Mortgages Flashcards
Santley v Wilde [1899]
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
Contractual redemption date
This is the date on which the mortgagor should repay their loan at common law
Equitable right to redeem
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
Foreclosure
This is a court order which brings the equitable right to redeem to an end vesting the mortgages property in the mortgagee
Equity of redemption
This is the sun total of equitable rights which the mortgagor has in the property
Creation of mortgages
A mortgage may be recognised by law or by equity. The creation of legal mortgages is governed by the Law of Property Act 1925
Creation of freehold mortgages at law- term of years
The mortgagee is granted a long lease of 3000 years subject to cesser on redemption. The mortgagor retains the freehold
Creation of freehold mortgages at law- legal charge
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
Equitable mortgages- agreement for mortgage
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
Equitable mortgage- equitable charge
Where an estate owner shows an intention to charge specific property with the repayment of a debt
Equitable mortgage- mortgage of an equitable interest
Any mortgage of an interest which cannot exist as a legal estate must be equitable
Equitable mortgages- prior to registration in registered land
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
No clogs or fetters
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
Samuel v Jarrah Timber & Wood paving corp Ltd [1904]
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
Postponement of the right to redeem
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
Undue influence
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
Barclays Bank plc v O’Brien [1993]
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
Royal bank of Scotland plc v Etridge (no 2) [2001]
- A relationship of trust
- Bank always enquires where relationship is no commercial
- A loan to the husbands company is not a joint loan even where the wife is a director or secretary
In order the protect the mortgagee from undue influence the bank must
- Ensure the surety receives legal advice and get confirmation that the implications has been explained to the surety
- Solicitor should advise the surety of any potential liabilities
- The role of the solicitor is to explain the nature of the documents and practical consequences
- The bank should provide the solicitor with the necessary financial information
- It is not for the solicitor to veto the transaction
- The solicitor may act for the bank as long as there is no conflict
- The bank will rely on the solicitors certificate
Abbey National plc v Stringer [2006]
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
Personal remedy mortgages
Both legal and equitable mortgages can use the personal remedy of sueing for a breach of terms
Possession legal mortgage
The mortgagee can exercise the possession power immediately but in most cases the mortgagee will obtain a court order for possession
Possession equitable mortgage
There is no right to take possession unless the right has been expressly reserved
Sale legal mortgages
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
Sale equitable mortgages
Equitable mortgagees have the statutory power of sale only if the mortgage was made by deed
Appointment of receiver
Legal mortgages
The mortgagee has a right to appoint a receiver
Equitable mortgages
Only applied where the mortgage was made by deed
Foreclosure
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
Legal mortgages registered land priority
Interests rank in order of creation whether they are legal or equitable.
Legal mortgages unregistered land priority
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
