Term
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Definition
| The borrower (the borrower GIVES/GRANTS the mortgage) |
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Term
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Definition
| The lender (the lender RECEIVES the mortgage) |
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Term
| What is the common misconception w.r.t who gives the mortgage? |
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Definition
| The common misconception is that the bank gives the mortgage. This is WRONG. The borrower gives the mortgage. |
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Term
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Definition
| Rights over property (real & personal) which a mortgagor gives to a mortgagee as security against money which the mortgagee has leant to them. |
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Term
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Definition
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Term
| What different types of property can you mortgage? |
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Definition
| Real property, ships, oil paintings, stocks & shares, aeroplanes... (must find a mortgagee who wants to take your property as security) |
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Term
s1(2)(c) LPA - Mortgage = an interest which is capable of being legal...
How do you create a legal mortgage? |
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Definition
1) s52 (1) LPA - must be done by deed
2) s1LP(MP)A = how to make a deed
3) s85 LPA - you must execute a deed which says that you are charging your land by way of legal mortgage |
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Term
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Definition
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Term
| How can you create an informal mortgage of a legal interest? (equitable mortgage) |
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Definition
Must be done by a contract which complies with s2LP(MP)A
1) Contain all the terms
2) Signed by both parties
3) In writing |
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Term
| What is an informal mortgage of a legal interest? |
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Definition
It is a type of equitable mortgage.
Mortgage which has been created by a contract... therefore a mere agreement to create a mortgage (rather than doing it by deed). Usually used for short term borrowing, when the parties wish to avoid the formalities of a full legal mortgage. |
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Term
| United Bank of Kuwait v Sahib [1997] |
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Definition
IT IS NO LONGER POSSIBLE TO CREATE AN INFORMAL MORTGAGE OF A LEGAL INTEREST BY THE DEPOSIT OF TITLE DEEDS... NEEDS A CONTRACT
WHEN MAKING AN INFORMAL MORTGAGE OF A LEGAL INTEREST, IF IT DOESN'T COMPLY WITH S2LP(MP)A, IT WILL NOT BE AN ENFORCEABLE EQUITABLE MORTGAGE |
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Term
| What are the two types of equitable mortgage? |
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Definition
1) Informal mortgage of a legal interest
2) Mortgage of an equitable interest |
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Term
| What is a mortgage of an equitable interest? |
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Definition
It is a type of equitable mortgage.
It arises where the mortgagor only holds an equitable interest in whatever it is that he is mortgaging. |
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Term
| How do you create a mortgage of an equitable interest? |
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Definition
| s53(1)(c) LPA - must be in writing. |
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Term
| What are the different rights of the mortgagor? |
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Definition
1) Legal right to redeem mortgage on a specified date... legal right, as set out in the contract, to redeem the mortgage on a specified date.
2) Equitable right of redemtion / equitable right to redeem - allows the mortgagor to redeem mortgage once capital and interest have been paid back to mortgagee |
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Term
| What is the purpose of the equitable right of redemtion? |
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Definition
RECOGNISES THAT A MORTGAGE IS SECURITY FOR A LOAN, NOT AN OPPORTUNITY TO TAKE PROPERTY FROM SOMEONE WHO IS WILLING AND ABLE TO PAY - THE MORTGAGE SHOULD BE CAPABLE OF BEING REDEEMED.
With the legal right of redemption, if the mortgagor did not finish paying on the date set out, the borrower forefited the entire mortgaged estate (even if the money owed was only a small fraction of the land's value). To take advantage of this, unscrupulous lenders often made it difficult for borrowers to repay on the specified date. STEP IN EQUITY...
