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or in receipt of the rents and profits of land, is to be deemed a Chap. XI. tenant within the meaning of that Act, and entitled to obtain (iii.) or join in obtaining and effecting enfranchisement. Any money obtain enfranpaid by him for that purpose is to be added to the amount due chisement. to him as mortgagee; and the land is not to be redeemable without payment of such money with interest thereon.

enfranchise

By sect. 20 of the same Act (g), a mortgage of copyholds Effect of becomes, on enfranchisement, a mortgage of the freehold, but ment. subject to any charges under the Act for consideration money, interest, and expenses of enfranchisement (r).

An equity of redemption in copyholds, being an equitable Mortgage of estate only, may be effectually mortgaged by deed, without equity of redemption.

surrender.

For the same reason an equity of redemption in copyholds Devolution of will, on the death of the mortgagor, devolve to his legal per- redemption. equity of sonal representative under the Land Transfer Act, 1897 (s).

(9) Re-enacting in effect the corresponding provision of the repealed Copyhold Act, 1841 (4 & 5 Vict. c. 35),

s. 81.

(r) See as to enfranchisements, post, Chap. XXII., Sect. II. (iv).

(s) Re Somerville and Turner, (1903) 2 Ch. 583.

CHAPTER XII.

OF A MORTGAGE OF LEASEHOLDS.

Liability of i. Mortgage of Leaseholds by Assignment.-A mortgage of mortgagee by leaseholds may be by assignment of the whole unexpired residue

assignment.

Cesser of mortgagee's liability on transfer of mortgage. Depositee

of lease not liable on covenants.

of the term. It has long been settled, and it is now clear, both on principle and sound authority, that if a mortgagee accepts an assignment of all the remaining interest in the term, he will be liable to the payment of the rent, and performance of the covenants in the original lease, so long as he shall be the legal owner thereof, although he shall not take actual possession of the premises (a). The Court will not, on the one hand (b), assist the lessor in an action brought by him against the mortgagee for a discovery of the deed of assignment to him and for a specific performance of the covenants, but will leave the lessor to his remedy; so neither will it, on the other hand (c), after the lessor has obtained judgment against the mortgagee for the arrears of rent, give the mortgagee relief, although he has never been in possession.

In case of mortgage by assignment, the liability of the mortgagee on the covenants ceases on transfer or sale and assignment (d).

It was formerly supposed that a depositary of a lease was liable for the rent and covenants in a suit by the lessor (e). But it is now clear that a depositary of a lease is not answerable for the rent and covenants of the lease, and the landlord cannot compel him to take, or the mortgagor to execute, an assignment,

(a) Traherne v. Sadlier, 5 Bro. P. C. 179; Williams v. Bosanquet, 1 Br. & B. 238; 3 Moo. 500; Burton v. Barclay, 7 Bing. 745; Haig v. Homan, 4 Bli. N. S. 38.

(b) Sparkes v. Smith, 2 Vern. 276. (c) Pilkington v. Shaller, 2 Vern. 374. (d) Onslow v. Currie, 2 Madd. 330. (e) Lucas v. Comerford, 3 Bro. C. C. 166; Flight v. Bentley, 7 Sim. 149.

even if the depositary has been in possession and paid rent (ƒ). In such a case, though not liable for the rent and covenants under the lease, he would apparently be liable in respect of his tenancy.

Chap. XII. (i.)

Where judgment by default has been taken against a mort- Forfeiture by gagor-lessee for forfeiture, the equitable depositee of the lease mortgagor. can set aside the judgment under Ord. XXVII. r. 15, and defend in the name of the lessee, indemnifying him (g).

demise.

ii.-Mortgage of Leaseholds by Demise.-It has been gene- Form of rally recommended that a mortgage of leaseholds should be by mortgage by way of underlease, in order to avoid rendering the mortgagee liable for the rents and covenants of the original lease. In framing such mortgages, the practice is to demise the property to the mortgagee at a peppercorn rent, reserving the last day, or the last few days of the original term, and to make the mortgagor covenant to pay the rent and perform the covenants in the original lease. It is also usual to insert in such mortgages a declaration by the mortgagor that he will stand possessed of the nominal reversion in trust for a purchaser on any sale by the mortgagees under his power, or else in trust for the mortgagee himself. The form of declaration more frequently adopted in practice has been that of a declaration of trust in favour of a purchaser; but it may be regarded as settled that a declaration of trust in favour of the mortgagee himself will not render him liable to the lessor for the rent and covenants of the lease (h); nor entitle the lessor to require him to take an assignment of the lease (i).

It has been held that a mere covenant for the assignment of Effect of declaration the nominal reversion upon a sale, in such manner as the pur- of trust of chaser should require, would not render the mortgagor trustee reversion. for a purchaser, so as to enable the latter to obtain an order under the Trustee Acts (k) vesting in him the outstanding

(f) Moore v. Greg, 2 De G. & Sm. 304; 2 Ph. 717; Walters v. The Northern Coal Mining Co., 5 De G. M. & G. 629; Cox v. Bishop, 8 De G. M. & G. 815. See Newry Rail. Co. v. Moss, 14 Beav. 64; Wright v. Pitt, L. R. 12 Eq. 408.

