Subrogation, and the Abolition of Tacking

In one line

Somebody other than the borrower who pays off a mortgage steps into the lender's shoes and gets his rights, but nobody can improve the ranking of his own debt merely by paying off an earlier one.

In exam wording: section 92 provides that any of the persons referred to in section 91, other than the mortgagor, and any co-mortgagor, shall on redeeming property subject to the mortgage have, so far as regards redemption, foreclosure or sale, the same rights as the mortgagee whose mortgage he redeems may have against the mortgagor or any other mortgagee; and this is called the right of subrogation.

Section 91: who may redeem besides the mortgagor

Redemption is not the mortgagor's monopoly. Besides him, the following may redeem or sue for redemption:

(a) any person, other than the mortgagee of the interest sought to be redeemed, who has any interest in, or charge upon, the mortgaged property or upon the right to redeem it;

(b) any surety for the payment of the mortgage-debt or any part of it;

(c) any creditor of the mortgagor who has, in a suit for the administration of his estate, obtained a decree for sale of the mortgaged property.

The reason for opening the door so wide is that many people can be ruined by a mortgage they did not grant. A second mortgagee is wiped out if the first forecloses. A surety must pay if the debt is not met. A buyer of the equity of redemption loses what he paid for. Each of them should be able to protect himself by paying the debt, rather than watching the property go.

Note the exclusion in clause (a): the mortgagee of the interest sought to be redeemed cannot use the section, for the obvious reason that he is the person being redeemed.

Section 92: subrogation

Subrogation means standing in another's place. The person who pays off the mortgage does not simply discharge it; he takes it over.

Who gets it. Any of the persons in section 91 other than the mortgagor, and any co-mortgagor.

What they get. So far as regards redemption, foreclosure or sale, the same rights as the mortgagee whose mortgage he redeems had against the mortgagor or any other mortgagee.

Why the mortgagor is excluded is worth stating: when the mortgagor pays, the debt is discharged, because he is the person who owed it. There is nothing left to be subrogated to. Everyone else is paying somebody else's debt, and equity keeps the security alive in their hands.

Conventional subrogation. The section adds a second route. A person who has advanced money to a mortgagor with which the mortgage has been redeemed is subrogated to the redeemed mortgagee's rights if the mortgagor has by a registered instrument agreed that he shall be so subrogated.