Mortgages

Question 1

What is a mortgage?

Answer 1

Money advanced by a lender to a borrower, to help them purchase a property.

The borrower continues to hold the legal estate, subject to the mortgage. Mortgage is a third party right over land.

Question 2

Is a mortgage capable of being legal?

Answer 2

Less, they are capable of being legal interest in land.

Listed in s 1(2)(c) of LPA

Question 3

What are the formalities required for a legal mortgage?

Answer 3

A deed is required to create a legal mortgage in relation to a legal estate, s 52 (1). The deed must meet the requirements set out in s 1 LPMPA

Question 4

Can a mortgage be equitable?

Answer 4

When the document lacks the requirements of a deed, equity may intervene and recognise an equitable mortgage under the principle of Walsh v Lonsdale.

A mortgage can be created over an equitable interest, must comply with s 53 LPA, writing and signed.

Question 5

Who is the mortgagor?

Answer 5

borrower.

Owner of the estate in land, borrowings sum of money to help pay

Question 6

Mortgagee

Answer 6

Lender - has the benefit of the mortgage enabling them to enforce security

Question 7

What 5 remedies are available for protection of mortgagors for a legal mortgage?

Answer 7

Possession
Power of sale
Debt action
Appointing a reciever
Foreclosure

Question 8

What is possession as a protection for mortgagors?

Answer 8

Lender has a right to take possession “before ink is dry” on the mortgage.

Borrower does not need to be in default for the lender to exercise the right of possession.

Possession means either:
- taking physical possession, or,

• Where the property is let, directing that the tenant pay their rent to lenders.

Question 9

When will possession be allowed for protection of mortgagors?

Answer 9

When the borrower is in default. Rarely used.

Lender cannot use or threaten violence towards anyone to btain possession.

Question 10

What are possession proceedings?

Answer 10

Where residential, lender must comply with pre-action protocol - talk first to attempt to resolve any arrears.

Question 11

When does s 36 AJA apply to possession proceedings?

Answer 11

When the lender has started procession proceedings,

The property includes a dwelling house,

The borrow is likely within a reasonable period to pay any sums due under mortgage

Question 12

What must be present with the power of sale?

Answer 12

It must exist (expressly stated in deed or implied into every legal mortgage)

It must have arisen (money must be due, legal date of redemption has passed or instalment)

It must have become exercisable

Question 13

What is the legal date for redemption

Answer 13

Usually 1 on the into mortgage term

Question 14

When does the power of sale become exercisable?

Answer 14

Will either be set out expressly in mortgage deed, or lender will rely on s 103 LPA:

• lender has given borrower notice, and borrower has not paid the sum for 3 MONTHS
• interest is in arrears for 2 MONTHS after becoming due
• borrower has breached a terms the mortgage (other than to pay)

Question 15

What are the lenders duties on sale?

Answer 15

Lender must ensure that the power of sale has arisen and become exercisable.

Buyer only needs to check that the power of sale EXISTS and has arisen.

Buyer does not need to check that power has EXECISABLE.

Question 16

What is the effect of sale?

Answer 16

When a lender exercises its owner f sale, the buyer of property takes the whole estate from the borrower, free of any estates or interests which the selling lender took priority of, and subject to any estates and interests which toook priority OVER selling lender.

Question 17

What is the hierarchy of proceeds of sale?

Answer 17

Cost of redeemingany prior mortgages
Lenders expenses of sale
Lenders own mortgage
Balance to person entitled to equity of redemption

Question 18

When can debt action be a remedy of a mortgage?

Answer 18

Recover debt by an action for repayment on the borrowers covenant to pay.

Question 19

What is the limitation of debt action?

Answer 19

Limitation Act, limits the lenders ability to recover the debt to 6 years for recover of interest, and, 12 years for recover of capital.

Question 20

When can the lender appoint a receiver?

Answer 20

If the property subject to the mortgage is producing INCOME (let to tenants etc).

Must have arisen adn be exercisable.

Question 21

What does the reciever have power to do?

Answer 21

Reciever has power to demand and recieve income from the property

• outgoings or prperty
• insruance on any prior mortgages
• insruance premiums, repair costs
• interest on current mortgage
• capital on current mortgage
• balance to the borrower.

Question 22

What are the duties of a receiver?

Answer 22

To ensure that personal interest do not conflict

To act in good faith in course of employment

To act with reasonable competence

To take reasonable care to obtain true market value of the property

Take steps to increase value of prperty (not obliged to)

Question 23

When is foreclosure available to a mortgagor?

Answer 23

Available by applicaiton to high court, once legal date for redemption has passed.

Question 24

What are the 2 stages of foreclosure?

Answer 24

Foresclosure Nisi (preparing accounts of what is owed followed by period of 6 months to pay)

Foreclosure Absolute (effect of vesting title to property in lender, and extinguishing equity of redemption)

Question 25

What protection does the borrower have for foreclosure?

Answer 25

The discretion of the court to re-open foreclosure proceedings

Where dwelling house, borrower may seek to adjourn foreclosure proceedings

Any application to court for judicial sale. This will PRESERVE the equity of redemption in favour of the borrower.