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SQE1 - Land Law > 9. Mortgages > Flashcards

9. Mortgages Flashcards

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1
Q

why are the courts and parliament prepared to intervene in the mortgagor-mortgagee relationship and declare terms void?

A

inequality of bargaining power between borrowers and lenders

particularly in the resi context where a borrower needs to borrow money to buy a home

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2
Q

fundamental legal principle re: mortgages

A

a mortgage should be security for a loan only, and not an opportunity for the lender to gain something more than the security (the equity of redemption)

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3
Q

rights of the borrower = equity of redemption:

A
  1. equitable right to redeem
  2. no postponement or prevention of redemption
  3. no collateral advantages
  4. no unconscionable terms
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4
Q

what is the equitable right to redeem?

A

a borrower now has an equitable right to repay (redeem) their mortgage any time the legal date of redemption has passed

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5
Q

in a resi context, when does the legal right of redemption arise?

A

usually within the first 6 months of the mortgage term

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6
Q

how are clauses which postpone redemption treated by the courts?

A

may be declared void (since it prevents the equitable right to redeem from being able to arise)

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7
Q

how are clauses which prevent redemption treated?

A

will be void

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8
Q

How must a legal mortgage be made?

A

Deed + registration

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9
Q

Does a mortgage trigger compulsory first registration?

A

Yes, if the land is unregistered

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10
Q

Can a mortgage be recognised even if it does not comply with deed + registration?

A

Yes, it will be recognised as an equitable mortgage, but it must at least comply with s2 LP(MP)A 1989:
1. In writing;
2. Contains all terms; and
3. Signed by both parties

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11
Q

What are the two ways a mortgagor can create a legal charge?

A
  1. Executing a deed declaring the mortgagor is charging the land for sums to be repaid
  2. Charging a registered estate (no need for express declaration)
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12
Q

What are the three situations in which an equitable mortgage can be created?

A
  1. Parties agree that mortgage should only be equitable
  2. Contract in writing to create a legal mortgage, and there is no deed or the deed fails
  3. Mortgagor owns equitable interest only
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13
Q

A contract to create a legal mortgage gives rise to an equitable mortgage from what time?

A

Date of the contract

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14
Q

What is the effect of an unsuccessful attempt to create a legal mortgage?

A

It takes effect in equity

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15
Q

Does an equitable mortgage need to be by deed?

A

No, but it must be in writing and signed by mortgagor or their agent + mortgagee

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16
Q

In the registered system, what are the two factors to be considered in determining how a mortgage should be protected?

A

Whether mortgage:
1. Is legal or equitable; and
2. Was created before or after the Land Registration Act 2002

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17
Q

How is a legal mortgage over registered land protected?

A

It must be registered if the mortgagee wants to exercise power of sale.

Once registered, it has priority over competing interests, unless those are previously registered, or overriding.

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18
Q

How is an equitable mortgage over registered land protected?

A

Placing a notice or restriction on the property’s register of title

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19
Q

In the context of mortgages, who has priority in the unregistered system, and why?

A

The first mortgagee, because they will have custody of the title deeds

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20
Q

How does one protect a subsequent legal mortgage over unregistered land, when they do not have the title deeds?

A

Register a class C(i) puisne mortgage land charge

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21
Q

How does one protect an equitable mortgage over unregistered land, when they do not have the title deeds?

A

Register a class C(iii) general equitable land charge

C(i) puisne is for legal mortgages in the same situation

22
Q

What is required if the equitable mortgage is over an equitable interest, e.g. a beneficiary’s interest under a trust?

A

Mortgagee should give notice to the trustees

23
Q

Within what time period of a company creating a charge must it be filed with Companies House?

A

21 days

24
Q

What are the two main situations in which a third party may have an interest in land subject to sale?

A
  1. Tenants
  2. Co-owners
25
Q

When considering a tenancy, what is the key point?

A

When the tenancy began relative to the mortgage’s creation

26
Q

Does a legal tenancy of unregistered land bind the mortgagee?

A

Yes

27
Q

Does a legal tenancy of registered land bind the mortgagee?