Equity intervened to prevent a borrower losing his property in this way, by allowing mortgagor to repay the loan and redeem the mortgage after the legal date of redemption had passed. |
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Term
| Equity of redemption means that equity looks with suspicion upon anything which might interefere with the mortgagor's right of redemption. What are the 5 categories of things which might do just that? |
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Definition
1) Postponment of redemption
2) Options to purchase
3) Collateral advantages
4) Unconscionable terms
5) Undue influence |
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Term
| In what way could 'postponment of redemtion' affect the mortgagor's right of redemption? |
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Definition
| If the right of redemption is so far in the future as to render the right to redeem illusionary. |
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Term
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Definition
| THE COURT WILL NOT ALLOW A MORTGAGE TERM WHICH PREVENTS REDEMPTION ALTOGETHER |
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Term
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Definition
POSTPONEMENT OF REDEMPTION - IF THE DATE FOR REDEMPTION IS SO FAR IN THE FUTURE THAT IT RENDERS THE RIGHT OF REDEMTION AS ILLUSIONARY, THE COURTS WILL STRIKE IT DOWN
A clause in a commercial mortgage of a 17.5 year lease was struck down because it postponed the legal date of redemption until 6 weeks before the lease expired. |
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Term
| Knightsbridge Estates Trust v Byrne [1939] |
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Definition
IN CERTAIN CIRCUMSTANCES, COURT WILL NOT FIND A SUPER FAR AWAY DATE OF REDEMPTION TO BE INEQUITABLE
Borrower wanted to redeem earlier. Lender refused.
Court upheld a mortgage term preventing redemtion for 40 years from the date of the loan. This was because the mortgage was an arm's length commercial bargain, mortgage covered a freehold property, and the borrower had negotiated a favourable rate of interest.
Court refused to intervene and find that the right to redeem had been rendered illusory. |
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Term
| Compare Fairclough v Swan Breweries [1912] and Knightsbridge Estate Trust v Byrne [1939] |
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Definition
Both cases are to do with postponed dates of redemption.
Knightsbridge concerned a commercial arm's length baragain in which the borrower had negotiated a favourable rate of interest. Also, mortgage covered a freehold.
Fairclough concerned a commercial mortgage of a leasehold estate. Redemption date = 6 weeks before the lease expired. |
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Term
| In what way could 'an option to purchase' affect a mortgagor's right of redemption? |
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Definition
| Options to purchase are usually contingent upon the borrower's failure to do something e.g. failure to keep up with repayments. |
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Term
| Samuel v Jarrah Timber and Wood Paving [1904] |
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Definition
| IF AN OPTION TO PURCHASE IS GRANTED AT THE SAME TIME AS THE MORTGAGE, IT WILL ALMOST CERTAINLY BE INVALIDATED... AS THE LOAN WAS OBVIOUSLY CONDITIONAL UPON GRANTING THE OPTION |
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Term
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Definition
| IF AN OPTION TO PURCHASE IS GIVEN IN A SEPARATE AND INDEPENDENT TRANSACTION, THE COURT MAY UPHOLD IT - AS THE LOAN WAS THEREFORE NOT CONDITIONAL UPON GRANTING THE OPTION |
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Term
| Why would the courts look upon 'collateral advantages' with suspicion? w.r.t the equitable right of redemption? |
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Definition
| Because in principle, a lender is entitled to nothing more than repayment of the loaned sum, plus interest. Therefore, anything gained above and beyond repayment + interest = collateral advantage. Any collateral advantages gained will be considered suspiciously. A collateral advantage may be struck down if it is unconscionable, in the nature of a penalty, or if it is repugnant to the equitable right to redeem. |
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Term
| In what circumstances will the courts strike down a term which gives a collateral advantage? |
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Definition
| Where the collateral advantage = unconscionable, in the nature of a penalty, or if it is repugnant to the equitable right to redeem. |
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Term
| What is a typical example of a 'collateral advantage'? |
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Definition
| Where the mortagee to a pub makes it a condition of the loan that the borrower only sells their products. The courts have generally upheld these agreements, so long as they do not extend beyond the length of the mortgage. |
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Term
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Definition
IF A COLLATERAL ADVANTAGE IS NEITHER UNCONSCIONABLE, NOR REPUGNANT TO THE RIGHT TO REDEEM, NOR CONTINUES BEYOND THE REDEMPTION DATE, IT WILL BE UPHELD BY THE COURTS.
