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New Zealand law explained for everyone

Public Works Act 1981

Compensation - The award

99: Mortgaged land

You could also call this:

“How money is handled when mortgaged land is taken for public projects”

If someone takes your land for a public project and you’re supposed to get money for it, but you have a mortgage on that land, here’s what happens:

The person or group taking your land can use the money they owe you to pay off your mortgage instead of giving it directly to you. This helps make sure the bank gets paid.

If only part of your mortgaged land is taken, you and the bank can agree on how much of the mortgage should be paid off. If you can’t agree, a special group called a Tribunal will decide for you. They’ll make sure the remaining land is still good enough security for the rest of the mortgage.

Sometimes, if the amount of money is small (less than $250), the government or local council might decide to give you the money directly, even if you have a mortgage.

When they talk about ‘mortgage debt’, they mean the money you owe on your mortgage, plus up to 6 months of interest after the bank was told about your land being taken.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM46956.

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Part 5 Compensation
The award

99Mortgaged land

  1. If the land in respect of which compensation is awarded, or compensation or purchase money is agreed to be paid, is subject to a mortgage, the compensation or purchase money or so much of it as is required for the purpose shall, on the application of the mortgagee, be paid in discharge of the mortgage debt, or part of it, so far as the compensation or purchase money will go; and if the land is part of land subject to a mortgage debt, and the mortgagee requires a part of the debt to be discharged—

  2. the mortgagor and mortgagee may agree; or
    1. failing agreement, the Tribunal shall determine—
        1. what part of the compensation or purchase money shall be paid in discharge of part of the mortgage debt, so that the remaining part of the mortgaged land constitutes as good security as before for the part of the mortgage debt remaining undischarged.

      1. Notwithstanding anything in this section, the Minister or local authority, as the case may be, shall have a discretion to pay the mortgagor the full amount of any compensation where the compensation does not exceed $250, without incurring any liability to the mortgagee.

      2. The expression mortgage debt in this section includes the interest payable on such mortgage up to 6 months beyond the day on which notice was received by the mortgagee of the land affected being taken under this Act.

      Compare
      • 1928 No 21 s 94