Also known as:clogs the equity of redemption · clogging the equity of redemption · clog on the equity of redemption · clogs on the equity of redemption · clog on equity of redemption
Written by attorneys · grounded in primary & secondary sources — see below
A principle in mortgage law that voids any agreement made at the time of the mortgage that unreasonably restricts or waives the mortgagor's right to redeem the property by paying the debt before foreclosure. The doctrine treats such restrictions as contrary to public policy because a mortgage must function solely as security for an obligation rather than an outright transfer of title.
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Common Law
Restatements
Study Supplements
How it applies
Common Examples
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Automatic Title Transfer Upon Default
Carmen Choi borrowed funds from Canyon Construction secured by a mortgage on her warehouse. The loan documents included a side letter stating that any missed payment would cause full title to vest immediately in Canyon Construction with no opportunity for Carmen to pay the debt and recover the property. After one late installment Canyon Construction recorded a deed asserting ownership. Carmen tendered the full balance plus interest but Canyon Construction refused the payment.
Purchase Option Incident to Mortgage
Cynthia Cortez granted a mortgage on her commercial building to Cobalt Energy. At the same closing the parties executed an option allowing Cobalt Energy to purchase the building for a fixed sum upon any default. When Cynthia missed a payment Cobalt Energy sought to enforce the option and acquire the property without foreclosure. Cynthia sued to prevent enforcement of the option.
Common questions
Frequently Asked
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What makes an agreement an impermissible clog on the equity of redemption?+
An agreement clogs the equity of redemption when it is made at the time of the mortgage and either makes redemption impossible or converts the mortgage into an absolute conveyance upon default or another triggering event. Courts invalidate such terms because they undermine the fundamental character of a mortgage as security for repayment rather than a sale.
Supporting sources
Does the mortgagor's sophistication or the commercial nature of the loan affect whether a provision clogs the equity of redemption?
No. Courts apply the prohibition on clogging even when the parties are sophisticated commercial entities that negotiated at arm's length. The public policy protecting the equity of redemption operates regardless of bargaining power or the risk profile of the transaction.
Supporting sources
Can a mortgagee enforce an option to purchase the mortgaged property granted at the time of the loan?+
Courts may refuse specific performance of such an option because it allows the mortgagee to acquire the property by means other than foreclosure and thereby renders the land irredeemable. The option is treated as a clog on the equity of redemption.
Supporting sources
When may a debtor validly waive the right of redemption?+
In non-consumer transactions a debtor may waive the right of redemption only by an agreement entered into and authenticated after default has already occurred. Any attempt to waive the right in the original security agreement or before default is ineffective.
Supporting sources
Real PropertyMortgages/security devices · Security relationshipsUBEIntermediate