Form. A mortgage is in substantially the same form as a deed, with the addition of the defeasance clause. This is a clause containing a statement that the conveyance is made conditional upon the payment of a specific amount, which amount being paid, the instrument is void. A mortgage is executed with all of the formality of, and in practically the same manner as, a deed. As a rule, when the mortgage is given to secure a debt, it is accompanied by a note or bond or other evidence of indebtedness, making the mortgagor personally liable, so that the mortgagee may look to him personally in case the mortgaged property is not sufficient to pay the debt. This is not necessary to the validity of the mortgage, as there may be a valid mortgage without any personal liability on the part of the mortgagor, in which case the creditor's only right to payment is out of the mortgaged property.

Defeasance Clause. This is the clause showing that the instrument is given as security for a debt. No particular form is necessary so long as this condition appears. And although on its face the instrument may be a deed, a court of equity will permit it to be shown that the agreement really was that the conveyance should be made as security for a debt and not absolutely; therefore when this is shown, although the instrument be a deed in form, it will be declared a mortgage.

Covenants.

The mortgage may or may not include one or more covenants. They are usually inserted for the better security of the mortgagee. One clause gives the mortgagee the right to sell the property; that is, to foreclose the mortgage upon default of the payment of any part of the principal as agreed.

The insurance clause is inserted to protect the mortgagee's interest in the buildings on the mortgaged premises.

Another clause, called the interest, tax, and assessment clause, compels the mortgagor to pay the interest, taxes, and all assessments levied against the property, and in case of default for a given number of days, the mortgagee may, if he choose, consider the whole amount of the debt due and proceed with the same remedies as though the time within which the debt was to have been paid had expired.

A short form of mortgage is shown in the Appendix.

Assignment. The mortgagee may desire to sell the mortgage or transfer it to another party. This he may do, as the interest of the mortgagee in the property mortgaged is subject to sale as well as the interest in the property remaining in the mortgagor. The assignee takes the mortgage with all of the rights of the assignor, but no others. The mortgage can be assigned only by an instrument in writing and under seal, and the assignment should be recorded, to protect the assignee against a subsequent fraudulent assignment.

Foreclosure. The remedy of the mortgagee when the debt secured by the mortgage is not paid as agreed is to foreclose his lien. The foreclosure of the mortgage means the proceedings by which the mortgaged premises are applied to the payment of the mortgage debt, and by which the equity of redemption is barred or cut off. This remedy usually consists of an action in the courts from which a judgment is obtained, decreeing that the property be sold and the proceeds applied toward the payment of the mortgage debt. If anything remains after the costs of the proceedings and the mortgage debt are paid, it is turned over to the mortgagor. This action bars all rights of the mortgagor to the property and cuts off his equity of redemption. All parties interested in the property must be made parties to the action, so that they will have notice of the proceedings and can present their claims to the court if they desire. The statutes generally require that the property be advertised for sale in the papers for a certain length of time before the sale takes place. In case the property does not sell for enough to satisfy the debt, a personal judgment on the note or bond is taken for the balance, this being called a deficiency judgment.

Record. Mortgages are required to be recorded in the same. manner as deeds, in order to give notice to subsequent purchasers of the property. If not so recorded, they are in most states valid as between the original parties, but not against persons who have purchased in ignorance of the existence of the mortgage. But in some states the statutes require the mortgage to be recorded in order to render it valid.

Discharge. If the mortgage is paid according to its terms when it becomes due, it is discharged; or payment after it is due,

but before an action is brought to foreclose, discharges the mortgage. In order to cancel the mortgage on the records, an instrument called a satisfaction of mortgage or discharge of mortgage, executed by the mortgagee, must be filed in the office where the mortgage was recorded, otherwise the mortgage, although paid, would still appear by the records to stand against the property.

Second Mortgage. The mortgagor may place a second or subsequent mortgage on the property. Unless it is otherwise stipulated, the mortgages take priority according to their date; that is, the second mortgagee gets nothing until the first is paid in full. But in case the first mortgage is not recorded and the second mortgagee has no notice of it, the second mortgage will, if recorded, have priority.

Any mortgagee may foreclose his mortgage when it is past due or the mortgagor is in default, but he can not affect the interest of a prior mortgagee by such proceedings, although he may cut off any subsequent mortgagee. By foreclosing his mortgage, therefore, the holder of a first mortgage will bar the second mortgage, and if the property sells for only enough to pay the first mortgage, the second mortgagee will lose. course if the property sells for more than enough to pay the first mortgage, the balance will be applied on the second mortgage. If the second mortgagee forecloses, he must sell the property subject to the lien of the first mortgage.

