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Mortgages Flashcards

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1
Q

What is the equity of redemption?

A

It is the mortgagor’s right to redeem the loan when he wishes to do so, recovering his property in an unencumbered state. But the mortgagee is entitled to have the loan monies repaid together with any interest that might have accrued.

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2
Q

When is the contractual date of redemption normally specified as?

A

6 months

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3
Q

When is the equitable right to redeem?

A

Allows redemption of the mortgage at any stage on reasonable notice to the lender.

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4
Q

What is the rule against irredeemability?

A

A mortgage cannot be constructed so that it is impossible to pay back the loan. Any attempt to limit this right to redeem may be void.

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5
Q

When is postponement of the right to redeem invalid?

A

Postponement struck down if it renders the right to redeem illusory.

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6
Q

In what case did the court hold that the postponed right to redeem the mortgage six weeks before the expiry of the leasehold was void?

A

Fairclough v Swan Brewery [1912]

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7
Q

In which case did the court hold that postponement of the right to redeem the mortgage will be struck down if it is oppressive or unconscionable but that unreasonableness is insufficient? What were the facts of the case?

A

Knightsbridge Estates Trust Ltd v Byrne [1940]

Commercial mortgage of freehold between two experienced parties but could not be redeemed for 40 years.

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8
Q

Who is the mortgagee?

A

The lender

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9
Q

Who is the mortgagor?

A

The borrower

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10
Q

Which case established that ‘once a mortgage, always a mortgage’? What does that phrase mean?

A

Seton v Slade (1802)

The borrower always has a right to repay the loan and to redeem their property.

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11
Q

In which case was a collateral advantage requiring the owner of a pub mortgaged to a brewery to buy all beer from brewery including after the mortgage was redeemed held to be an impermissible clog?

A

Noakes & Co Ltd v Rice [1902]

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12
Q

In which case was an additional term to a mortgage giving right of first refusal over sheepskins produced for 5 years held to be valid for the entire period even though loan paid off early? Why was it valid?

A

G & K Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914]
Term held to be an independent condition of the loan freely and knowingly entered into.

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13
Q

Which case is authority for the fact that an option to purchase obtained as part of the mortgage transaction will always be void?

A

Samuel v Jarrah Timber and Wood Paving Corporation Ltd [1904]

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14
Q

If an option to purchase is obtained in a transaction independent of the the mortgage could it be valid?

A

Yes

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15
Q

Which case held that even when an option to purchase is obtained in a transaction independent of the mortgage, if it is held to be a variation of the original mortgage it will still be struck down? What were the facts?

A

Jones v Morgan [2001]
Option to purchase 50% share granted 3 years after the original mortgage but struck down as held to be a variation of the original mortgage.

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16
Q

What are the formalities for creating a legal mortgage in unregistered land? What is the authority?

A

ss. 85(1) and 86(1):
(1) mortgage by demise - grant of lease for 3000 years subject to condition that lease terminates once loan paid off
(2) charge by way of legal mortgage - created by deed

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17
Q

How do you create a legal mortgage in registered land? What is the authority?

A

s.23(1) LRA 2002 - create mortgage by charge by way of legal mortgage

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18
Q

What is the authority for the fact that a charge by way of legal mortgage constitutes a conveyance of land?

A

s.205(1)(i) LPA 1925

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19
Q

What is the authority for the fact that all conveyances of land must be made by deed?

A

s.52 LPA 1925

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20
Q

What is authority for the fact that a charge by way of legal mortgage must be registered as a charge at the Land Registry to operate at law?

A

s.27(2)(f) LRA 2002

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21
Q

When do you have an equitable mortgage?

A

If the legal mortgage is not registered or the formalities for creation have not been complied with.

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22
Q

What do you need to ensure you have to make sure you have an equitable mortgage? What is the authority for this?

A

You need a specifically enforceable written contract

s.2 LP(MP)A 1989 requires writing plus terms signed by both parties

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23
Q

What should you consider if you have no writing and no contract for an equitable mortgage, but you can show reliance to your detriment on an oral promise to create a mortgage where unconscionable for the bank to go back on their word?

A

A proprietary estoppel claim

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24
Q

In which case did the court hold that there was a mortgage by estoppel created because money had been lent on an assurance that a valid mortgage would be forthcoming?

A

Kinane v Mackie-Conteh [2005]

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25
Q

What is required for overreaching where mortgages are concerned?

A

Mortgage paid to 2 or more trustees
Right capable of being overreached - s.2(3) LPA 1925
Sale must be made by those persons and in those circumstances that constitute an overreaching transaction - s.2(1)(ii) LPA 1925

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26
Q

What is the basic priority rule? What is the authority?