A

Yes, as an overriding interest as long as it does not exceed seven years

28
Q

What is required for a legal tenancy of greater than seven years to be binding?

A

It must be registered with its own independent title

29
Q

What is required of an equitable tenancy of unregistered land to be binding, and what is the consequence of not doing this?

A

An equitable tenancy of unregistered land must be registered as a class C(iv) estate contract land charge, and failure to do so will render the tenancy void against a bona fide purchaser for value without notice.

30
Q

Does an equitable tenancy of registered land not exceeding seven years override the mortgage?

A

Only when the tenant goes into occupation, i.e. it becomes a legal interest

31
Q

Where the mortgage deed prohibits creation of tenancies without mortgagee’s consent, is the mortgagee bound by unauthorised tenancies?

A

No

32
Q

How will a person in occupation with a property interest defeat the mortgagee’s ability to repossess?

A

Court may be willing to allow the occupier to stay in occupation

33
Q

What is required where an institution is lending money secured by co-owned property, but the proceeds are to be used by only one of the co-owners for a separate purpose?

A

Other co-owner must be:

  1. Separately represented by another solicitor, and
  2. Given full financial information
34
Q

In this situation, what must the institution ensure the other co-owner understands?

A

The practical implications of the proposed transaction in a meaningful way

35
Q

What are the five rights a mortgagee has once the legal mortgage is registered as a charge?

A
  1. Sue for the debt
  2. Take possession
  3. Foreclose
  4. Sell
  5. Right to appoint receiver
36
Q

Whilst a mortgagee can usually always take possession, the presence of what on the land adds an additional requirement, and what is this step?

A

If there is a dwelling on the land, possession can only be sought through the courts

37
Q

What is the effect of foreclosure and when does the right to it arise?

A

The mortgagee becomes the owner of the property. Right does not arise until after the contractual due date has passed.

38
Q

What requirement must be met before a legal mortgagee can sell the property without applying to court?

A

Contractual date set to redeem the mortgage has passed (usually six months after creation)

39
Q

What are the three requirements, one of which is enough, for the power of sale to become exercisable?

A
  1. Interest payments more than two months in arrears
  2. Written request for payment and three months has passed
  3. Breach of any other term of the mortgage
40
Q

What is sale by a mortgagee under a power of sale subject to and what is it free of?

A

Subject to any prior mortgages, but free of any interest over which the mortgagee has priority

41
Q

What are the five rights an equitable mortgagee has?

A

Same fives rights as legal mortgage, subject to some differences for sale and receiver

42
Q

Whilst an equitable mortgage will generally have the power of sale, what do they not have?

A

Power to convey or transfer the legal estate

43
Q

What is required for an equitable mortgagee to have the right to appoint a receiver, and what is required in the absence of this?

A

Equitable mortgage must have been created by deed, otherwise an application must be made to the court

44
Q

Unless there is anything on the register to the contrary, what will a legal mortgage have priority over when it is entered on the register of title?

A

Any interest whose priority is not protected

45
Q

What two things will have priority over a properly registered legal mortgage in the registered system?

A
  1. Charge registered before it, and
  2. Overriding interest if it existed before it
46
Q

When an equitable mortgage in the registered system is protected by placing a notice or restriction on the property’s register of title, what will the equitable mortgage have priority over?

A

Any later dealing with the legal estate, even a later legal mortgage

47
Q

In the unregistered system, which legal mortgage will have priority?

A

Whichever one is protected by deposit of the title deeds with the lender

48
Q

For all legal mortgages in the unregistered system other than the first protected by the title deeds, what is the main factor in determining priority?

A

The date of registration as a legal charge

49
Q

In the unregistered system, how should (1) a legal mortgage not protected by deposit of title deeds and (2) an equitable mortgage be protected?

A

Legal mortgage: Class C(i) puisne mortgage land charge

Equitable mortgage: Class C(iii) general equitable interest land charge

50
Q

What are the priority rules for equitable interests in both systems?

A

Generally, first in time has priority

51
Q

What is postponement?

A

Process whereby lenders agree between themselves to vary the priority of their respective charges

SQE1 - Land Law (16 decks)

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