analogous inclusion in Civil Code, art. 824, no. 2. To sum up, the tenant’s rights will not prevail over the right of the mortgage creditor, except where the lease was concluded prior to the registration of the mortgage.

Under Portuguese law, property rights are ranked according to the maxim prior in tempore, potior in iure. Since the ranking of B’s right depends on prior registration, the fact that the personal servitude was registered after the registration of a mortgage on the property means that the personal servitude of B will not prevail against the prior mortgage. Note that mortgages constitute one of the few cases in Portuguese law where registration is necessary for the validity (as opposed to the enforceability) of a real right.53 If registered, Civil Code, art. 686 grants the mortgage creditor a priority right with regard to the proceeds of the sale, subject to special privileges that rank above the mortgage or real rights registered before the mortgage.54 There is no rule against the constitution of a personal servitude or a second mortgage on property which is already burdened with a mortgage. If a conflict arises, however, the first mortgage creditor has priority with regard to the proceeds of the sale (of all property and not only of the nude property). Further, in such a situation, the personal servitude would expire (Civil Code, art. 824: if the property is sold in execution, only real rights of use registered before the constitution of a mortgage or attachment of the property remain valid). The holder will then have a right to compensation for termination of his/her right, but his/her claim will rank lower than the claim of the mortgage creditor. Normally, the price obtained in a sale in execution would not be enough to pay this compensation.

If A created two mortgages (in favour of B and C), instead of a mortgage and a personal servitude, the situation will be different. The court will order the selling of the property free from the mortgages and grant the creditors a share of the proceeds resulting from the sale, according to their priority ranking.

Scotland

Competition between real rights is regulated by the maxim prior tempore, potior iure: prior in date, preferable in right.55 In the event of A’s

53In general, registration has declarative value: it renders the registered rights enforceable against third parties.

54This only applies to real rights registered after the registration of the mortgage.

55Reid et al., Property, paras. 684–7. This is now subject to the rules of land registration

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creditors attaching the property or A becoming insolvent, B’s timelimited right is not included in the attachment or insolvency assets (for it is an asset in B’s estate and not in A’s). Provided that B’s right has been constituted as a real right, it binds attaching creditors and survives A’s insolvency.

‘Diligence’ is the name given by Scots law to the procedure for enforcing debts against a debtor’s assets. The relevant diligence to attach land is adjudication, although it is not often used.56 The creditor must obtain a decree of adjudication from the Court of Session. That has the effect of a heritable security (mortgage) in favour of the adjudging creditor. The decree must be registered in the appropriate Land Register. If the debt remains unsatisfied at the end of a ten-year period (the ‘legal’), the creditor can acquire ownership of the land. In the meantime, by a further court action (of maills and duties), the creditor can draw the rents from any tenants or, if there is none and the debtor is in personal occupation, eject the debtor and let out the subjects.57 The decree of adjudication carries with it the rent due at the ensuing term and all subsequent terms, but not arrears due prior to the date of the decree.58 The Scottish Parliament has enacted legislation to replace adjudication with a new diligence known as ‘land attachment’, which will make it easier for a debtor’s land to be sold by creditors.59 However, the relevant provisions have not yet been brought into force and it is not clear that they will be.

The precise behaviour of B’s lease in the event of A’s insolvency is complex. Assuming that A is an individual, the relevant insolvency regime is sequestration and the insolvency official the ‘trustee in sequestration’. Although the lease survives A’s insolvency and B is able to remain on the property,60 the extent to which the trustee in sequestration is liable to implement A’s obligations depends on how the

where, by reason of the positive effect of the Land Register, a later registration defeats an earlier one, subject to the possibility of the Register being rectified because it does not accurately reflect what should be the position applying the ‘ordinary rules’ of property law. The Scottish Law Commission proposes to abolish this ‘bijural’ aspect of registration in the Land Register: Scottish Law Commission, Report on Land Registration, para. 3.11.

56See Gretton and Maher, ‘Diligence’, pp. 189–215 for an overview.

57Ibid. para. 202. 58 Stewart, Treatise Diligence, p. 621.

59Bankruptcy and Diligence (Scotland) Act 2007, Part 4.

60Unless, owing to the circumstances in which it was concluded, the lease is reducible as an unfair preference or a gratuitous alienation in B’s favour.

insolvent estate is administered. The trustee is liable to implement the conditions of the lease at least to the extent of rents received by him/ her.61 But he/she may simply sell the property without adopting the lease, in which case it is said that he/she incurs no liability for any special obligations (such as repairs) incumbent on A. In respect of those claims, B must rank as a personal (that is, unsecured) creditor on A’s estate.62

Security over land in Scots law is constituted by a standard security.63 One of the conditions of such a security is that the debtor may not let the property without the creditor’s consent.64 Any lease granted without the creditor’s consent is voidable at the instance of the creditor,65 that is to say it is valid but may be reduced by the creditor. Once reduced, the creditor may remove the tenant. In the case of an assured or short assured tenancy, particular statutory procedures must be followed, but the tenant can still be removed.66 Pending the removal of the tenant, the creditor is entitled to receive the rent.67

An adjudging creditor68 and a trustee in sequestration69 both take subject to previously constituted real rights and so are bound by B’s liferent. It is not included in the insolvent estate, for it is an asset in B’s estate and not in A’s.

