgagor has the right to any excess monies generated by the sale Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-30 Personal property securities reform • Personal property, both tangible and intangible, can be used as security for a loan • The intensely complicated and inconsistent state legislation and systems of registration of personal property for loans limited both individuals and businesses • National reform achieved through referral of state powers—purpose to improve ability of individuals and businesses to employ all their property in raising capital • New national personal property security system commenced operation October 2011 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-31 Personal Properties Securities Act 2009 (Cwlth) • One federal Act applying across Australia provides rules for the creation, extinguishment and enforcement of security interests • Personal property security defined as ‘an interest in personal property that secures a payment or performance obligation’ • Provides for a national electronic Personal Property Securities Register (PPSR) which replaces more than 40 existing registers • PPSR to be available at all times, contain all relevant details for use of all relevant parties Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-32 Security interests A pledge is a transfer of possession (not ownership) of a chattel, giving the lender (pledgee) the right to sell the pledged goods if the borrower (pledgor) defaults by the stipulated date, or within a reasonable time (if no date stipulated) Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-33 Liens • • • • • • A lien gives a creditor a right to possess the debtor’s property until the debt is paid A particular possessory lien is the right of one person to retain possession of goods of another until the debt associated with those goods is paid A general possessory lien is the right of one person to retain possession of goods (lawfully obtained) of another until the debt owing is paid An equitable lien is the right to have the property of another utilised to ensure payment of a debt, without possession of the property Maritime liens are specifically binding on a ship and its cargo and freight Statutory liens are created by an Act of Parliament Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-34 Guarantees A contract where one party (the guarantor) promises another party (the creditor) to carry out the obligations to another (the debtor), should the debtor default on their obligations Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-35 Indemnity A contract where one party (the indemnifier) undertakes to become liable for another against any loss arising out of a transaction with a third party Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-36 Bailment Occurs when possession (not ownership) of goods is transferred from one person (bailor) to another (bailee), e.g pledge Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-37 Duties and liabilities of a bailee • • Duties of bailee – To return the goods to the bailor at the expiry of the bailment – Not to misuse the goods – To retain possession of the goods – To take (reasonable) care of the goods Liability of bailee – Breach of contract – Torts: Negligence Conversion Detinue – Vicarious liability Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-38 Duties of a bailor • Not to interfere with possession of goods that the bailee has, for the duration of the bailment • To ensure quality and fitness of goods for a particular purpose Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-39 Special types of bailment— common carrier • A carrier whose business is to carry goods for any customer requesting this service: – Airlines – Shipping operators – Railways • Liability: – For any loss or damage to goods in its possession Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-40 Special types of bailment— innkeepers • Persons who hold themselves out as providing accommodation for travellers: – Hotel keeper – Motel keeper • Liability: – For loss or damage of guests’ property, taken into their possession for safekeeping Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-41 ... McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev • 2-2 3 Co-ownership of land • Land can be owned by a number of persons jointly • The law refers... 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2 -1 0 Freehold estates Reversion Remainder A (Fee simple of land) A (Fee simple of land)...Property law: mortgages, leases and licences Chapter 10 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev • 2-2 Learning