Mortgages Flashcards
Section 52 LPA 1925
comes in again to say that the lease has to be created by deed, or the charge has to be created by deed, and then you have to go on and think about whether you should register.
So, if you are a lender, you say I want to mortgage as security for the loan. You create your charge by deed or long lease by deed, and then you need to go on and consider whether you need to register your mortgage for it to become fully effective at law.
Whether registration is necessary differs depending on whether title to the mortgage land is registered or unregistered.
S.29 LRA 2002
the legal mortgage would have to be registered for it to become fully effective as a legal mortgage. So, that is if title to the mortgage land is registered
s.99 LPA 1925
Once a borrower has mortgaged his or her property the borrower can go ahead and create leases under s.99 LPA 1925 that will bind both the lender and the borrower.
Why does that matter? It matters because if your landlord does not keep up the repayments on the loan, the lender might want to get you out of the property. This is so that the lender can sell the property vacant, and they can’t do that if your lease binds their mortgage.
This is something called PRIORITY.
Once the borrower, under the LPA, has mortgaged the property to a lender the borrower can create residential leases not exceeding 50 years, and those will bind the lender, provided it is not exceeding 50 years and the lease contains a forfeiture clause for nonpayment of rent— a clause allowing the landlord to forfeit the lease if the tenant is in arrears.
Limitation Act 1980.
There is a limitation period. It is quite long; most lenders won’t wait this long. As far as the capital or principle is concerned – so with my example with my 200,000 pound mortgage… As far as that 200,000 pound capital sum is concerned, the lender has 12 years to sue, but most lenders will not wait that long. See Limitation Act 1980.
As far as the interest – the income – is concerned, the lender has got six years. Again, most lenders will not wait that long. Limitation Act 1980.
Four Maids Ltd v Dudley Marshall
he lender may go into possession before the ink is dry on the mortgage unless there is something in the contract, express or by implication, whereby he has contracted himself out of that right. He has the right because he has a legal term of years in the property…
White v City London Brewery
our borrower here owns the freehold of a free house, and he mortgages that free house to a brewery. What is the difference between a free house and a tied house? The free house can sell sell any beer it wants because it is not tied to any particular brewery. So, this borrower owns a free house, he mortgages the land to a brewery, and then the brewery, the lender, then took possession because the borrower defaulted. And what the lender did, because the lender has taken possession, was lease the property out as a tied house, meaning the tenant could only sell beer coming from the lender’s brewery — could only sell one sort of beer, and that is the beer that comes from the lenders own brewery. And because it is a tied house the rent was lower than the rent that would’ve been paid if it were a free house. And the court said, here, the lender is liable to account to the borrower, paid to the borrower, the difference between the rent actually received and the rent that would have been received had the property been left as a free house instead of a tied house.
s.6 Criminal Law Act
The difficulty for the lender is if he uses, or threatens to use violence or force, then he commits a criminal offense
s.36 Administration of Justice Act
s.36 Administration of Justice Act says the court can adjourn possession proceedings, postpone things, and bring you back to court another day if the court believes the borrower can pay sums due within a reasonable period of time.
So what you will find is you go to court and talk to a district judge and you have a conversation about how the borrower is going to make up the arrears – it is not just keeping up with payments, it is about the arrears as well.
Now, there was a bit of a query at one stage about what was meant by “sums due.” Did it mean you have to pay the whole of the outstanding debt – so the whole of the £200,000 you borrowed – or was it just the arrears?
s.8 Administration of Justice Act cleared it up and said it is not the whole amount, it is the arrears at the date of possession proceedings.
And the important thing here, if you are a lender, is if you go taking possession in this way the court cannot postpone under s.36 Administration of Justice Act.
The only situation that a court can postpone the order for possession is if you go to court under s.36 AJA. If the lender goes to court and tries to obtain possession by obtaining a court order.
So, s.36 AJA is not applicable where the lender obtains possession by peaceable reentry rather than obtaining a court order for possession. The court cannot interfere.
Ropaigealach v Barclays Bank
This case confirmed that a lender can take possession by physical reentry if you are dealing with a dwelling house, and where the lender does this… In this particular case they were away – the borrowers happened to be away on holidays, so there was no force and nobody there to object, so there is no threat of violence or violence. And the court confirmed in this case, that it is okay – the lender, in some circumstances, can take possession by physical reentry.
Horsham Properties Group Ltd v Clark and Beech
you will not be surprised to hear because of English courts and human rights in this country, the courts said that there may well be an infringement of the borrower’s rights in respect of his private and family life…and something something possession, but it is justified in the public interest.
when can a lender appoint a receiver?
1) The power to appoint a receiver has to arise, and that will arise as soon as the legal date for redemption has passed. This is identical for sale, and appointing a receiver, and foreclosure…???? So, the first thing is the power to appoint a receiver must arise, and that happens as soon as the legal date for redemption has passed. As we said earlier on, in most mortgages that means as soon as the mortgage is created.
2) That’s not enough, however, because the lender then needs to check that the powers become exercisable, and the power becomes exercisable …???…..once one of the three events in s.103 LPA 1925 occurs, or as varied by the mortgage deed. On the main, you will find that s.103 is varied by the mortgage deed.
Power of Sale
Remember, the borrower is the legal owner. The lender here, unusually, is being allowed to sell the property and to transfer legal ownership, even though the lender does not own it.
The lender is doing this because they have a power to sell in the mortgage deed.
Now, if you act for the selling lender, you have to check that the power of sale has both arisen and become exercisable.
… We have just looked at the appointment of a receiver – power for sale arises on the legal date for redemption, and becomes exercisable s.103 LPA 1925, or whatever the mortgage deed says.
If you are buying from a lender, it is slightly easier for you – you only have to check the power of sale has arisen s.104(2); you do not have to check that it has become exercisable.
Cuckmere Brick Co.
The lender is not a trustee, but does owe a duty of good faith, and it has to be a true sale.
What Salmon LJ said is the lender must act in good faith and not cheat the borrower, and the lender must take reasonable care to obtain the true market value of the property at the date of the sale.
s.104(1) LPA 1925
It says that when a lender sells he sells free of any interest he takes priority over. He is going to sell free of rights that do not bind him.
But he is going to sell subject to any interest which take priority over his mortgage, or sell subject to any interest which binds his mortgage.
s.48 LRA 2002
Priority of mortgages depends on s.48 LRA 2002, which is the date of registration of the mortgage.
Basically the lender that comes first in the order of priority gets paid off in full first. The lender that comes second, gets paid off second, etc.
Here, if you look here at s.48, it says that it depends on order of registration.
The mortgage… It is not creation, it is registration. The mortgage that is registered on the Charges Register first comes first in the order of priority.
