A Hawaii real estate licensee is advising a buyer who is purchasing a property in Waikiki that is registered in the Land Court system and encumbered by an existing first mortgage. The seller wants to sell the property 'subject to' the existing mortgage. The buyer's attorney discovers that the existing mortgage was not properly registered with the Land Court and is not noted on the current certificate of title. Under Hawaii's Land Court system, which of the following best describes the legal effect of this unregistered mortgage on the buyer?
Correct Answer
A) The unregistered mortgage is not enforceable against the buyer who takes title in good faith, because the Land Court certificate of title is conclusive as to encumbrances and an unregistered mortgage does not appear on the certificate
Hawaii's Land Court (Torrens) system provides a state-guaranteed certificate of title that is conclusive as to the state of title and encumbrances on the property. A fundamental principle of the Torrens system is that encumbrances not registered with the Land Court and not noted on the certificate of title are generally not enforceable against a subsequent purchaser who takes title in good faith. The buyer is entitled to rely on the certificate of title as a complete and accurate statement of all encumbrances. This is one of the most powerful protections offered by the Land Court system and a key distinction from the Regular System (Bureau of Conveyances).
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Related Topics & Key Terms
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Related Concepts
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
The loan-to-value ratio (LTV) is the percentage of a property's appraised value or purchase price (whichever is lower) that is being financed through a mortgage. LTV = Loan Amount / Property Value.
A comparison of the major mortgage loan types—conventional, FHA, VA, and USDA—covering their eligibility requirements, down payment amounts, mortgage insurance rules, and best use cases.
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