First Principles of Business Law

5. Using property as a security

5.2.1. Registered mortgages of land

If Albert decides to buy land for his business he will need enough money to pay the purchase price when the sale is completed. Albert does not have enough money of his own for this purpose and will have to borrow a substantial sum, either from a bank or from another lender.

Albert wants to know how the land he buys can be used to provide security to a lender while Albert himself keeps the possession and use of the property.

Which of the following statements is correct?

(a) It is possible for Albert to give a lender real rights in the land he purchases as a security for the repayment of a loan without losing the right to possess and use the land for his business.

(b) If Albert gives a lender real rights in the land he purchases as a security for the repayment of a loan, he will necessarily lose possession and use of the land until the loan is repaid.