Property T2 A1 Clark loan and lease documents Christopher Darling

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Jan 9, 2024

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5/10/2023 Peter and Louise Clark 123 Current Address Suburb NSW 2000 RE: Purchase of 16 Junction Street, Summer Hill NSW 2130 Dear Mr and Mrs Clark, Thank you for your instructions in relation to the above. Please see below in response to your questions. QUESTIONS ON THE MORTGAGE 1. It was our understanding that the standard rate of interest we would pay in relation to the mortgage is 4.00% and that we may be required to pay 6.00% interest if we are late making our payments. However, the schedule to the mortgage states that we will pay interest at the rate of 6.00% per annum. It then goes on to say that if we make repayments within 14 days of the due date, the interest rate will be 4.00%. Why is the mortgage document expressed this way? Your understanding is correct, if repayments are made within 14 days you will receive a 2% deduction in interest, meaning you will pay 4%. Should you fail to pay within 14 days of the due date you will be liable for the full 6% amount. The mortgage document is expressed in this way because they cannot impose a higher rate of interest as a penalty, and clauses which create any sort of penalty have been deemed unenforceable. Instead as per Memorandum Q860000, it is framed that the mortgagee will accept interest at a lower rate in circumstances like the above. 2. Does this mortgage allow us to make extra payments of principal or interest if we have extra funds available? Under clause 8 of the mortgage contract, titled prepayment, ‘You may prepay any part or all of the balance at any time’. You should bare in mind however, that early payment of the loan comes with additional fees under s82 of the National Credit Code (NCC). That stipulates that you may pay the debt with interest only being charged to the date of payment, but also reasonable enforcement expenses and early termination charges. 3. If our financial circumstances change and we are unable to make mortgage payments, does the mortgagee have any rights against us. Although we have read the memorandum, we cannot see where the mortgagee is granted these rights.

The consequences and rights of the mortgagee are outlined in clause 9 of the mortgage contract and clause 9 of the attached schedule. Should you fail to pay the mortgage and default, then as per the Real Property Act 1900 (NSW)( RPA ) and the Conveyancing Act 1919 (NSW), the mortgagee may exercise any of the powers available to them under those acts. Namely they may exercise the power of sale under ss 109(1) and 110(1) of the Conveyancing Act and ss 57 and 58 of the RPA . In order two legally exercise the power of sale there must be a default, and notice given. Section 57 of the RPA includes the notice requirements to enable the power of sale. 4. Do we have any specific obligations in respect of the state of repair of the property? As per clause 7 of the attached schedule you as the mortgagor have an obligation to ensure that the property is kept in ‘good tenantable repair, order and condition’. In addition, the mortgagor’s obligation to keep the property maintained is covered by Memorandum Q860000 which states that there is an obligation to keep the property in good repair, and in addition pay any ‘pay any rates and charges on land and comply with statutory requirements’. It also notes that should the mortgagor fail to comply with the above, the mortgagee has a right to carry out the necessary repairs at the mortgagor’s cost. 5. Is the form of loan agreement appropriate bearing in mind our proposed ultimate use of part of the property for a business? The form of loan agreement may not be appropriate given your intended use of the property. Under s106 of the Conveyancing Act , there are limited powers for a mortgagor to lease mortgaged property. While the contract does not specifically address leasing the property, clause 11 of the attached schedule notes that all powers, rights and remedies in favour of the mortgagee apply. Given most home loans are given on the basis of owner occupation, you should seek consent from the mortgagee prior. 6. What is the reason for the document headed “AUTHORITY TO COMPLETE & UNDERTAKING”? We are not very trusting of banks and want to understand why there would be any blanks in the loan documents signed by us. The purpose of an authority to complete is to allow the mortgagee’s solicitor to finalise the relevant dates once the transaction has been completed. This means they can include the dates when the money is forwarded onto you, which will then correspond with the dates that repayments are due.

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