Lender's Rights to Possess Flashcards
When does a lender’s right to possess the mortgaged property arise?
A) Only if the borrower misses three consecutive payments
B) Only if the lender obtains a court order
C) As soon as the mortgage is granted
D) Only after the lender attempts to sell the property first
C) As soon as the mortgage is granted
Explanation:
📌 Key Case: Four Maids v Dudley Marshall (1957)
The lender’s right to possess exists immediately upon granting the mortgage, before the ink dries on the deed.
Under general mortgage law, does a lender need a court order to take possession of a property?
A) Yes, a court order is always required
B) Only if the borrower is living in the property
C) Only if the mortgage agreement expressly requires a court order
D) No, the lender can take possession immediately
D) No, the lender can take possession immediately
Explanation:
📌 Key Case: Ropaigelach v Barclays Bank (2000)
A lender does not need a court order to take possession, but most lenders seek one to avoid legal disputes.
What law restricts lenders from using force to take possession of a property?
A) The Financial Services Act 2012
B) The Pre-Action Protocol (2008)
C) The Criminal Law Act 1977, s 6
D) The Housing Act 1988
C) The Criminal Law Act 1977, s 6
Explanation:
This law makes it a criminal offence to use force or threats to enter a property, even if the lender has a right to possession.
Under AJA 1970, s 36, when can a court postpone possession?
A) If the borrower can repay all mortgage arrears within a reasonable period
B) If the lender has not registered the mortgage correctly
C) If the borrower has never missed a payment before
D) If the lender does not apply for possession within six months of default
A) If the borrower can repay all mortgage arrears within a reasonable period
Explanation:
📌 Key Case: Cheltenham & Gloucester v Norgan (1996)
Courts can delay possession if the borrower proves they can repay the arrears over a reasonable period (often the remainder of the mortgage term).
A borrower falls into mortgage arrears. The lender wants to sell the property for the best price but knows buyers prefer vacant possession.
Why might the lender seek possession before selling?
A) To increase the value of the sale by selling with vacant possession
B) To force the borrower to renegotiate the mortgage terms
C) To ensure they get all outstanding debt, including future payments
D) To evict the borrower as punishment for non-payment
A) To increase the value of the sale by selling with vacant possession
Explanation:
Buyers prefer vacant possession, so lenders often seek possession first before selling to achieve the highest sale price.
A lender seeks possession of a residential property. The borrower requests more time, stating they can repay arrears over 5 years.
How will the court likely respond?
A) Grant a long postponement if the borrower can prove affordability
B) Deny postponement unless the borrower repays all arrears immediately
C) Reject the request since lenders have an automatic right to possess
D) Suspend the mortgage agreement entirely
A) Grant a long postponement if the borrower can prove affordability
Explanation:
📌 Key Case: Cheltenham & Gloucester v Norgan (1996)
Courts can allow repayment over the remainder of the mortgage term if the borrower provides a detailed financial plan.
A borrower in arrears tells the court they are selling the property and asks for a delay on possession.
What is the most important factor for the court?
A) Whether the borrower has lived in the property for over 5 years
B) Whether the borrower owes over £50,000 in arrears
C) Whether the borrower can afford legal fees
D) Whether there is evidence of an actual buyer
D) Whether there is evidence of an actual buyer
Explanation:
📌 Key Cases:
Bristol & West BS v Ellis (1996): Borrowers must show real proof of a buyer, not just an estimate of property value.
Mortgage Services Funding v Steele (1996): Courts require firm evidence of imminent sale, like an offer or exchange of contracts.
A lender applies for possession but did not engage with the borrower about alternative repayment options.
What can the court do?
A) Dismiss the possession claim entirely
B) Postpone possession and order the lender to pay legal costs
C) Order the lender to reduce the mortgage balance
D) Automatically rule in the borrower’s favour
B) Postpone possession and order the lender to pay legal costs
Explanation:
Under the Pre-Action Protocol (2008), lenders must explore repayment options before seeking possession.
Failure to comply can result in delays and legal cost penalties, but does not block possession altogether.
A borrower is in arrears and their property is in negative equity (the mortgage is greater than the property’s value).
What can the lender do?
A) Sell the property and write off the shortfall
B) Take possession and apply for foreclosure
C) Sell the property and sue the borrower for the shortfall
D) Cancel the mortgage and release the borrower from debt
C) Sell the property and sue the borrower for the shortfall
Explanation:
If the sale does not cover the full mortgage, the lender can pursue the borrower for the remaining debt through a debt action.
A lender seeks foreclosure instead of possession and sale.
What is the most likely court response?
A) The court will approve foreclosure immediately
B) The court will reject foreclosure and order a sale instead
C) The borrower must repay the full mortgage balance immediately
D) The court will ask the borrower to negotiate with the lender
B) The court will reject foreclosure and order a sale instead
Explanation:
📌 Key Point:
Foreclosure is rarely used today. Courts prefer ordering a sale to avoid unfairly transferring the property to the lender.
