Mortgages

Question 1

Santley v Wilde [1899]

Answer 1

A mortgage is a transaction under which land or chattels are given as security for the payment of a debt or the discharge of some other obligation

Question 2

Contractual redemption date

Answer 2

This is the date on which the mortgagor should repay their loan at common law

Question 3

Equitable right to redeem

Answer 3

This is the right recognised by equity to pay off the loan after the contractual date has passed this is usually 6 months after the mortgage date

Question 4

Foreclosure

Answer 4

This is a court order which brings the equitable right to redeem to an end vesting the mortgages property in the mortgagee

Question 5

Equity of redemption

Answer 5

This is the sun total of equitable rights which the mortgagor has in the property

Question 6

Creation of mortgages

Answer 6

A mortgage may be recognised by law or by equity. The creation of legal mortgages is governed by the Law of Property Act 1925

Question 7

Creation of freehold mortgages at law- term of years

Answer 7

The mortgagee is granted a long lease of 3000 years subject to cesser on redemption. The mortgagor retains the freehold

Question 8

Creation of freehold mortgages at law- legal charge

Answer 8

A charge is not an actual mortgage but by s87 LPA 1925 the charger has the same rights, remedies and liabilities as if a mortgage by 3000 years

Question 9

Equitable mortgages- agreement for mortgage

Answer 9

The application of the maxim equity seems as done that which ought to be done applies to a contract to create a legal mortgage. Before 1989 the informal deposit of title deeds to be retained as security for a loan was sufficient to give rise to an equitable mortgage

Question 10

Equitable mortgage- equitable charge

Answer 10

Where an estate owner shows an intention to charge specific property with the repayment of a debt

Question 11

Equitable mortgage- mortgage of an equitable interest

Answer 11

Any mortgage of an interest which cannot exist as a legal estate must be equitable

Question 12

Equitable mortgages- prior to registration in registered land

Answer 12

In registered land a mortgage is not legal until it’s actual registration at the land registry. Therefore prior to it will exist as an equitable mortgage

Question 13

No clogs or fetters

Answer 13

The right to redeem must not be subject to any restrictions. The mortgagee usually has more power over the mortgagor because the mortgagor needs the money

Question 14

Samuel v Jarrah Timber & Wood paving corp Ltd [1904]

Answer 14

Stock worth £30,00 was mortgaged to Samuel to secure an advance of £500 at 6% interest. The mortgage money was to become payable with interest at 30 days notice. Samuel the mortgagee was given the option to purchase the whole or any part of the stock at anytime within 12 months. Samuel claimed to exercise the option and the mortgagor sought to redeem and have the option declared as void. Reluctantly the courts agreed

Question 15

Postponement of the right to redeem

Answer 15

Fairclough v Swan Brewery Co Ltd [1912]
There was a 20 year lease with 17 lease left to run. The mortgage provided that there could be no redemption until 6 weeks before the end of the lease. The provision postponing redemption was held to be void because the value of the lease would be virtually worthless

Question 16

Undue influence

Answer 16

This is the equitable doctrine under which the court may set aside or decline to enforce any bargain including a mortgage eg where a vulnerable elderly person had been pressurised into entering into a transaction that is against their free will or not in their best interest

Question 17

Barclays Bank plc v O’Brien [1993]

Answer 17

The husband owned a company. The company had a large overdraft and in order to secure overdraft facilities both the husband and wife signed the second charge over their home. The wife did not read the charge and when the bank sought to enforce the charge the wife argued her husband pressured her into signing and she thought it was only 3 weeks and that it was limited to £60,000. The HOL held there was no undue influence but misrepresentation. The bank did not warn the surety so the charge was not enforceable against the wife

Question 18

Royal bank of Scotland plc v Etridge (no 2) [2001]

Answer 18

1. A relationship of trust
2. Bank always enquires where relationship is no commercial
3. A loan to the husbands company is not a joint loan even where the wife is a director or secretary

Question 19

In order the protect the mortgagee from undue influence the bank must

Answer 19

1. Ensure the surety receives legal advice and get confirmation that the implications has been explained to the surety
2. Solicitor should advise the surety of any potential liabilities
3. The role of the solicitor is to explain the nature of the documents and practical consequences
4. The bank should provide the solicitor with the necessary financial information
5. It is not for the solicitor to veto the transaction
6. The solicitor may act for the bank as long as there is no conflict
7. The bank will rely on the solicitors certificate

Question 20

Abbey National plc v Stringer [2006]

Answer 20

In 1983 a property was purchased in the joint names of mother and son to help her obtain a mortgage. In 1989 a second mortgage was taken out to fund a commercial venture for the son but he defaulted on the payment. The mother had little reading or English skills so it was held there was undue influence

Question 21

Personal remedy mortgages

Answer 21

Both legal and equitable mortgages can use the personal remedy of sueing for a breach of terms

Question 22

Possession legal mortgage

Answer 22

The mortgagee can exercise the possession power immediately but in most cases the mortgagee will obtain a court order for possession

Question 23

Possession equitable mortgage

Answer 23

There is no right to take possession unless the right has been expressly reserved

Question 24

Sale legal mortgages

Answer 24

The mortgage was made by deed
There is no contrary provision in the deed
The mortgage money is due

If all 3 conditions are satisfied the mortgagees power of sale arises. It doesn’t become exercisable until 1 of the conditions in s103 is compiled with
There has been 3 months default of loan
Interest is at least 2 months in arrears
There is some other breach of a covenant

Question 25

Sale equitable mortgages

Answer 25

Equitable mortgagees have the statutory power of sale only if the mortgage was made by deed

Question 26

Appointment of receiver

Answer 26

Legal mortgages
The mortgagee has a right to appoint a receiver
Equitable mortgages
Only applied where the mortgage was made by deed

Question 27

Foreclosure

Answer 27

Legal mortgages
The court will first grant a foreclosure order but this method is used as a last resort
It is the same for equitable mortgages

Question 28

Legal mortgages registered land priority

Answer 28

Interests rank in order of creation whether they are legal or equitable.

Question 29

Legal mortgages unregistered land priority

Answer 29

Where the legal mortgagee also holds the title deeds their interests binds the world. Where a later mortgage is also legal the first in time of creation will prevail