Part VII of the Land Registration Act gives a lender an unusually complete set of remedies. A borrower should know all five, because they can be used together.
1. Notice, then sale
The primary remedy, and the one dealt with in detail in how a mortgage works:
- Section 67 — on one month’s default in payment, the creditor may give written notice to pay; on default in a covenant, written notice to observe it. Notice may be given in person, by leaving it on the land, or at the debtor’s last known address in the country.
- Section 68 — if the default continues a further month from the notice, the creditor may sell, altogether or in lots, by auction or private contract, on such conditions as he thinks fit, and may buy in and resell without liability for loss.
A mortgage or charge may provide that the period specified in section 68(1)(a) or (b) shall be extended or reduced, and the period varies accordingly. Subject to the express variation, the same covenants, rights, powers and obligations are implied as if no variation had been made.
So the one-month-plus-one-month timetable is a default, not a floor. Read your mortgage: the notice period may have been reduced.
2. Entry into possession — section 74(1)(a)
Where default is made in payment of any secured money, the creditor may enter into possession of the land by receiving the rents and profits.
This does not require the two-month sale timetable. It is available on default, and it lets the lender intercept the income stream from tenants while deciding what else to do.
A creditor of a leasehold estate, or a person claiming through the creditor, becomes on entering into possession of the land or its rents and profits liable to the lessor for (a) the payment of rent and (b) the performance and observance of the covenants in the lease or implied under this Act — to the same extent as the lessee was liable.
Since almost all registered land in Papua New Guinea is a State lease, a lender taking possession steps into the lessee’s shoes — including for rent to the State and the lease conditions. That is a real deterrent, and borrowers should know it exists.
3. Distraint on the tenant’s goods — section 75
Where (a) secured money has been in arrears for 21 days, and (b) the creditor has made written application to the occupier or tenant for payment, the creditor may, in addition to his other remedies:
(c) enter on the land and distrain and sell the goods and chattels of the occupier or tenant; and
(d) detain out of the proceeds the money in arrears and all costs and expenses of the distress and sale.
Twenty-one days — considerably shorter than the sale timetable. But there are two important limits protecting the tenant:
- Section 75(2) — the occupier or tenant shall not be liable to pay the creditor more than the rent which, at the time of the distress, is due from him to the debtor or to a person claiming under the debtor.
- Section 75(3) — an amount paid or realised by distress is, to that extent, a satisfaction of the rent.
You cannot be made to pay more than the rent you actually owe, and what you pay the lender discharges that rent — you do not pay twice. Ask for the written application under section 75(1)(b), keep records, and tell your landlord in writing what you have paid and to whom.
4. Action of ejectment — section 74(1)(c)
The creditor may bring an action of ejectment to obtain possession. Under section 74(2), that action may be brought before or after exercising any of the other remedies in section 74 or the power of sale in section 68.
The remedies are therefore cumulative. A lender can take possession, distrain, sue for possession and sell — in whatever order suits.
5. Foreclosure — section 74(3)
A creditor is entitled by action or other proceedings in the Court to foreclose the right of the debtor to redeem the mortgaged or charged land.
Foreclosure extinguishes the borrower’s equity of redemption — the right to get the land back by paying what is owed. It requires proceedings in the Court, not a mere notice, which is the borrower’s protection: there is a hearing.
In practice sale under section 68 is the usual route because it produces money; foreclosure matters where the security is worth less than the debt or a sale is impracticable.
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.
Partial discharges are expressly contemplated, which is what makes it possible to sell part of a mortgaged parcel. See transferring part of your land.
Paying the loan off does not clear the folio. Until the discharge is registered, the mortgage remains an encumbrance notified on the folio and binds a buyer under section 33(1)(b). Obtain the discharge instrument, lodge it, and check the title afterwards.
Section 72 — instalment securities
Payment of a sum by weekly instalments or other periodical payments may be secured by a mortgage or charge in the approved form, varied so as to express fully the terms and modes of payment.
What a borrower should do
- Read the mortgage for a section 73 variation of the notice periods.
- Act within the first month. The statutory timetable is short and may be shorter.
- Check any notice — written, identifying the default, served in a permitted way.
- Warn your tenants that a lender may approach them, and explain section 75(2) and (3).
- Keep the State lease alive — rent and conditions. Forfeiture destroys the lender’s security and your interest together.
- Consider selling yourself. A controlled sale usually beats a mortgagee sale, where the borrower is last in the queue for proceeds.
Sources
- Land Registration Act (Chapter 191) — ss 33, 61–77; Part VII
- Land Act 1996 — ss 83, 122, 127–129
- Insolvency Act (Chapter 253)
- Paga No 36 Ltd v Eleadona [2018] PGSC 17; SC1671
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.