Equity of Redemption

Introduction

The equity of redemption is the mortgagor’s right to get their property back on payment of the debt, interest and costs, even after missing the legal redemption date. It arose because the common law treated a mortgage as a strict transfer: miss the date and the property could be lost for good. Equity stepped in to treat a mortgage as security for a debt rather than an outright conveyance, allowing redemption within a reasonable time and policing mortgage terms that try to make redemption pointless.

In short: once there is a mortgage, the borrower must have a real chance to redeem. Clauses that make redemption impossible or illusory are struck down. Collateral bargains may stand if they are truly separate and not repugnant to the right to redeem. Foreclosure is tightly controlled, and modern registration rules interact with these principles.

What You'll Learn

• What the equity of redemption is and how it developed
• How and when the right to redeem can be exercised
• The doctrine of clogs and fetters, with leading cases
• When collateral advantages are valid and when they fail
• How foreclosure works and why the right to redeem may persist
• How the Land Registration Act 2002 treats equitable rights in practice
• How to spot risky clauses and structure mortgage deals safely
• Case law you can cite in exams and in practice

Core Concepts

The equitable right to redeem: nature and timing

• Equity treats a mortgage as security for a debt. The famous maxim is often paraphrased as “once a mortgage, always a mortgage.”
• If the mortgagor tenders the full amount due (principal, interest, costs, and any contractual expenses properly incurred), they can redeem.
• Equity allowed redemption after the contractual date had passed, preventing forfeiture of the property for a temporary default.
• In modern practice, the right to redeem normally continues until a sale has been completed to a third party. Foreclosure is rare and strictly supervised.
• Cases such as Toomes v Conset (1745) 3 Atk 261 confirm that the court focuses on substance over form: a mortgage is to be treated as a mortgage and nothing else.
• Pawlett v Attorney General (1667) Hardres 465 shows equity’s reach: even the Crown is subject to equitable control in mortgage matters.

Clogs and fetters: terms that imperil redemption

• Any clause that makes the mortgage irredeemable, or redemption merely theoretical, is void.
• Typical examples of clogs/fetters:
  • Option to purchase given to the mortgagee within the mortgage transaction. Held void in Samuel v Jarrah Timber [1904] AC 323 because it defeats the borrower’s right to get the property back.
  • Redemption date set so late or on terms so harsh that redemption is worthless. In Fairclough v Swan Brewery [1912] AC 565, the right to redeem six weeks before a lease expired was struck down.
  • Compulsory tie-in to the mortgagee’s services if it operates as part of the security in a way that restrains redemption, as in Bradley v Carritt [1903] AC 253 (brokerage tie invalid).
• Context matters. In Knightsbridge Estates Trust v Byrne [1940] AC 613, a 40-year postponement of redemption in a commercial deal between parties with equal bargaining power and proper advice was upheld. It was not oppressive and did not make redemption illusory.

Collateral advantages: when added benefits stand

• A mortgagee may obtain a collateral advantage (e.g., a supply contract or option) alongside the mortgage.
• The key questions:
  • Is the advantage separate from the security?
  • Does it prevent or penalise redemption, or is it repugnant to the right to redeem?
  • Is the arrangement fair at the time it is made, with no oppressive features?
• Valid examples:
  • Biggs v Hoddinott [1898] 2 Ch 307: a beer tie linked to a public house mortgage was upheld where it did not destroy the ability to redeem.
  • Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] AC 25: a sheepskin purchase option was valid as a separate commercial bargain that could continue after redemption.
  • Santley v Wilde [1899] 2 Ch 474: profit-sharing may be valid if it does not extend the mortgage or undermine redemption.
• The court will look at substance. In Jones v Morgan [2001] EWCA Civ 995, a later variation granting the lender a share in the borrower’s property was treated as a clog on the equity of redemption and set aside.

Foreclosure and the continuing right to redeem

• Foreclosure extinguishes the mortgagor’s equity of redemption and vests the property absolutely in the mortgagee. It is discretionary and rarely granted without giving the mortgagor a clear chance to pay.
• Even after a foreclosure order, equity may allow redemption where justice requires it, particularly before the process is finalised.
• Campbell v Holyland (1877) 1 Ch D 166 shows that redemption may be permitted even where a third party purchaser is involved, reflecting the strong protection given to the right to redeem.
• In practice, lenders usually opt for sale rather than foreclosure, because the court’s control over foreclosure is strict and the remedy is blunt.

Registration and modern application

• The Land Registration Act 2002 (LRA 2002) interacts with equitable rights. A person with an equitable right linked to occupation may claim priority as an overriding interest (Schedule 3, para 2).
• In Swift 1st Ltd v Chief Land Registrar [2015] Ch 602, the High Court treated certain equitable rights coupled with actual occupation as capable of binding a purchaser or lender, showing how equity and registration rules meet in practice.
• Good conveyancing demands proper enquiries about occupiers and any unregistered rights that could affect title or priority.

