Mortgages

Question 1

Is a mortgage capable of being a legal interest?

Answer 1

Yes, if created by a valid deed

Question 2

Can an equitable mortgage exist?

Answer 2

Yes, where a deed fails equity may recognise an equitable mortgage

Question 3

Can a mortgage be created over an equitable interest?

Answer 3

Yes provided it is in writing and signed.

Question 4

What is the lender’s right in terms of possession?

Answer 4

The lender has a right to take possession ‘before the ink is dry on the mortgage’ i.e. taking physical possession or directing the tenants to pay rent to the lender. This will only typically happen in cases of default, though they do have the right to possess in isolation.

Question 5

What must a lender comply with if they are seeking possession?

Answer 5

Pre-action protocols i.e. trying to resolve out of court before issuing proceedings.

Question 6

When can a power of sale be exercised?

Answer 6

Where it exists (i.e. expressly stated in the mortgage deed, or implied as a legal mortgage)

It must arise (mortgage money must be due)

It must be exercisable

Question 7

What makes a power of sale exercisable?

Answer 7

The lender has given the borrower notice to repay

Interest is in arrears for two months after becoming due

The borrower has breached a term of the mortgage

Question 8

What is the effect of sale when a lender exercises its power of sale?

Answer 8

The buyer takes the whole estate of the borrower free of any estates or interests which the selling lender took priority over BUT subject to any estates or interests that took priority over the selling lender.

Question 9

How are the proceeds of sale distributed when a lender exercises its power of sale?

Answer 9

Redeeming any prior mortgages
The lender’s expenses of sale
The lender’s own mortgage
The balance