OBITER - IF A COLLATERAL ADVANTAGE IS PART OF THE MORTGAGE, IT CANNOT LAST BEYOND THE MORTGAGES DURATION
Beer tie was set for duration of the mortgage. After two years, mortgagor tried to argue that the beer tie was a clog on the equity of redemtion.
HELD - it was not. However, if it lasted beyond the duration of the mortgage, it would be. |
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Term
| Noakes & Co v Rice [1902] |
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Definition
| IF A COLLATERAL ADVANTAGE ENDURES BEYOND THE DATE OF REDEMPTION, IT WILL BE STRUCK DOWN. (however, see Kreglinger) |
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Term
| Kreglinger v New Patagonia Meat & Cold Storage [1914] |
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Definition
IF THE COLLATERAL ADVANTAGE IS CONSIDERED AS WHOLLY INDEPENDENT OF THE MORTGAGE TRANSACTION, AND IT HAS BEEN VALIDLY ENTERED IN TO, THE COURT MAY ALLOW IT TO CONTINUE BEYOND THE ORDINARY MORTGAGE TERM.
Case concerned two commercial entities, of equal bargaining power. |
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Term
| Cityland and Property v Dabrah [1968] |
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Definition
INFRINGING WITH THE EQUITABLE RIGHT OF REDEMPTION
W.R.T UNCONSCIONABLE TERMS - INEXPLICABLE INTEREST RATE AND AN IMBALANCE BETWEEN THE BARGAINING POWERS OF THE LENDER AND THE BORROWER = TERM STRUCK OUT, COURT ADJUSTED THE INTEREST RATE. |
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Term
| Multiserve bookbinding v Marden [1979] |
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Definition
INFRINGING WITH THE EQUITABLE RIGHT OF REDEMPTION
W.R.T UNCONSCIONABLE TERMS, COURT ATTEMPTED TO DEFINED WHAT WOULD = UNCONSCIONABLE PRACTICE TAKING ADVANTAGE OF A YOUNG, INEXPERIENCED OR IGNORANT PERSON, BY INTRODUCING TERMS WHICH NO SENSIBLE, EXPERIENCED WELL ADVISED PERSON WOULD HAVE ACCEPTED. |
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Term
| What are the different types of consent to a mortgage that you can have? |
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Definition
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Term
| If all those who hold an interest in some property are not party to the forming of a mortgage, and are not aware that the mortgage has been created, what happens? |
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Definition
In order for a mortgage to be enforceable, you must have the consent of all those who have an interest in the mortgaged property.
If the mortgagee wishes to enforce his right to posession in the event of default, he will not be able to. Williams & Glyn's Bank Ltd v Boland [1981] |
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Term
| Bristol and West Building Society v Henning [1985] |
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Definition
| POSSIBLE TO FIND IMPLIED CONSENT TO A MORTGAGE. WIFE KNEW THAT A MORTGAGE WAS BEING GRANTED IN ORDER TO ENABLE THE PROPERTY TO BE BROUGHT. IT WAS THEREFORE IMPLIED THAT SHE CONSENTED TO LENDER'S RIGHTS TAKING PRIORITY OVER HER OWN, EVEN THOUGH SHE WAS NOT PARTY TO THE MORTGAGE. |
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Term
| William & Glyn's Bank v Boland [1981] |
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Definition
| In order for a mortgage to be enforceable, you must have the consent of all those who have an interest in the mortgaged property. |
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Term
| In response to the case of William & Glyn's Bank v Boland [1981], what did mortgagee's start doing? |
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Definition
| Lenders rapidly adopted the practice of requiring all adult occupiers to sign a written form of consent to the mortgage. |
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Term
| In response to William & Glyn's Bank v Boland, lenders began requiring that all adults with an interest in the mortgaged property sign a written form of consent to the mortgage. However, even with this precaution taken, what could create a big problem for the mortgager? |
