Land Law - Mortgages Flashcards
What are the requirements for a legal mortgage?
Deed and registration
What are the requirements of an equitable mortgage?
In writing and signed by the grantor
Can a lender impose a clause which prevents redemption of the mortgage?
No - the courts look closely at clauses which postpone the legal date for redemption and will not allow a clause which prevents redemption altogether (Toomes v Conset (1745)
Why was the postponement clause in Fairclough v Swan Brewery Co Ltd (1912) struck out?
The clause was deemed a fetter on the equity of redemption because it prevented the borrower from getting back anything of value. It was 6 weeks before the lease expired, which would render the lease virtually worthless and basically irredeemable.
Why was the postponement clause upheld in Knightsbridge Estates Trust Ltd v Byrne [1939] Ch 441
It was a freehold, therefore the borrower would eventually get back exactly what had been mortgaged and the borrower had been given a favourable low rate of interest as part of the mortgage deal.
What are collateral advantages? What are lender’s entitled to?
When a lender tries to extract additional value from the borrower, the offending term in the mortgage deed may be struck out as being contrary to the equity of redemption. Lenders are entitled only to the repayment of capital advanced plus interest.
When will a collateral advantage be struck out by the courts?
A collateral advantage will be struck out if it is unconscionable, in the nature of a penalty, or if it is repugnant to the equitable right to redeem.
What is a solus tie?
Where the lender makes it a condition of the mortgage that the borrower buys all its supplies from the lender.
Can a solus tie exceed the mortgage term?
No - in Noakes & Co Ltd v Rice, the Court held that a solus tie cannot exceed a mortgage term.
What did the Court in Cityland and Property Holdings Ltd v Dabrah highlight as a key factor in determining an unconscionable term?
Goff J emphasised the clear imbalance of bargaining power between the parties.
How did the courts define unconscionability in Multiservice Bookbinding Ltd v Marden?
Browne-Wilkinson LJ said that a mortgage term would be unconscionable if it were imposed in a “morally reprehensible manner”.
Can a unconscionable term be justified?
In Davies v Directloans Ltd, the court held a lender will not have acted improperly and a higher interest rate can be justified if the borrowers have a poor credit history and are a credit risk.
Does the lender’s financial position come into account in regards to unconscionable terms?
Yes - the lender is entitled to take its own commercial needs into account and may be justified in imposing a higher interest rate where it is in financial difficulties itself providing it is not exercising any discretion for an improper purpose.
What does s.48 of the LRA 2002 state about priority of mortgages?
Priority of registered charges depends upon the order in which they are entered on the register.
How do equitable mortgages rank?
Equitable mortgages rank in order of creation LRA 2002, s.28.
What happens to priority if an equitable mortgage over registered land is protected by the entering of a notice on the charges register (LRA 2002, s.32)?
If protected by the entry of a notice, an equitable mortgage over registered land will take priority over a subsequent legal mortgage.
What happens if there is a surplus in a sale of mortgaged property?
Surplus goes to borrower after debt is paid.
What does the Pre-Action Protocol for Possession Claims 2008 do?
Sets out the steps which a court will expect a lender to have taken before resorting to possession of residential property.
What does Administration of Justice Act (AJA) 1970, s.36 allow the Court to do?
The Court can postpone date of delivery for possession if it appears that the mortgagor is likely to be able within a reasonable period to pay any sums.
What are limits of AJA, s.36?
Does not enable the court to prevent lender from exercising its right to possess altogether.
Does not enable the court to postpone possession in cases where there has been no application for an order for possession.
Does not enable the court to prevent a lender from exercising a power of sale without first obtaining a court order.
When does power of sale arise in capital and interest repayment mortgage?
As soon as one portion of capital is due, meaning that it arsies as soon as one payment is due.
Does the property need to be residential for AJA, s.36 to apply?
It applies where the property is wholly or partially residential, although need not to be the borrower’s home.
When does statutory power of sale arise?
LPA 1925, 101(1)(i) - statutory power of sale arises “when the mortgage money has become due”.
What happens if there is not an express power of sale in mortgage documents?
In the absence of an express power, a right to sell can be implied under LPA 1925, s.101(1)(i) unless it is excluded or modified in the mortgage deed.