A

s.28 LRA 2002
If the transferee is not a purchaser for valuable consideration the new owner takes the land subject to all prior proprietary rights.

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27
Q

What are the special priority rules? Where do you find the authorities?

A

s. 29(1) LRA 2002 - If you have given valuable consideration then you take priority if it is a registered disposition. It postponed any interest on the estate immediately before the disposition over any rights that are not protected.
s. 30(1) LRA 2002 - establishes the same concerning mortgages specifically.

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28
Q

When is the priority of a prior interest to the mortgage protected? What is the authority?

A

s. 30(2) LRA 2002
(a) (i) it is a registered charge of the subject of a notice in the register
(ii) falls within any of the paragraphs in schedule 3 (overriding interest)

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29
Q

What do you need to do to protect an equitable mortgage’s priority?

A

Enter a notice on the register

30
Q

What is undue influence?

A

Where there is a relationship of trust and confidence between two individuals, where one person may have improperly used their dominant position to manipulate the other party into the transaction.

31
Q

What do you need to establish actual undue influence?

A

Actual evidence that a person entered into the mortgage not out of their own free will but through overt acts of improper pressure exerted upon them by another.

32
Q

What is the effect of establishing actual undue influence?

A

You can have the mortgage set aside.

33
Q

What do you need to establish presumed undue influence and what is the authority for this?

A

RBS v Etridge (No.2) [2002]

(1) A relationship of trust and confidence
(2) A transaction that requires an explanation

34
Q

If you can establish presumed undue influence what is the effect?

A

The presumption is that if the alleged wrongdoer cannot explain the nature of the transaction then undue influence will exist.

35
Q

What are the instances of irrebuttable presumptions of a relationship of trust and confidence? Authority?

A 
RBS v Etridge (No.2) [2002]
Parent and child 
Guardian and ward 
Trustee and beneficiary 
Solicitor and client
Medical adviser and patient
36
Q

Which case established that you have to prove that a relationship of trust and confidence exists between a husband and wife? What are the factors that the court will consider when assessing?

A

RBS v Etridge (No.2) [2002]
Factors:
Relative ages
Education and experience
Nature of relationship and the length of it
The roles the parties have assumed in their joint lives

37
Q

When is the presumption of undue influence raised outside of marriage?

A

Where one of the couple stands as surety for a debt and they gain no obvious personal advantage from acting in that way.

38
Q

In which case did the court hold that a mother who jointly executed a further charge on the property for her son’s business gave rise to a presumption of undue influence as the mother was not aware of the charge and would not obtain a benefit from it?

A

Abbey National Bank plc v Stringer [2006]

39
Q

In which case did the transfer of land to a great nephew which greatly devalued the gifter’s land give rise to a presumption of undue influence as the nephew could not explain the transaction?

A

Goodchild v Bradbury [2006]

40
Q

What do you need to show to rebut a presumption of undue influence? What is the authority?

A

RBS v Etridge (No.2) [2002]

Lord Nicholls [20] - proof of independent legal advice pre-transaction could rebut but it is a question of fact

41
Q

Which case established that if the bank fails to take the appropriate steps after being put on inquiry as to the existence of undue influence, then the mortgage is tainted and can be set aside?

A

Barclays Bank v O’Brien [1994]

42
Q

When is the lender put on inquiry? What is the authority?

A

RBS v Etridge (No.2) [2002]

(1) Whenever a wife offers to stand as surety for her husband’s debts
(2) Any other relationship: in any non-commercial transaction where the purpose of the loan does not appear to be for the mutual benefit of the parties involved

43
Q

Which case established that for the lender to be put on inquiry, they have to know that the wife is standing as surety for the husband’s debts? What happened in the case?

A

CIBC Mortgages v Pitt [1994]

Undue influence of mortgage for investment on stock exchange but application said money for purchase of holiday home

44
Q

What must a bank do to ensure that the mortgage is protected from claims of undue influence? What is the authority?

A

RBS v Etridge (No.2) [2002]
Insist that the wife attends a private meeting with a bank representative where she is told of the extent of her liability as surety, warned of the risk she is running and urged to take independent legal advice.

45
Q

What are the requirements for independent legal advice for the mortgagor under Etridge?