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Definition
| If any of the signatures are acquired under undue influence. |
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Term
| Avon Finance Co Ltd v Bridger [1985] |
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Definition
| A CHARGE WAS SET ASIDE BECAUSE A SON MISLED HIS ELDERLY PARENTS INTO BELIEVING THAT THEY WERE SIGNING A DOCUMENT CONNECTED WITH THEIR ORIGINAL MORTGAGE, NOT A FRESH MORTGAGE. |
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Term
| Kingsnorth Trust v Bell [1986] |
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Definition
JUDGE STATED - 'MORAL OF THE STORY IS TO INSISTE THAT 3RD PARTIES TAKE INDEPENDENT ADVICE BEFORE THEY SIGN'
A MORTGAGE WAS SET ASIDE BECAUSE THE HUSBAND HAD FALSELY ASSURED HIS WIFE, A JOINT TENANT, THAT IT WAS FOR A SHORT TERM LOAN WITH LITTLE RISK. |
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Term
| Coldunell Ltd v Gallon [1986] |
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Definition
IF THE MORTGAGEE MAKES AN EFFORT TO ENCOURAGE 3RD PARTIES TO SEEK INDEPENDENT ADVICE BEFORE SIGNING, THE MORTGAGE MAY NOT BE SET ASIDE
In this case, the lender wrote directly to the borrower's elderly parents. The borrower, their son, intercepted the letter, and visited the parents with a solicitor to obtain their signiature.
HELD - having written to the elderly couple and advised them to take independent advice, it was not the lender's fault if they failed to do so (even though they never got the letter). |
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Term
| Hewett v First Plus Financial Group plC [2010] |
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Definition
IF THERE ARE ANY ERRONEOUS MATERIAL FACTORS WHICH LEAD TO THE SIGNING OF THE AGREEMENT, AND THE MATERIAL FACTORS TURN OUT TO BE LIES, THIS COULD AMOUNT TO UNDUE INFLUENCE
In this case, the CA held that a hisband's failure to disclose an extra-marital affair to his wife could amount to undue influence. The wife agreed to the mortgage in order to save her home and to maintain what she (wrongly) believed was a stable family relationship, making the affair a material factor. |
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Term
| Royal Bank of Scotland v Etridge (No.2) [2002] |
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Definition
A LENDER WILL BE PUT ON ENQUIRY IF...
1) A WIFE GUARANTEED HE HUSBAND'S DEBTS OR THE DEBTS OF HIS COMPANY
2) WHERE SOMEONE WITH A NON-COMMERCIAL RELATIONSHIP GUARANTEED THE DEBTS OF ANOTHER. |
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Term
| What does it mean for a lender to be 'put on inquiry'? |
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Definition
| It is where, something in the nature of the transaction (for a mortgage) should ring alarm bells for the lender, and make them ensure that all those who consent to the mortgage are doing so without any undue influence |
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Term
| According to Royal Bank of Scotland v Etridge (No.2), what must a lender to to discharge their duty after being put on enquiry? |
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Definition
| They must show that they took reasonable steps to ensure that all parties (with an interest) sought independent advice before consenting to the transaction/mortgage. |
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Term
| CIBC Mortgages v Pitt [1994] |
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Definition
THE LENDER IS NOT PUT ON ENQUIRY WHERE MONEY IS JOINTLY ADVANCED FOR AN APPARENT JOINT BENEFIT
husband lied to bank and claimed money was for a holiday cottage for the family. Money was actually spent gambling. HELD – lender not put on enquiry, mortgage was upheld |
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Term
| Barclays Bank v Thomson [1997] |
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Definition
| THE LENDER IS ENTITLED TO RELY ON THE SOLICITOR UNDERTTAKING THE TASK OF EXPLAINING THE TRANSACTION, EVEN THOUGH THE SOLICITOR MAY WORK FOR THE HUSBAND AS WELL. |