South Africa

The property of A, subject to the lease in favour of B, may be attached and sold in execution by A’s creditors, but always subject to the lease, unless B has agreed otherwise.70 The time-limited right of B is not therefore included in the assets which can be attached on A’s bankruptcy/insolvency.

The insolvency of the landlord (A) does not terminate the lease and the lease is not included in the insolvency assets of A.71 The administrator

61Harvie v. Haldane (1833) 11, S872 (IH).

62Rankine, Leases, pp. 52–3; Paton and Cameron, Landlord and Tenant, pp. 192–3; Harvie v. Haldane (1833) 11, S872 (IH); Harkness v. Rattray (1878) 16 SLR 117 (IH).

63Conveyancing and Feudal Reform (Scotland) Act 1970, Part 2, especially s. 9 (henceforth CFR(S)A 70).

64CFR(S)A 70 Schedule 3, Standard Condition 6.

65Trade Development Bank v. Warriner and Mason (Scotland) Ltd. 1980 SC 74 (IH).

66Tamroui v. Clydesdale Bank plc 1997 SLT (Sh Ct) 20.

67CFR(S)A 70 Schedule 3, Standard Conditon 10(3).

68Gretton and Maher, ‘Diligence’, para. 209.

69Bankruptcy (Scotland) Act 1985, s. 31(1)(b).

70High Court Rules r. 45(10); Schoeman v. Aberdeen Trading Co. (Pty) Ltd. 1955 1 SA 100 (C).

71Norex Industrial Properties v. Monarch SA Insurance Co. 1987 1 SA 827 (A) 837J; Smith, Insolvency, para. 175; Cooper, Landlord and Tenant, p. 323.

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in insolvency is obliged to sell the property subject to the lease and the tenant’s real right prevails over the right of a purchaser in a forced sale.72

The owner (A) of mortgaged property may, unless precluded by the mortgage agreement, conclude a lease of the mortgaged property and register a long lease without the mortgage creditor’s consent as long as it does not prejudice the mortgage creditor’s security.73 If the prior mortgage is enforced, the property must first be sold subject to the lease.74 Only if the highest bid is insufficient to discharge the mortgage debt, may it be sold free of the lease.75 The effect of such a sale is that the lease is extinguished.76 The tenant (B) has a claim for breach of contract against A for loss suffered.77 This claim will rank as a concurrent claim on the insolvency of A.

Likewise the property of A, subject to a personal servitude in favour of B, may be attached and sold in execution. However, the sale in execution will be subject to the usufruct of B.78 The time-limited usufruct of B is therefore not included in the execution assets of A.

In principle, the insolvency of the nude owner (A) does not terminate the personal servitude (usufruct, use or habitation) registered against the property. In a sale by the insolvency administrator, B is protected in that the property can only be sold and acquired by the purchaser subject to the personal servitude. Note, however, that if the nude ownership ripens during insolvency (for example, if the usufructuary dies), full ownership will immediately vest in the owner (A) and will thus become part of his/her insolvency assets.79

Under the Deeds Registries Act, a personal servitude can only be constituted over property already burdened with a prior mortgage with the written consent of the mortgage creditor. This consent must be to the effect that the personal servitude may be registered free from the bond.80 Consequently, unlike lease, a situation can never arise where on

72Shell Rhodesia v. Eliasov 1979 3 SA 915 (R) 917. A stipulation in a lease that it will terminate or be varied upon the sequestration of the landlord’s estate is null and void: Insolvency Act 24 of 1936, s. 37(5).

73Cooper, Landlord and Tenant, p. 24; ABSA Bank v. Sweet 1993 1 SA 318 (C).

74See Cooper, Landlord and Tenant, pp. 24, 304 and 323.

75Cooper, Landlord and Tenant, p. 25; Timm v. Kay 1954 4 SA 585 (T) 586.

76See decisions quoted in Cooper, Landlord and Tenant, p. 323 n. 75.

77De Wet and Van Wyk, Kontraktereg, p. 461.

78High Court Rules r. 45(10); Schoeman v. Aberdeen Trading Co. (Pty) Ltd. 1955 1 SA 100 (C).

79Wasseman v. Sackstein 1980 2 SA 536 (O). See Smith, Insolvency, para. 159.

80Deeds Registries Act 47 of 1937, s. 65(3). See Nel, Jones: Conveyancing, p. 211.