(g) Jacques v. Harrison, 12 Q. B. D. 165, C. A. See North London Land Co.

v. Jacques, W. N. (1883) 187; 49 L. T.

659.

(h) Walters v. Northern Coal Mining Co., 5 De G. M. & G. 629.

(i) Moore v. Greg, 2 De G. & S. 304. (k) 13 & 14 Vict. c. 60, s. 30, and 15 & 16 Vict. c. 55, s. 2 (both repealed). And see now 56 & 57 Vict. c. 53, ss. 26, 31.

(ii.)

Chap. XII. reversion (1). It is, however, conceived, upon the analogy of the rule with respect to declarations of trust of copyholds covenanted to be surrendered (m), that a declaration in either of the forms above referred to would entitle a purchaser or the mortgagee himself (as the case may be) to a vesting order, if the mortgagor should refuse or fail to assign the reversion.

Indemnity

against rent and covenants.

Forfeiture of lease.

Conv. Act, 1881, s. 14.

Restrictions

on and relief against forfeiture of leases.

It also seems clear that the mortgagor, after a sale, will be entitled, on the ordinary footing of a trustee, to claim an indemnity from the purchaser in respect of the rents and covenants (n).

A mortgage security by way of underlease is, however, affected by the possibility of a breach of covenant by the mortgagor, whereby the lease may become liable to forfeiture, and, in such case, independently of the statutory enactments hereafter referred to, the mortgagee has no remedy against the lessor (0).

The effect of recent legislation and decisions has been to alter materially the incidents formerly considered to attach to mortgages by demise, as regards the risk of forfeiture of the original

term.

In the first place, the right of a lessor to enforce forfeiture has been to a great extent restricted. By the Conveyancing Act, 1881 (p), s. 14, it is enacted as follows:

"(1.) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant or condition in the lease, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice specifying the particular breach complained of and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and in any case, requir ing the lessee to make compensation in money for the breach, and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach."

By sub-sect. (2), where a lessor is proceeding, by action or otherwise, to enforce such a right of re-entry or forfeiture, the lessee may apply to the Court for relief; and the Court may grant or refuse such relief on such terms as it may think fit.

And by sub-sect. (3), for the purposes of this section a lease includes an original or derivative underlease, and a lessee in

(1) Re Propert, 22 L. J. Ch. 948. And see Re Carpenter, Kay, 418, 420. But see London and County Banking Co. v. Goddard, (1897) 1 Ch. 642.

(m) Re Collingwood, 6 W. R. 536.

(n) Phene v. Gillam, 5 Ha. 1, 9. (0) Nokes v. Fish, 3 Drew. 735; Hughes v. Howard, 25 Beav. 575.

(p) 44 & 45 Vict. c. 41, s. 14.

cludes an original or derivative underlessee and assigns of a Chap. XII. lessee, i.e., assigns of a legal estate (9). (ii.)

It has been decided that the effect of the last sub-section is Effect of this merely to make the provisions of the section applicable as between section. a derivative lessor and his lessee, and not to create new statutory rights between an original lessor and a derivative lessee claiming under his lessee, between whom no privity of contract exists (r).

This section does not extend to covenants and conditions against assigning, underletting, &c. (s); and the Court cannot, under the Act, relieve against forfeiture for breach of such covenants (t).

Nor does the section extend, in the case of mining leases, to covenants and conditions to allow the lessor to inspect books, workings, &c. (s).

The section does not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent.

Leases are sometimes made determinable by re-entry on bank- Conv. Act, ruptcy of the lessee (u). Under the Act of 1881, s. 14 thereof 1892, s. 2. is limited, by sub-sect. (6) thereof, so as not to extend to a condition for forfeiture on the bankruptcy of the lessee, or on the taking in execution of the lessee's interest. But by the Conveyancing Act, 1892 (x), s. 2, it is enacted as follows:

"Sub-sect. (2).-Sub-sect. 6 of sect. 14 of the Conveyancing and Forfeiture in Law of Property Act, 1881, is to apply to a condition for forfeiture case of bankon bankruptcy of the lessee, or on taking in execution of the lessee's ruptcy or interest only after the expiration of one year from the date of the execution. bankruptcy or taking in execution, and provided the lessee's interest be not sold within such one year, but in case the lessee's interest be sold within such one year, sub-sect. 6 shall cease to be applicable thereto.

Sub-sect. (3).—Sub-sect. 2 of this section is not to apply to any lease of:

(a) Agricultural or pastoral land;

(b) Mines or minerals;

(c) A house used or intended to be used as a public-house or

beershop;

(d) A house let as a dwelling-house, with the use of any furni

(9) See Friary, &c. Brewery v. Singleton, (1899) 1 Ch. 86.

(r) Nind v. Nineteenth Century Building Society, (1894) 2 Q. B. at p. 232, C. A.

(s) 44 & 45 Vict. c. 41, s. 14, sub-s. 6.

(t) Barrow v. Isaacs, (1891) 1 Q. B. 417, 430.

(u) See as to this, Exp. Gould, Re Walker, 13 Q. B. D. 454; Smith v. Gronow, (1891) 2 Q. B. 394.

(x) 55 & 56 Vict. c. 13.

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