Legal Issues In The Creation of Security - Part 2

SECURITY OVER FUTURE ASSETS

The common law has always denied the legality of taking security over future assets (ie assets which do not yet exist). At common law, therefore, security over future property by way of a mortgage or a charge is invalid. However, in Holroyd v Marshall³⁷, the House of Lords held that security over future assets is valid in equity by virtue of the contract of assignment. Hence, while it is not possible to have a legal mortgage over future assets, it is possible to take an equitable mortgage or charge over future assets. Security by way of pledge or lien, however, can never be taken over future assets, because there can be no physical delivery of future assets.