Mortgages Flashcards
What is a mortgage?
A legal agreement relating to the loan of money in exchange for legal interest over land or property. Remember the home owner is the one that grants the mortgage.
The borrower is the mortgagor and the lender is the mortgagee.
Formalities of a legal mortgage
A deed is required and must be registered
Equitable mortgages
May arise where the mortgagor only holds an equitable interest in the land or where there is a defective legal mortgage. It would need to be in writing and signed.
Equitable right to redeem
Right of mortgagor to repay the loan in full at any time after the legal date of redemption (six months after the start of the mortgage).
The doctrine of clogs and fetters
Unfair conditions in the mortgage I.e which prevents the mortgagor from fully repaying the mortgage will be unenforceable. The right needs to be more than an illusion and give the mortgagor something which is clearly beneficial to them.
Collateral advantage
A situation where one of the contracting parties (usually the mortgagee) uses their stronger bargaining position or power to agree the mortgage on terms that are far more favourable to them. A court will only set aside any collateral conditions where they are unconscionable.
Protection under consumer protection legislation
Consumer Rights Act 1925 - which will govern unfair terms
FSMA 2000 - applies to mortgages after 31 October 2014 and stipulates that those providing regulated mortgage contracts must ensure they are fair and transparent. Failure to do so may result in a claim for compensation from the mortgagor
- Consumer Credit Act 2005 allows the courts to intervene if they find the mortgagor/ mortgagee relationship to be unfair on the mortgagor
Undue influence
A decision made by a person without their free will due to pressure everted upon them by another.
Presumed undue influence
Where one party could have influence over another who may be vulnerable. E.g doctor- patient, solicitor- client.
It could also arise if there is evidence of a relationship of trust and confidence and the transaction called for an explanation.
Actual undue influence
Claimant must be able to prove to specific evidence and positively prove they have been subject to undue influence.
Steps mortgage can take to protect themselves if undue influence is established
Is there proof of undue influence
Was the mortgagee aware of the mortgagor and so was put on inquiry’s
If so did the mortgagee take reasonable steps to minimise the risk of undue influence
Rights and remedies of the mortgagee
The right to payment
The right to possession
Power of sale - mortgagee obliged to act in good faith, obtain true market value and consider mode and timing of sale
Appointing a receiver (usually only for commercial premises)
Foreclosure
The remedies can be used singularly or cumulatively
Priority of legal mortgages
All legal charges must be registered in the charges register of the title deeds and they will take priority in order of the date they are registered. Proceeds of sale must be first paid to the first legal charger holder. The surplus (if any) is paid to the second charge holder. If there is a shortfall the second legal charge holder would have to bring further action against the mortgagor.
Priority of equitable mortgages
Registered land - to ensure priority, it must be protected by way of notice in the title deeds.
Unregistered - prior to 1989, depositing the title deeds with the mortgagee would be sufficient evidence of an equitable mortgage. Now they must be protected by registration or a C(iii) land charge. If not the mortgage will be void against any future purchase for valuable consideration.
Tacking
Means to lend further money under an original mortgage agreement
