Equity of Redemption in United Kingdom

Definition of Equity of Redemption

In accordance with the work A Dictionary of Law, this is a description of Equity of Redemption : The rights of a mortgagor over his mortgaged property, particularly the right to redeem the property. This right of redemption allows a mortgagor to redeem the mortgaged property at any time on payment of principal. interest, and costs, even after the contractual date of redemption, as stated in the mortgage deed, has passed. Any *clogs on the equity of redemption are void, but the mortgagor’s rights may be terminated under certain circumstances (See mortgage).

Before 1926 a mortgage was commonly effected by the transfer of the mortgagor’s interest in the property to the mortgagee, but the mortgagor’s rights were recognized by equity. Since 1925 the mortgagor retains legal ownership of the property in all cases: the term equity of redemption is still used, however, although the right to redeem is no longer strictly an equitable interest.

Definition of Clog On The Equity of Redemption

In accordance with the work A Dictionary of Law, this is a description of Clog On The Equity of Redemption : Any provision in a *mortgage deed to prevent redemption on payment of the debt or performance of the obligation for which the security was given. Such provisions are void. An example is an option contained in the mortgage deed for the mortgagee to purchase the mortgaged property before or after the mortgage has been redeemed. Unconscionable provisions in a mortgage (for example, one to prevent redemption for 100 years) are also void. However, a company may issue irredeemable *debentures. A provision that would otherwise be unconscionable may be valid if the transaction containing it is a commercial arrangement rather than a mortgage. Thus, such provisions in mortgages of public houses or garages by their tenants or owners to breweries or oil companies will be upheld, provided that they do not infringe the contractual rules against *restraint of trade. Under the Unfair Terms in Consumer Contracts Regulations 1994 unfair redemption penalties may also be subject to challenge.