Land 2 - Mortgages Flashcards
What are the requirements for a legal mortgage?
- Valid deed
- Registered as a charge
What 2 rights are automatically granted by mortgage to a lender?
- Right to Possess Property (to ensure it’s vacant for sale)
- Power to Sell Property
In what 2 ways can an equitable mortgage arise?
- Mortgage of an Equitable Interest: borrower holds equitable interest in land - they are not the legal owner
- Defective Legal Mortgage: not a valid deed OR not completed by registration; but (for either) complies with estate contract requirements
What must be done when a mortgage is repaid in full?
Mortgage entries at Land Registry must be cancelled
What is ‘Equity of Redemption’?
Borrower has an equitable right to redeem
Equity will look unfavourably & be prepared to declare void any term trying to postpone/prevent redemption
How is the financial value of equity of redemption calculated?
Market value LESS outstanding debt
What 3 principles apply to equity of redemption?
- It supplements legal right to redemption
- No postpone/prevention of redemption: won’t allow a clause that prevents redemption altogether; an option to purchase may be declared void if granted at same time as mortgage
- No collateral advantages: solus tie is upheld if ends within mortgage term; other collateral terms struck out if unconscionable
What is undue influence and its effect on a mortgage?
The borrower has the right to be protected from undue influence
Where undue influence is found, mortgage is unenforceable (bank can’t repossess/sell)
When should a procedure for undue influence be taken with regard to mortgages?
In every domestic case, where a private individual offers his property as security for someone else’s debts
What procedure should a bank take to not be liable for undue influence?
- Write to party granting mortgage NOT for their benefit, saying that they need confirmation from an independent solicitor that transactions been explained to them
- Ask party to nominate solicitor
- Provide all info to solicitor
- Don’t proceed to lend until confirmation received
What procedure should a solicitor take to ensure undue influence isn’t present?
- Meet relevant party face-to-face and on their own
- Explain reason for meeting & documents/transaction in non-technical language
- Point out risks & show there’s a choice
- Keep detailed attendance note
- Send letter to said party confirming what was discussed
- Send certificate to the bank
What is the order of priority for legal mortgages?
Order in which they were registered
What is the order of priority for equitable mortgages?
Order of creation
What happens to the order of priority where an equitable mortgage is protected by notice?
- That mortgage will take priority over a subsequent legal mortgage
- Will not affect priority between competing equitable mortgages though - always on date of creation
- legal mortgage will take priority over equitable mortgage not protected
How can priority rules of mortgages be modified?
By postponement of pre-existing interest
Lenders agree to alter position/order with agreement registered
What remedies are there for a lender?
- Debt Action
- Appoint a Receiver
- Foreclosure
- Possession
- Right to Sell
What can’t be done WITHOUT a court order for an equitable mortgage?
- Possession
- Right to Sell
What limitations are there on lenders on the right to possess?
- Criminal offence to use/threaten violence to gain entry (makes possession by self-help risky)
- Follow process for residential property
- Common Law Jurisdiction to Postpone (see notes)
- Statutory Jurisdiction to Postpone
What is required for the lender’s right to sell to exist?
(a) There’s an express power of sale (in mortgage documents)
(b) Implied power under statute unless excluded/modified
When does the lender’s right to sell arise?
As soon as one payment becomes due
When is a lender’s right to sell exercisable?
When one of the following applies:
- Notice requiring payment served & borrower defaults
- Interest unpaid for at least 2 months
- Some breach of another mortgage provision
What duties does a lender owe when exercising a right to sell?
(a) reasonable care to obtain proper price for property
(b) Perfection as to price isn’t necessary
(c) Must get expert advice on method of sale, marketing strategy and reserve price
(d) Lender has unfettered discretion as to when to sell
