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Lessee has an option to renew it is exercisable

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lessee has an option to renew, it is exercisable against the mortgagee, even if mortgagee is registered. 2. HCA held the indefeasibility of a reg’d lease extended to an option to renew (in the lease), and the new term (lease) resulting from the renewal Spoke also of covenants that touch and concern the land, such as a requirement to pay money to a third party that isn’t related to the lease. Some lease covenants T and C because they’re integral to the lease. So, not every covenant is going to pass on to a new registered lease (corresponds to the T and C test). IS THE COVENANT TO PAY ENFORCEABLE? 1. Mortgage secures a loan agreement or a guarantee of a loan to another person. 2. If a forged mortgage is made indefeasible by registration, is the RP’s covenant to pay also indefeasible? 3. Pyramid BS v Scorpion Hotels (VCA): indefeasibility of the mortgage plainly extends to the covenant for payment. SCOPE OF THE COVENANT TO PAY 1. Perpetual Trustees v Tsai –covenant to pay is indefeasible because it defines the quantum of the mortgagee’s interest in the property and limits the rights. ENFORCEMENT OF COVENANT TO PAY 23
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24 1. If the covenant to pay is made indefeasible, can the mortgagee can sue the RP for debt, separately from its right of recourse to the land? 2. Grgic v ANZ (NSWCA) (BMM 361 at 364) 3. ‘Notwithstanding that the subject property stands charged with moneys secured by the bank’s mortgage, [the defrauded RP] is not liable to the ANZ on the personal covenants contained in that mortgage.’ PERPETUAL TRUSTEES V TSAI 1. People with no mortgage (unencumbered) were being targeted by a crime gang who were forging duplicate certificate of title. Perpetual Trustees gave $500,000 mortgage to a Mr. Tsai. There was a separate loan agreement that was also forged. The mortgagee couldn’t prove the money had been advanced to Mr. Tsai. 2. Registered mortgage to PT secured all amounts payable at any time by T to PT under a loan agreement 3. Both the mortgage and the loan agreement were forged 4. PT could not prove that it advanced moneys to T. PERPETUAL TRUSTEES V TSAI 1. Held: 1. PT was not fraudulent, so its regd mortgage was indefeasible 2. But indefeasibility did not extend to the loan agreement. 3. PT could not enforce mortgage as it couldn’t prove it had advanced moneys to T under a loan agreement with him. 4. This would not be a problem under a traditional mortgage where the loan terms were incorporated in the mortgage. 24
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25 TOPIC 5: EXCEPTIONS TO INDEFEASIBILTY FRAUD EXCEPTION TO INDEFEASIBILITY 1. S 42: fraud is an express exception to the indefeasibility of registered title 2. Distinguish two cases of fraud Fraud against the [previous] RP. If proved, this leads to rectification of the register. Fraud against the holder of a prior unregistered interest. If fraud is proved, the new RP takes subject to the prior interest.
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