Mortgages

Question 1

Lender remedy - possession

Answer 1

The lender has the right to take possession ‘before the ink is dry on the mortgage’ .

The borrower does not need to be in default for the lender to exercise its.

Possession means either:
* taking physical possession (ousting the borrowers); or
* where the property is let, directing that the tenants pay their rent to the lender (rather than the borrower).

The lender cannot use or threaten violence towards anyone known to be present on the property in order to obtain possession.

A court order for possession is not always required if lender can retake without threat of violence.

Question 1

Lender remedy - possession - proceedings

Answer 1

Must follow pre-action protocol for residential - involves open dialogue.

Borrower can ask court to exercise its discretion to:
* adjourn proceedings; or
* on making an order for possession, suspend execution or postpone the date for possession.
Applies when:
(a) the lender has started possession proceedings;
(b) the property includes a dwelling- house; and
(c) the borrower is likely within a reasonable period to pay any sums due under the mortgage (ie arrears).

The court will not exercise its discretion unless the borrower can provide a detailed financial plan.

Can use income property produces.

Question 2

Lender remedy - power of sale

Answer 2

The power of sale must:
* exist;
(e.g. in deed)

• have arisen; and
• become exercisable.
  ((i) the lender has given the borrower notice to repay the loan amount and the borrower has not paid the sum for three months after such notice; or
  (ii) interest is in arrears for two months after becoming due; or
  (iii) the borrower has breached a term of the mortgage (other than the covenant to pay the mortgage money or the interest thereon).)

A lender must:
(a) act in good faith and not cheat borrowers (eg the property must be properly advertised and the lender cannot sell hastily at a knock down price); and
(b) take reasonable care to obtain the true market value of the property at the date of sale.

Question 3

Lender remedy - Debt action

Answer 3

The legal date for redemption must have passed before action can be taken.

The Limitation Act 1980 limits the lender’s ability to recover the debt to:
* six years for the recovery of interest; and
* twelve years for the recovery of capital.

Question 4

Lender remedy - appointment of a receiver

Answer 4

Lender appoints receiver to collect income from the property as agent.

The power arises in the same way as the power of sale and therefore the power must exist, have arisen and be exercisable,

The receiver must be appointed in writing and it is for the lender to decide who to appoint.

Question 5

Lender remedy - Foreclosure

Answer 5

= lender exercising its power of sale

Available by an application to the High Court once the legal date for redemption has passed. The process is in two stages:
(i) Foreclosure Nisi - directing the preparation of accounts of what is owed followed by a period of (usually) six months in which to pay; and
(ii) Foreclosure Absolute -which has the effect of vesting title to the property in the lender and extinguishing the equity of redemption held by the borrower.

Question 6

Lender remedy - Foreclosure - borrower protections

Answer 6

(a) the discretion of the court to re- open foreclosure proceedings, in exceptional circumstances, even after the foreclosure absolute order; or

(b) where the property is a dwelling house, the borrower may seek to adjourn the foreclosure proceedings by means of an application under the AJA 1970; or

(c) an application to court for a judicial sale under s 91(2) LPA 1925. This will preserve the equity of redemption in favour of the borrower. Such an application can be made by any person with an interest in the equity of redemption. For example, another mortgagee.