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Term
| Equity and Law Homes Ltd v Prestige [1992] |
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Definition
WHERE A WIFE VALIDLY CONSENTS TO AN INITIAL MORTGAGE, BUT NOT TO A SUBSEQUENT LATER RE-MORTGAGE FOR A LARGER SUM, THE WIFE WILL GENERALLY ONLY BE BOUND TO THE EXTENT OF THE INITIAL MORTGAGE SUM
In this case, the implied consent given by a wife to a first mortgage was held to extend to a later remortgage made without her consens. However, that implied consent did not extend to a sum larger that that she had already agreed to...e.g. only liable for the first mortgage. |
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Term
| Technically, from what point may the mortgagee take posession of the mortgagor's property? |
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Definition
| Before the ink is dry on the mortgage deed. HOWEVER, that is technically, in practice, there are lots of limitations... |
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Term
| If the mortgagor defaults, what can the mortgagee do? |
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Definition
1) Action in contract for debt (not particularly useful, as if the borrower has defaulted, it probably means they have no money)
2) Right to posession (presumably they would get this in preparation for selling the property, however note, it is not necessary to take posession before you sell it)
3) Power of sale (ss101(1)(i) & 103 LPA) |
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Term
| Four Maids Ltd v Dudley Marshall [1957] |
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Definition
THE MORTGAGEE'S RIGHT TO TAKE POSESSION OF THE BORROWERS PROPERTY ARISES AS SOON AS THE MORTGAGE DEED IS EXECUTED... BEFORE THE INK BECOMES DRY
(however, = many limitations...this is only like a technical thing) |
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Term
| What are the ways in which the mortgagee can acquire possession of the property (if the mortgagor defaults) |
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Definition
1) Self-help, mortgagee can DIY (Ropaigealach v Barclays Bank [2000]
2) Possession by court order |
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Term
| What are the drawbacks to a lender seeking possession of the defaulted borrower's property by the DIY way? |
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Definition
| s36 Criminal Law Act makes it an offence to use or to threaten violence for the purpose of securing entry. Therefore, unless the mortgagor acquiesces to you telling them to get out of the house/hand over the property, this = risky strategy and you could face criminal proceedings. |
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Term
| What are the drawbacks to a lender seeking possession of the defaulted borrower's property by the court order way? |
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Definition
1) s36 Administration of Justice Act 1970, gives the court the right to postpone a possession order if it seems likely to the court that the borrower will be able to pay the sum due within a reasonable time. (NOTE - S36 ONLY APPLIES TO MORTGAGES OF LAND WHICH CONSISTES OF OR INCLUDES A DWELLING HOUSE)
2) The pre-action protocol |
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Term
| Ropaigealach v Barclays Bank [2000] |
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Definition
W.R.T LENDER TAKING POSSESSION OF DEFAULTED BORROWER'S PROPERTY - A PRIOS COURT ORDER IS NOT NECESSARY, THE LENDER CAN TAKE POSSESSION THEMSELVES.
NOTE = drawbacks to the DIY approach, in this case it was feasible, because the property was vacant. |
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Term
| Under s36 Administration of Justice Act, a court can postpone the granting of a possession order to a lender if it appears as though the borrower can repay monies due within a 'reasonable' amount of time. How does one determine what a 'reasonable' amount of time is? |
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Definition
CASE LAW, OBVIOUSLY!!!
