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Mortgages

Legal interest in land under s1 (2) (c) LPA 1925 and


o Brower is mortgagor
o Lender is the mortgagee
o Under s85 LPA the mortgagor creates a lease which is terminated
when the charge is paid.
o Under s86 LPA the mortgagor creates a sublease which is terminated
when the charge is paid regarding leases.
o S87 LPA give powers to the mortgagee
o (s4 gives the first mortgagor to trigger the first registration if it isnt
registered)
is a registerable disposition under s27 (2) LRA 2002
Explain why mortgages are important (securer, less payment back and less
hassle), c/p with personal loans
Define secured(This is important)
o The normal method of financing such a purchase is to obtain a loan
from a bank, building society or finance house. Since large sums of
money are involved the lender will seek security for the money
advanced and this will normally take the form of a mortgage of the
property to be purchased. Mackenzie quote
o Mortgage is the traditional name for the arrangement by which
property becomes security for a debt but, as we shall see the correct
modern term is normally charge. Mackenzie quote
o Santley v Wilde [1899] a charge is a conveyance of land as
secured for the payment of a debt or the discharge of some other
obligation.
Remedies available to the owner of registered land charge
mortgagors right are the equity of redemption- explain
The Mortgagees Remedies
1) Personal remedy for suing on the covenant to repay
o Contract between mortgagor and mortgagee
o Can sue for breach
o Problems- negative equity
2) Foreclosure (This need minimum discussion on it)
o Very rare in uk but common in America
o Cant go await under the contract for the payment of mortgage is
broken (Williams v Morgan [1906]) thus providing the Mortgagor
gets one last opportunity to repay the debt
o Mortgagee becomes the owner
o Re Farnol Easdes Irvine and Co Ltd [1915]- A court order is
required for foreclosure

o Mortgagee is not liable to pay more than the debt owed to him, if
the property is valued more.
o Mortgagor can request sale of property instead (s91 (2) LPA
1925)
o Palk v Mortgage Service Funding plc [1993] - sale is appropriate
where the outcome suits the mortgagor
o Another reason why this is unpopular is because the courts can
go back and make an order to reopen the property (Campbell v
Holyland (1877))
3) Possession
leads
to this

o Right to possess the land/property


gain rent from it by letting it
take possession and rent it out to mortgagor
o Only exercised if mortgagor refuses to leave the property
o Usually need a court order to re-enter; this buys the mortgagor
time (Cheltenham and Gloucester plc v Krausz [1997])

4) Sale (This is the important one so talk in detail)


o Most common mortgagee remedy
o The power for the mortgagee to sell the land in implied in the
deed by s101 (1) (a) but cannot be raised until one of the
requirement in s103 is met.
o 3 criteria under s103 of LPA
1. A notice requiring the payment has been served on the
mortgagor and the default has continued for three months
thereafter; or
2. Some of the interest payable is at least two months in
arrear; or
3. There has been breach of covenant in the mortgage deed
(other than that relating to the payment of money) or of
some provision of the LPA 1925.
o Explain what the new purchaser will need to do
Bailey v Barnes [1894] the purchaser must satisfy that
there is a power to sell under the mortgage but he does
not have to check that one of the conditions of exercise
has been met.
o Sale dont need a court order unlike foreclosure and can be
negotiated by any suitable manner (by auction or private
contract)
o However the court may delay the possession preluding sale if
the court believes that the mortgagor may be able to obtain a
higher price (Target Homes Loans Ltd v Clothier [1994]
o Palk v Mortgage Service Funding plc [1993] and Barrett v
Halifax Building Society (1995) took lenient approach to the sale

and allowed the Mortgagor to sell as he could obtain more


money for himself. Cheltenham and Gloucester plc v Krausz
[1997] criticised the view in Palk and Barrett case and the Court
of appeal stated that the powers under the administration of
justice act 1970 should not be used unless the full sum of
mortgage will be paid by using the procedure
o Where the mortgagor is still faced with a greater equity debt
than the value of the property the mortgagee will still be entitled
to immediate possession and sale.
o Mortgagee can apply for sale under s14 of the TOLATA 96 so
overreaching procedure can be used (Bank of Boroda v Dhillon
[1998])
o Due to various provisions in this area of law, namely;
TOLATA
Adminitrations of Justice act 1970
LPA
Undue influence
A wise mortgagee takes great care before deciding on the exact
approach to the issue on hand." Mackenzie
o S88 (1) and S89 (1) state that the purchaser will obtain full state
belonging to the mortgagor not just the lease or sublease which
was granted to the mortgagee
o Horsham Properties Group Ltd v Clark [2009] which was
confirmed in the case of Ropaigealach v Barclays Cank plc
[2000] states that the mortgage procedure is complaint with
ECHR. Ministry of Justice has proposed law which deals with
Mortgages and Human Rights.
o Mortgagees duties (Cuckmere Brick v Mutual Finance (1971)):
To act in good faith-(subjective) Kennedy v De Trafford
(1897) -Mortgagee should not act wilfully and recklessly
and this also stops the mortgagee from fraud, corruption,
collusion with the purchaser (Silven Properties v Royal
Bank of Scotland plc [2004]) and disadvantageous sales
for mortgagor
To take reasonable care (Downsview Nominees Ltd v
First City of London Corporation [1993]) - (objective)
where the mortgagor is likely to pay the sum within a
reasonable time he should be given another chance
because s36 of the administration of justice Act state the
mortgagor is likely to be able within a reasonable period
to pay any sums due under the mortgage. (implied in First
National Bank plc v Syed [1991]). However if peaceful re-

entry can be used then s36 does not apply (Ropaigealach


v Barclays Cank plc)
o impacts of these duties:
a. Cuckmere Brick v. Mutual Finance - Timing of sale
and Sale price
b. Compare with Standard Chartered Bank v Walker
c. Mode of Sale
d. Sale to self / related persons Tse Kwong Lam v
Wong Chit Sen
o Mortgagee becomes the trustee under s105 LPA 1925 and
should apply for proceeds in following order;
In payment of sums which were made prior to the
mortgage
In payment of costs, charges and expenses properly
incurred in arranging the sale
In payment of mortgage debt including interests and other
sums
Any balance should be paid to the mortgagor or the other
person entitled to the mortgage property
o If the sale does not raise the full sum to the mortgagee then he
may be able to sue under contract for full sum (RudgeRichens
(1873)). However the mortgagee may sue the mortgagor on a
later date, where the mortgagors only valuable asset is the
property.(West Bromwich Building Society v Wilkinson [2005])
o If two or more than two then s104 of LPA 1925 applies

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