Solicitors Qualifying Examination (SQE) Practice Exa\

What happens when there is a mortgage on a property?

1. The mortgage should be included in the list of encumbrances

2. The mortgage is automatically discharged upon sale

3. The property is sold free of the mortgage after an undertaking

4. The seller's solicitor must pay off the mortgage before closing

The correct answer is: The property is sold free of the mortgage after an undertaking

A mortgage on a property represents a legal claim by a lender against the property, which generally remains in effect until it is satisfied or discharged. The correct answer, stating that the property is sold free of the mortgage after an undertaking, means that when a property is sold, the seller usually agrees to ensure that the mortgage is paid off, typically through an instruction conveyed by the lender to the seller’s solicitor. This process often includes assurances or undertakings that the mortgage will be dealt with at closing, enabling the buyer to acquire the property without having to take on the seller's mortgage obligations. This concept is important in real estate transactions, as it protects the buyer from any existing financial burdens associated with the property. Thus, if a seller's solicitor provides an undertaking to the lender, they assure that the proceeds from the sale will be used to pay off the outstanding mortgage, facilitating a clear transfer of ownership. Factors such as ensuring the mortgage is settled at closing are essential to maintaining the integrity of property transactions and protecting the rights of the buyer against prior encumbrances. This understanding reinforces the legal principle that encumbrances must be cleared for a property sale to proceed cleanly, aligning with standard practices in real estate law.