C&G v Norgan [1996] - reasonable period must be considered in relation to how long the mortgage is for |
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Term
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Definition
| IN DETERMINING WHETHER THE BORROWER CAN REPAY MONEY DUED WITHIN A 'REASONABLE PERIOD' (S36 AJA), COURT WILL CONSIDER REASONABLE PERIOD IN RELATION TO HOW LONG THE MORTGAGE IS FOR |
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Term
| Target Home Loans v Clothier [1994] |
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Definition
| IF A BORROWER HAS GONE IN TO DEFAULT AND LENDER = SEEKING POSSESSION ORDER FORM THE COURT, THE COURT MAY GRANT THE BORROWER THE OPPORTUNITY TO SELL THE HOUSE HIMSELF. |
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Term
| Bristop and West Building Society v Ellis [1996] |
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Definition
| UNDER S36 AJA, THE COURT CAN POSTPONE A POSSESSION ORDER (SOUGHT BY A LENDER). HOWEVER, A POSTPONEMENT IS LESS LIKELY IF THE LENDER MAY BE PREJUDICED BY FALLING PROPERTY VALUES. |
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Term
| What is the pre-action protocol? |
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Definition
| The pre-action protocol is an initiative which deals with possession claims in relation to residential properties. The purpose of the protocol is to encourage lenders to seek and discuss alternatives to possession with the borrower, so that possession proceedings are seen as a last resort. If a case reaches court, the lender will have to explain to the court exactly what it has done to comply with this protocol. |
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Term
| What are the circumstances in which a mortgagee can exercise it's power of sale? |
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Definition
1) Notice requiring payment has been served, and default has been made on the payment for three months after the service
or,
2) Some interest under the mortgage is in arrear and unpaid for two months after becoming due (not referring to 2 months interest in arrear, it could be just £1 outstanding for 2 months)
or,
3) There has been a breach of some other mortgage provision (express or implied by the LPA). |
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Term
| Which part of which act governs when a mortgagee (lender) can exercise it's power of sale? |
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Definition
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Term
| Which part of which act grants the mortgagee with the power of sale? |
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Definition
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Term
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Definition
| POWER OF SALE IS NOT INCOMPATIBLE WITH ART. 1 HUMAN RIGHTS ACT |
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Term
| What does s105 LPA set out? |
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Definition
| It sets out the duties the lender has to deal with monies raised in the sale of the property |
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Term
| If a mortgagee exercises the power of sale provided under s101 LPA, and sells the property to an innocent purchaser... however, the requirements in s103LPA haven't yet been satisfied. What happens? |
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Definition
| A sale to an innocent purchaser will be valid. The borrower's remedy will be to claim damages from the lender for selling too early (s104LPA) |
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Term
| At what point is the borrower's right to redeem lost? |
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Definition
| As soon as the lender enters in to a contract to sell the property. |
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Term
| If a person has lots of mortgages on a property, and the lenders of the first mortgage take posession of the house and sell it. What happens w.r.t the new owner of the house, and the additional mortgages? |
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Definition
The buyer takes free of any mortgages.
The other mortgagees security is lost. However, the first mortgagee will be obliged to pass on any surplus proceeds of sale to the next mortgagee... and so on and so forth. |
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Term
| If there are lots of mortgages on a property, what happens w.r.t entitlement to sale proceeds? |
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Definition
| It goes in order (see later for how order is determined).... If the selling mortgagee is the second mortgagee, it sells subject to the first mortgagee. |
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Term
| What duty does the lender have w.r.t selling the property? |
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Definition
| The lender must take reasonable care to obtain a proper price / the true market value - Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] |
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Term
| Cuckmere Brick Ltd v Mutual Finance Ltd [1971] |
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Definition
WHEN SELLING THE PROPERTY, A LENDER IS UNDER A DUTY TO TAKE REASONABLE CARE TO OBTAIN THE TRUE MARKET VALUE OR THE PROPER PRICE. HOWEVER, THE LENDER IS ENTITLED TO SELL WHEN HE LIKES, EVEN IF A HIGHER PRICE COULD BE OBTAINED BY MARKETING THE PROPERTY FOR A LONGER PERIOD.