Key Examples or Case Studies

Toomes v Conset (1745) 3 Atk 261

• Background: Lender tried to treat mortgage arrangements as more than security.
• Held: A mortgage is a mortgage and nothing else; equity looks at substance.
• Use: Resist attempts to turn a security into a sale or to strip away redemption rights.

Pawlett v Attorney General (1667) Hardres 465

• Background: Dispute over mortgaged property involving the Crown.
• Held: Equitable principles bind the Crown in mortgage matters.
• Use: Confirms broad reach of equity in protecting the right to redeem.

Samuel v Jarrah Timber [1904] AC 323

• Background: Mortgage included an option for the lender to buy the mortgaged property.
• Held: Option void as it conflicted with the right to redeem.
• Use: Do not fold purchase options into mortgage security.

Fairclough v Swan Brewery [1912] AC 565

• Background: Right to redeem set six weeks before lease expiry.
• Held: Clause void; redemption was effectively worthless.
• Use: Redemption must be real, not nominal.

Knightsbridge Estates Trust v Byrne [1940] AC 613

• Background: Long postponement of redemption in a commercial loan.
• Held: Valid in a freely negotiated, well-advised transaction with no oppressive features.
• Use: Length alone is not fatal; focus on whether redemption remains genuine and fair.

Bradley v Carritt [1903] AC 253

• Background: Mortgagor required to use mortgagee as tea broker.
• Held: Invalid as part of the mortgage transaction; operated as a clog.
• Use: Service tie-ins can fail if they restrain redemption.

Biggs v Hoddinott [1898] 2 Ch 307

• Background: Beer tie linked to a mortgage over a public house.
• Held: Valid as not repugnant to redemption.
• Use: Collateral advantages can stand where they do not distort the security.

Kreglinger v New Patagonia Meat [1914] AC 25

• Background: Sheepskin purchase option alongside a loan.
• Held: Valid as a separate commercial bargain; not inconsistent with redemption.
• Use: Keep collateral deals independent and fair.

Jones v Morgan [2001] EWCA Civ 995

• Background: Later agreement giving lender a share in the property.
• Held: Struck down as a clog on the equity of redemption.
• Use: Even later variations can be invalid if they undermine redemption.

Campbell v Holyland (1877) 1 Ch D 166

• Background: Right to redeem after foreclosure steps and involvement of a third party.
• Held: Redemption allowed.
• Use: Shows the court’s reluctance to let foreclosure extinguish redemption where equity can intervene.

Swift 1st Ltd v Chief Land Registrar [2015] Ch 602

• Background: Equitable rights and actual occupation under LRA 2002.
• Held: Such rights can have overriding status.
• Use: Always assess occupiers and potential unregistered rights before lending or buying.

Practical Applications

• Drafting safe mortgages

  • Avoid options to purchase and terms that make redemption illusory.
  • If postponing redemption, ensure the bargain is commercially sensible, negotiated at arm’s length, and supported by independent legal advice.
  • Keep collateral advantages in a separate agreement; make them fair and not tied to redemption.
  • Record interest, fees and costs transparently so the redemption figure is clear and defensible.

• Due diligence for lenders

  • Investigate occupiers and obtain statements to flush out unregistered equitable rights that may override under the LRA 2002.
  • Prefer sale over foreclosure when enforcing; the latter invites strict court scrutiny.
  • Keep full accounts so a redemption figure can be produced promptly if requested.

• Protecting borrowers

  • Seek independent advice on any tie-in clauses or profit shares proposed by the lender.
  • If you can pay, tender the full amount due (principal, interest, costs); ask for redemption statements early and in writing.
  • Act quickly if foreclosure is threatened; apply to redeem and ask the court to suspend or set aside orders where appropriate.
  • If in actual occupation, consider whether your equitable rights may bind third parties even if not on the register.

• Problem-solving in exams and practice

  • Identify the security: is it a true mortgage? Cite Toomes v Conset.
  • Test for clogs/fetters: does any clause make redemption impossible or hollow? Use Samuel v Jarrah and Fairclough.
  • Consider collateral advantages: are they independent and fair? Use Biggs, Kreglinger, Santley.
  • Check enforcement route: foreclosure vs sale; persistence of the right to redeem. Use Campbell.
  • Apply LRA 2002 rules on actual occupation and overriding interests. Use Swift 1st.

Summary Checklist

• Treat the mortgage as security; redemption must remain real, not theoretical.
• Strike down clogs/fetters: options to purchase, illusory redemption dates, oppressive tie-ins.
• Allow collateral advantages only if separate, fair, and not repugnant to redemption.
• Foreclosure is exceptional and controlled; the right to redeem can persist.
• Registration does not wipe out all equitable rights; actual occupation may give priority.
• Ensure independent advice, clear drafting, and separate documentation for collateral deals.
• Keep accurate accounts and provide prompt redemption figures.
• Know the leading authorities: Toomes; Samuel; Fairclough; Knightsbridge; Bradley; Biggs; Kreglinger; Santley; Jones; Campbell; Swift 1st.

Quick Reference