Of

Deeds of Trust. Mortgages may be given by means of a deed of trust to a third party as trustee. These are called deeds of trust. The trustee has the right to foreclose. Should he fail to exercise his right, a bondholder may foreclose, for the benefit of the other bondholders. Before he can do this, he must show the court that the foreclosure is necessary to protect the interests of the bondholders and that the trustee refused to take action.

QUESTIONS

1. What is a mortgage on land?

2. Explain the term “equity of redemption.”

3. Is a mortgage a lien on the property mortgaged? Explain.

4. What interests in realty may be mortgaged?

5. How do a mortgage and a deed compare in form?

6. What is the defeasance clause? Explain.

7. Mention three covenants usually contained in a mortgage. 8. In what way is the debt usually represented? 9. (a) Are mortgages assignable? Explain. requirements?

(b) What are the

10. What remedy has the mortgagor when the debt is not paid?
II. Is it necessary to record mortgages? Explain.

12. What is necessary to discharge and cancel a mortgage?
13. Can a second mortgage be placed on property? Explain.
14. Can a mortgagor who holds a second mortgage foreclose? Explain.

5. LANDLORD AND TENANT

Estates for Years. We have discussed estates in fee simple and estates for life. But estates in real property may be created for a shorter definite period. These are called estates for years. The grantor is known as the lessor or landlord, and the grantee as the lessee or tenant. The contract creating an estate for years is a lease. It is important to observe that an estate for years, or a leasehold interest in real estate, is classed as personal property.

Taylor, at the time of his death, left a will giving his real estate to a certain person and his personal property to his son absolutely. Taylor owned a number of leases of property, some of which were to run ninetynine years. Held, these leases passed as personal property to the son. — Taylor v. Taylor, 47 Md. 295.

Leases.

By the Statute of Frauds in most states the lease must be in writing, if for a longer time than one year. Generally, if for one year or less it may be made orally, and this is true even though the term is to commence at a date in the future. In a few states leases can be made for only a limited number of years, while in others a lease for more than a certain number of years must be recorded.

Covenants. - A common form of lease is shown in the Appendix. Besides the provisions in it, any further agreement between the parties may be incorporated in the writing. A lease is but a contract, and the full agreement of the parties should be set forth. Frequently the following covenant is inserted: "It is further mutually covenanted and agreed that, in case the buildings or tenements on said premises shall be destroyed or so injured by fire as to become untenantable, then this lease shall become

thereby terminated, if said second party shall so elect; and in such case, he shall vacate said premises and give immediate written notice thereof to said landlord, in which case rent shall be due and payable up to and at the time of such destruction or injury."

Term. The term of the lease is the time for which it is to run. If the tenant has been in possession under a lease for one or more years, and he retains possession without executing a new lease, he is presumed, in the absence of some agreement, to be a tenant from year to year, which means that his term after the expiration of the lease is one year, and if he remains in possession after the next year he is a tenant for another year.

Express and Implied Covenants. The covenants contained in a lease are either expressed or implied. The implied covenants exist whether they are mentioned or not; the express covenants must be included in the express conditions of the lease, and may be many or few.

The implied covenants, on the part of the lessor, are those regarding quiet enjoyment and the payment of taxes. The usual words of grant in a lease are "demise and lease," or "grant and demise," these words being said to import a covenant of quiet enjoyment. This covenant is broken when the tenant is evicted by some one who has a paramount title.

Hanley leased certain premises to Banks, the lease containing no covenant of quiet enjoyment. Hanley raised and adjusted the building to conform to the grade of the street, doing the work while Banks was in possession and in such a manner that Banks' possession and use of the premises was seriously interfered with. Held, that the law always implies a covenant of quiet enjoyment from the fact of the leasing, and that the covenant is broken by any event which prevents the tenant from enjoying the premises as amply as he is entitled to by the lease.

Hanley v. Banks, 6 Okla. 79.

The landlord also impliedly covenants that he will pay all taxes assessed against the premises during the term. There is no implied covenant on the part of the lessor, or landlord, that the premises are in a tenantable condition.

In an action for rent of a store leased to one Coulter, the defense was, that the store was rented for the selling of musical instruments, and that it was so imperfectly and defectively constructed that rain came through the roof and ceiling, causing damage to the instruments. Held, that in the letting