In this case, the lender failed to mention one of two planning permissions which had been granted for the property. This resulted in a reduced price being paid and the lender was held liable to the borrower to make up the difference. |
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Term
| Newport Farm Ltd v Damesh Holdings Ltd [2003] |
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Definition
| THE LENDER'S DUTY TO OBTAIN THE BEST PRICE DEPENDS UPON THE CIRCUMSTANCES OF THE CASE. IT IS FOR THE LENDER TO MAKE AN INFORMED JUDGEMENT AS TO HOW THE SALE SHOULD BE ADVERTISED AND TO DECIDE HOW LONG THE PROPERTY SHOULD BE LEFT ON THE MARKET. PERFECTION IS NOT REQUIRED, AND THE LENDER WILL NOT BE FAULTED IF THE SALE PRICE IS BROADLY WITHIN THE CORRECT BRACKET OR AN ACCEPTABLE MARGIN OF ERROR. |
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Term
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Definition
| THE COURT HELD THAT THE LENDER HAD ACTED REASONABLE BY ACCEPTING £1.625M FOR AGRICULTURAL LAND VALUED IN THE RANGE OF £1.6M TO £1.9, |
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Term
| Birmingham CitiZens Permanent Building Society v Caunt [1962] |
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Definition
| IN ADDITION TO S36 AJA, THE COURT HAS A FURTHER INHERENT JURISDICTION TO POSTPONE POSSESSION, BUT GENERALLY ONLY FOR UP TO 28 DAYS. |
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Term
| Silven Properties Ltd v Royal Bank of Scotland plc [2004] |
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Definition
THE LENDER IS ENTITLED TO SELL THE PROPERTY AS IT STANDS AND IS UNDER NO OBLIGATION TO IMPROVE IT OR TO INCREASE ITS VALUE - JUST MUST GET REASONABLE PRICE FOR AS IT STANDS. FURTHERMORE, THE LENDER HAS AN UNFETTERED DISCRETION TO DECIDE WHEN TO SELL.
The mortgagor had defaulted. The mortgagee's agent, in selling the property, started applications for planning permission with a view to increasing the value of the property sold. The agent subsequently decided not to proceed with the applications and sold immediately.
Mortgagor argued that the agent was under an obligation to proceed with the applications in order to sell the property at the best obtainable price
HELD - the lender was held to be under no duty to apply for planning permission or to pursue the grant of leases to increase the best reasonably obtainable price. |
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Term
| Downsview Nominees Ltd v First City Corporation Ltd [1993] |
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Definition
THE LENDER IS UNDER NO GENERAL DUTY OF CARE GOING BEYOND OBTAINING A PROPER PRICE.
AS LONG AS ONE OF THE MOTIVES FOR SALE IS THE REALISATION OF THE LENDER'S SECURITY, AND THE TAKE REASONABLE CARE TO OBTAIN A PROPER PRICE. IT DOES NOT MATTER IF THERE ARE OTHER BUSINESS MOTIVES FOR THE SALE AS WELL. |
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Term
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Definition
| COURT HELD THAT THE MORTGAGEE WAS ENTITLED TO SELL FOUR PROPERTIES AS A PORTFOLIO AT A DISCOUNT FROM WHAT COULD HAVE BEEN OBTAINED FROM THE INDIVIDUAL SALE OF EACH OF THE PROPERTIES. GIVEN THE PREVAILING ECONOMIC CONDITIONS, THE MORTGAGEE WAS ENTITLED TO PREFER AN EARLIER SALE OF ALL FOUR TO THE RISKS OF WAITING FOR BETTER OFFERS. THE MORTGAGEE WAS NOT EXPECTED TO TAKE THE RISK OF WAITING FOR AN INDEFINITE PERIOD TO REALISE ITS SECURITY. |
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Term
| Palk v Mortgage Services Funding [1993] |
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Definition
IN CERTAIN CIRCUMSTANCES, THE COURT MAY AGREE TO AN ACCELERATED SALE AGAINST THE LENDER'S WISHES.
in this case, the debt was worth more than the property. The lender wanted to rent the property out and wait for a market recovery.
However, since the borrower's arrears would have continued to increase by £30,000 pa, the borrower was allowed toc ut his losses and sell the property instead. |
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Term
| To whom is the lender's duty owed (on selling the borrower's property)? |
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Definition
| The duty to obtain the proper price is owed to the mortgagor and any surety or guarantor for the mortgagor. |
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Term
| What happens if... the mortgagee sells the property, and the property sells for more than what is owed to the mortgagee? |
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Definition
| The lender becomes a trustee of the surplus proceeds of sale (s105LPA_. The lender, therefore, must hand the surplue to the person next entitiled. e.g. a second mortgagee if there is one... and eventually the borrower. |
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