This subtopic sets out the basic characteristics of all mortgages, as well as briefly outlining the following types of mortgages:

• legal mortgages over old system land;

• equitable mortgages over old system land;

• registered mortgages over Torrens system land;

• equitable mortgages of Torrens system land; and

• security interests in assets other than real property:

There are other types of security interests in property that are not mortgages, including statutory charges, equitable charges, common law liens and equitable liens, but these will not be dealt with in this topic.

The most common types of mortgages a practitioner is likely to encounter are registered mortgages over Torrens land, although equitable mortgages of Torrens land and chattel mortgages are not uncommon. For that reason, this topic will concentrate on those three types of mortgages, with the remaining types being dealt with only briefly under the present subtopic.

A mortgage is a type of interest in property that secures an obligation and which can be discharged by the performance of that obligation. Traditionally, a mortgage operated by assignment of property from the mortgagor to the mortgagee, with the mortgagor retaining a right to have the property returned on the performance of that obligation. Now, under the Torrens system, mortgages are similar to traditional charges over land, with a statutory power of sale in the case of a registered mortgage.

A mortgage can be a legal mortgage (which complies with all general law and statutory requirements), or an equitable mortgage, which does not so comply but will still be enforced by a court of equity. The distinction is important for several reasons, including available enforcement remedies and in determining priorities. A mortgage requiring an equitable remedy to be granted, merely to get it to the standard to qualify as an equitable mortgage, will be classed as a “mere equity” and has the lowest priority of all. See Mortgage basics.

Mortgages of land under old system title can be either legal or equitable mortgages.

A legal old system mortgage is created by a deed and involves the assignment of the land to the mortgagee by the mortgagor, with the right of the mortgagor to redeem the land later if and when the obligation secured by the mortgage is fulfilled and the mortgagee has not yet foreclosed on the mortgage. This right of the mortgagor to redeem the land later is known as the “equity of redemption”.

An equitable old system mortgage can arise either through a transaction not in the form of a deed (often by mere deposit of title deeds), or, more commonly, in the form of a second or subsequent mortgage over land. As only one mortgagee can receive an assignment of the security property, all subsequent mortgagees of old system land can only be equitable mortgagees. A second or subsequent equitable mortgage is created by the assignment of the equity of redemption remaining after the grant of the previous mortgage.

In Queensland, the Real Property Act 1861 (which has now been repealed) marked the introduction to Queensland of the Torrens system of registering interests in land. Prior to this, freehold land granted by the Crown was dealt with under the Registration of Deeds Act 1843. Unlike other states, all identified “old system land” in Queensland has now been converted to Torrens title. Accordingly, most mortgages of land in Queensland today are Torrens mortgages.

In Tasmania, any new mortgage over the increasingly rare land still under old system title requires conversion of the land to Torrens title.

In the Northern Territory and the Australian Capital Territory, all land has been converted to Torrens title. Accordingly, mortgages of land in the two territories are Torrens mortgages.

Practice Tip: General law land is now so rare that the skills to deal with general law land are also disappearing. Dealings with general law land is thus subject to extra delay, confusion and expense. Consider converting general law land to Torrens title before effecting required dealings. The dealings can then proceed under Torrens title.

See Old system mortgages

A mortgage over Torrens system land must be registered in order to be a legal mortgage. The Torrens system confers priority in accordance with the order of registration of interest in land, and also grants indefeasibility of title to registered interest holders. Mortgages of Torrens land are not by assignment, but by a charge regulated by the terms of the Torrens legislation. Registered mortgagees have a statutory power of sale after complying with the terms of the legislation.

All unregistered mortgages over Torrens system land are equitable mortgagees. They are charges, but with lower priority, with no indefeasibility of title and with no power of sale. See Torrens system mortgages.

Mortgages over chattels or choses in action are similar to old system land mortgages in that they are by assignment of the chattel or chose by the mortgagor to the mortgagee, with the mortgagor retaining a grant back of an equity of redemption. Chattel mortgages use to be regulated by Sale of Goods and other legislation. In February 2012, a national scheme was introduced in all Australian states and territories, governed by the Personal Properties Securities Act 2009 (Cth). This Act regulates not only chattel mortgages but also most mortgages of choses in action.

Mortgages over ships are no longer regulated by the Shipping Registration Act 1981 (Cth). The registration of ships’ mortgages was transferred from the Australian Register of Ships to the Personal Properties Security Register (PPSR) on 30 January 2012.

Mortgages of water access licences are regulated by the Water Management Act 2000 (NSW), the Water Act 1989 (Vic), the Water Act 2000 (Qld), the Rights in Water and Irrigation Act 1914 (WA), the Natural Resources Management Act 2004 (SA), and the Water Management Act 1999 (Tas). In each case, the regime is similar to that of the Torrens legislation, with mortgages by way of charge with priority determined by registration, but with no indefeasibility of title. Note, however, that in South Australia, there is currently no system of registration or priority of security interests in water access licences under the Natural Resources Management Act 2004 (SA) and security interests in water licences may still be registered under the Bills of Sale Act 1886 (SA).

In the Northern Territory, while the Water Act (NT) regulates the investigation, allocation, use, control, protection, management and administration of water resources, the Act does not provide a method for how water licences can be mortgaged like the other jurisdictions.

In the Australian Capital Territory, while a register of water licences is maintained under the Water Resources Act 2007 (ACT) (see s 66 of the Act), there is no requirement or obligation to record mortgages of water licences on the register.

See Other mortgages.