🌾Land: mortgages Flashcards
Difference between personal security and real security
📖Personal security-another person promises to pay
📖Real security-attaching liability to repay loan to specific item of persons property (ie. House (=mortgage)
Who is the mortgagor and who is the mortgagee
📖Mortgagor-person who owns land and gives mortgage to lender
📖Mortgagee-lender whose taking security over borrowers land (being given mortgage)
When is the legal date of redemption
normally just after mortgage created
Mortgage definition
- An interest in land given as a security for a loan.
Borrower continues to hold legal estate subject to mortgage (so mortgage is a 3rd party right)
What is a mortgage capable of being?
legal under s1(2) LPA 1925
Formalities for creation
Deed required (s52(1) LPA 1925
If not, check if an equitable mortgage under Walsh v Lonsdale
May be created over equitable interests-needs signed writing (s53(1) LPA 1925)
What will a 1st mortgage of qualifying estate trigger?
1st registration
Enforceability in unregistered land
Legal mortgage protected by deposit of deeds:
Bind the whole world
(Most lenders of 1st mortgage will take title deed as part of security-inability of borrower to produce title deeds warns buyer there’s a mortgage)
Puisne mortgages(=legal mortgage not protected by deposit of deeds, usually a second mortgage where 1st lender has already taken the deposit of deeds as part of its security)
Must be protected by a Class C(i) Land Charge
If not protected Land Charge is void against buyer for valuable consideration as charge is constructive notice
Enforceability in registered land
Registrable disposition-becomes legal only when entered on charges register of affected tile
2 entries:
1. identifying charge and date of creation
2. Identifies proprietor of charge (lender)
Priority of legal mortgage
By order entered on register NOT date of creation-entered 1st ranked 1st (so check if correctly registered)
Lender who ranks first in order of priority is entitled to be paid first from proceeds of sale
Priority of legal mortgages over other proprietary interests
Interest created BEFORE registration of mortgage:
Lender will be bound by if interest is:
a. A registered charge
b. Subject of a notice in the register
c. An overriding interest in Sch 3 (for para 2-occupation must pre date completion)
Interest created AFTER registration of mortgage: :ender NOT bound unless it has given consent to the interest (eg. Granting lease by borrower)
5 Remedies for lender
- Possession
- Power of sale
- Debt action
- Appointing a receiver
- Foreclosure
Possession
What is possession
Taking physical possession
OR where prop let, directing tenants to pay rent to lender rather than borrower
Strict duty to account
1. Must pay debt and no more-account to borrower for any sum beyond whats due
2. Must manage prop with due diligence, accounting to borrower for income that should have been received had the prop been managed correctly
Posession
When can a lender exersise the right
As soon as mortgage completed
Possession
Conditions to possess
- Criminal offence to threaten/use violence
- Court order not needed if prop empty or let and lender directs tenant to pay rent
- Possession without court order NOT breach of human rights (justified in public interest and reflected nature of the necessary security which a mortgagee needed to take to offer substantial lending on property at affordable interest rates)
Possession
Procedure for possession proceedings
If prop residential, lender must comply with pre action protocol
Under s36: Borrower can ask court to exercise discretion to:
a. Adjourn proceedings
b. On making an order for possession, suspend execution or postpone the date for possession
S36 applies when:
1. Lender started possession proceedings
2. Prop inc a dwelling house
3. Borrower is likely within a reasonable period to pay any sums due under the mortgage (arrears) (‘Reasonable period’ inc full remaining period of mortgage)
Court wont exercise discretion UNLESS:
Borrower can provide a detailed financial plan demonstrating they can pay both the mortgage instalments as they fall due and any arrears
Power of sale
What is the power of sale
Lender sells mortgaged prop and uses sale proceeds to pay themselves back sum owed under mortgage (balance goes to borrower)
Before exercising, lender may need to obtain possession of prop.
Power of sale
When can it be exercised?
Power of sale must:
1. EXIST: Express in mortgage deed OR implied into every legal mortgage
2. HAVE ARISEN: legal date for redemption passed OR any instalment of mortgage has become due under an instalment mortgage
3. BECOME EXERCISABLE:
Express in mortgage deed OR
Lender given borrower notice to repay loan amount and borrower hasn’t paid in 3mo
Interests been in arrears for 2mo after becoming due
Borrower has breached term of mortgage (other than cov to pay mortgage money/interest)
Power of sale
What are lenders duties on sale
□ Lender must ensure: power of sale arisen and become exercisable
□ Purchaser must ensure: power of sale exists and has arisen NO need to check if exercisable.
Duties:
a) Act in good faith and not cheat borrower
b) Take reasonable care to obtain the true market value of the prop at the date of sale (don’t have to delay sale to maximise value)
If fail to obtain true value, must account to borrower for difference
Power of sale
Effect of sale
Buyer takes whole estate of the mortgagor:
a) Free from any estates or interests (including other mortgages) which the selling mortgagee took priority over
b) BUT subject to any estates and interests which took priority over the selling mortgagee.
Power of sale
What happens to the proceeds of sale
Selling lender is a trustee of proceeds of sale and must distribute in following order:
1) Cost of redeeming prior mortgages
2) Lenders expenses of sale
3) Lender own mortgage
Debt action
When can a debt action be boughr
when Legal date of redemption has passed
Debt action
What is the lenders ability to recover debt limited to?
6y for interest
12y for capital
Debt action
When can it be useful?
where proceeds of sale insufficient to pay the debt
