A Judgment mortgage is a means by which a court order for money can be converted into a mortgage registered against a debtor’s property. The procedure does not require an application to the court. However, the sale of property subject to a judgment mortgage order requires a court order. The sale is conducted under court supervision.
Any court order for the payment of money can be converted into a judgment mortgage. An order from another EU state can be converted into a judgment mortgage after it has been recognised through the procedure in the EU Judgments Regulation.
A judgment against several persons may be registered against the property of one of them. A judgment mortgage may be registered against one of a number of joint owners. A recent case has highlighted certain difficulties with judgments mortgages in the case of jointly owned registered title properties. Under the 2009 law reforms the death of a joint tenant whose interest is subject to a judgment mortgage terminates the judgment mortgage.
The registration of a judgment mortgage is deemed to be a mortgage by the defendant owner to the judgment creditor over the property concerned. The judgment mortgage is deemed to be a mortgage for the amount due. As it is equivalent to a mortgage, the issues in relation to the priority arise in the same way as in relation to mortgages voluntarily created by the owner.
A judgment mortgage is weaker than a normal mortgage in certain respects. A judgment mortgage given within three months of bankruptcy is invalid if the debtor becomes bankrupt within three months. A judgment mortgage given after a contract for sale is entered, does not attach to the property. There are certain weaknesses with judgment mortgages against jointly owned property. In addition, because of the technicality of the older law, judgment mortgages are very vulnerable to challenge if there is any flaw in their creation.
Registration operates to mortgage or charge the debtor’s beneficial ownership in the land concerned. In the case of registered title, there is deemed to be a charge of the land. The judgment mortgage is registered in the Registry of Deeds in the case of unregistered title and in the Land Registry in the case of registered title. The mortgage or charge only applies to whatever interest is owned by the judgment debtor in the property at the date of registration.
A judgment mortgage registered against land takes effect, subject to rights to which the owner of the land is subject. This includes rights of third parties such as squatter ’s rights and an easement in the course of acquisition. A judgment mortgage does not have priority over equitable rights, which are not registered.
The rules as to registration are technical and in some cases require details such as the 19th-century Civil Parish and Barony, descriptions and occupation of the defendant and addresses. If there is any defect in the judgment mortgage, the judgment mortgage will not be validated by the courts. The courts do not have the discretion to correct the details. The 2009 Reforms should simplify some of the technical pitfalls in registration.
A judgment mortgage can be registered against a family home. Spouse’s consent is not required. However, the court has a discretion not to order the sale.
As with other mortgages, judgment mortgages have the power to marshal. See our separate chapter in relation to marshalling consolidation and equivalent issues.
In the case of a judgment mortgage against a company, the details must be sent to the company within 21 days (not the companies registration office). The company itself is then obliged within three days to register the charge in the Companies Registration Office. Failure to do so makes the company and its directors etc are liable to a fine. However, failure to register does not invalidate the judgment mortgage (unlike the case with non-registration of other mortgages and charges). This position will be changed by the 2009 Reforms.
Enforcement by Sale
In order to enforce a judgment mortgage, it is necessary to procure a well-charging order and an order for sale from the court. A well charging order is a court declaration that the judgment mortgage was validly created and affects the lands concerned as a mortgage. The order for sales directs the sale of the land through the High Court Examiner’s Office. The procedure is long and convoluted. The sale must be undertaken under the control of the court offices. See our chapter in relation to court-ordered sales.
It may be possible to have a court receiver to protect the judgment mortgage in certain exceptional circumstances. See our chapter in relation to court-appointed receivers. It would be necessary to show the property or its value is in danger.
A judgment mortgagee is entitled to pay off and have the judgment mortgage removed at any time.
It had been recommended many years ago, that the judgment mortgage be replaced by a charging order application to the court. In England and Wales, a further court application and order is required for a court order for money due to be registered against the defendant’s property. The courts have an element of discretion as to whether to grant a charging order.
The 2009 law reforms preserve the principle of a judgment mortgage while modernising and removing some anomalies. They preserve the principle that a court application is not necessary and that there is, therefore, a right to register against a defendant’s land and buildings. The legislation confirms that the creditor who registers a judgment mortgage obtains rights equivalent to a mortgage by the debtor for the amount of the judgment debt.
The 2009 Reforms will simplify the formalities for registration of a judgment mortgage. A judgment mortgage will have to be registered in the Companies Registration Office within 21 days. A judgment mortgage will be subject to a claim under the Family Home Protection Act, judicial separation or divorce legislation. Registration of the judgment mortgage will not sever a joint tenancy. On the death of a joint owner subject to a judgment mortgage, the judgment mortgage will terminate.
The former right of the sheriff to seize leasehold land was abolished by the 2009 reforms.