The last step in a mortgage is the one most often left undone. Section 77 of the Land Registration Act makes it simple, and the consequence of skipping it is expensive.
Section 77 — discharge
On production to the Registrar of an instrument in the approved form purporting to discharge mortgaged or charged land —
(a) in respect of all or part of the estate or interest secured; or
(b) in respect of part of the land,
the Registrar shall register the discharge.
Two features. The obligation is expressed as “shall” — on production of a proper instrument, registration follows. And partial discharges are expressly contemplated, in two different senses: as to part of the secured interest, and as to part of the land.
Why registration, not payment, is what counts
Under section 33(1)(b), a registered proprietor holds free of all encumbrances except those notified by entry or memorial on the folio. A mortgage that has been repaid but not discharged is still on the folio.
The practical consequences: a buyer’s lawyer will refuse to settle; a new lender will not advance against the title; and if the original lender has since been wound up, restructured or has lost its records, obtaining the discharge years later can be genuinely difficult.
When the loan is repaid, obtain the discharge instrument in the approved form then, lodge it, and search the title afterwards to confirm the entry is gone. Do not rely on the lender to lodge it, and do not assume a final statement of account is enough.
Partial discharge — and why it matters
Section 77(1)(b) allows discharge in respect of part of the land. That is what makes it possible to sell a portion of a mortgaged parcel: the lender discharges as to the part sold and keeps its security over the balance.
This connects to transferring part of your land. Where a State lease is being subdivided under Part XVIII of the Land Act, the existing lease is surrendered and new leases are granted — so the mortgage over the surrendered lease must be dealt with, and the lender will want fresh security over the new titles. Plan that with the lender before lodging the subdivision application.
Section 66 — transferring a mortgage
A mortgage or charge may be transferred by instrument in the approved form. The consideration shall be specified, and where it is not money the form is amended to state concisely the nature of the consideration.
On registration of a transfer of a mortgage or charge:
(a) the interest of the transferor, with all rights, powers and privileges belonging to it, passes to and vests in the transferee; and
(b) the transferee becomes subject to and liable for the same requirements and liabilities as if he had been named originally in the mortgage or charge as the mortgagee or chargee.
So a transferred mortgage carries its remedies with it — including the power of sale and the right to foreclose — and its burdens. A borrower whose loan is sold on does not lose the protections of Part VII; the new lender steps into exactly the same position.
Discharge, priority and later securities
Where there are several registered mortgages, priority follows the Register — under section 24, by the order of production for registration, with each memorial recording the day and hour.
Discharging a first mortgage moves the later ones up. That is why a second mortgagee will want to see the first discharge registered, and why a lender refinancing a first mortgage will insist on simultaneous discharge and registration of its own security rather than relying on undertakings.
Discharge checklist
- Obtain a final payout figure in writing, with a date to which it is calculated.
- Pay, and obtain the discharge instrument in the approved form at the same time.
- Recover the duplicate certificate of title if the lender holds it — remember section 24(2), under which a dealing lodged with the title beats one lodged without it.
- Lodge the discharge promptly.
- Search the title afterwards and confirm the mortgage entry has gone.
- If the lender no longer exists or will not co-operate, take advice: the Registrar’s powers under sections 160 and 161 — requiring delivery up of an instrument, and correcting the Register on sufficient evidence — may be the route, and section 161(3) allows cancellation of a matter that does not affect the land.
Sources
- Land Registration Act (Chapter 191) — ss 24, 33, 61–68, 77, 160, 161; Part VII
- Land Act 1996 — ss 122, 127–130
- Mudge v Secretary for Lands [1985] PGSC 13; [1985] PNGLR 387
Before relying on anything here, read the current text of the Land Act 1996 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.