A

(1) the solicitor need not act for the mortgagor alone
(2) mortgagee must ask the mortgagor to nominate a solicitor - and advise that will seek written confirmation of advice given so cannot dispute. Lender must wait for confirmation before it proceeds)
(3) Mortgagee must supply solicitor with all relevant financial information to give advice - needs consent from husband to do so and without the mortgage cannot proceed
(4) Mortgagee must inform solicitor of any suspicions that mortgagor is subject to pressure
(5) Solicitor must explain nature and risks of transaction to mortgagor - explain true realities of consequence of not paying, that she actually has a choice and check whether she wishes to proceed

46
Q

What is the effect of a vitiating factor on a mortgage?

A

If the Etridge principles are not followed the mortgage can be set aside in its entirety.

47
Q

In which case did the court hold that where a misunderstanding that led to wife thinking only liable for half of mortgage that the mortgage could not be enforced against her to her understanding as the mortgage was void?

A

TSB Bank v Camfield [1995]

48
Q

Which case established that if only part of the transaction is void for undue influence then the void part could be severed and the balance of the mortgage that remains would still be valid?

A

Barclays Bank v Caplan [1998]

49
Q

What are the three rights of the mortgagee?

A

(1) the contractual right to repayment
(2) the right to possession
(3) the power of sale

50
Q

What is the contractual right to repayment?

A

Absolute right to repayment so can be used in conjunction with other remedies. E.g. Can make the mortgagor bankrupt if have sold off the property and didn’t make enough to pay off the debt.

51
Q

Which case demonstrates that the mortgagee’s right to possession isn’t absolute? What did the case concern?

A

Palk v Mortgage Services Funding Plc [1993]
Bank sought to repossess with intention of retaining house until market conditions improved but mortgagor’s interest would increase drastically each year and redeeming mortgage would cost more than value of house.
Court held that a borrower could request an order for a sale from the court even if it wouldn’t fully discharge the debt.

52
Q

Which case established that the mortgagee has to act in good faith when seeking possession? What does this mean?

A

Quennell v Maltby [1979]

The mortgagee bank has to repossess with the purpose of getting their money back

53
Q

What is the authority for the fact that a court has the power to postpone a possession order in respect of a dwelling house?

A

s.36 Administration of Justice Act 1970

54
Q

When is a court able to exercise its discretion under s36 AJA 1970 to postpone a possession order?

A

s.36(1) AJA 1970 - if it appears to the court that a mortgagor is likely to be able within a reasonable period to pay any sums due

55
Q

What are the two restrictions to the court’s power to postpone a possession order under s.36 AJA 1970?

A

(1) only applies to dwelling houses

(2) jurisdiction only occurs where there is an action for an order for possession from the mortgagee

56
Q

Which case confirmed that where the mortgagee takes peaceful possession of the property without a court order, the court has no jurisdiction to postpone the possession under s.36 AJA 1970?

A

Ropaigeach v Barclays Bank Plc [2000]

57
Q

What is a reasonable period for repayment under s.36 AJA 1970 for a postponement of a possession order? What is the authority for this?

A

The remaining period of the mortgage - Cheltenham & Gloucester BS v Norgan [1996]

58
Q

Which case established that the court will not suspend a possession order under s.36 AJA 1970 if delaying the possession would leave the mortgagee bank inadequately secured?

A

Cheltenham and Gloucester plc v Krausz [1997]

59
Q

What is the authority for the fact that the power of sale is implied into every mortgage made by deed?

A

s.101(1)(i) LPA 1925

60
Q

What are the two conditions for the power of sale?

A

(1) the power of sale must have arisen

(2) the power of sale must have become exercisable

61
Q

When does the power of sale arise?

A

Arises when the contractual date of redemption passes - 6 months

62
Q

When does the power of sale become exercisable? What is the authority?

A

s. 103 LPA 1925
(1) three months default on payments and notice requiring payment served on mortgagor or;
(2) interest in arrears and unpaid for 2 months after becoming due, or;
(3) breach of some provision contained in the mortgage deed or Act

63
Q

Which case established that the mortgagor must take reasonable care to obtain a proper price for sale of mortgaged property?

A

AIB Finance v Debtors [1998]

64
Q

What is the consequence of a sale of mortgaged property under s.105 LPA 1925?

A

Bank holds proceeds of sale on trust.

(1) pay costs and charges of sale
(2) discharge mortgage
(3) pay off any second mortgages
(4) money to mortgagor

65
Q

Where is the authority for the fact that a borrower can request the sale of the mortgaged property by the court?

A

s.91 LPA 1925

66
Q

What is Thompson’s (2002) opinion on the impact of Etridge (No. 2) on undue influence?

A

Requiring the bank to be put on enquiry whenever one person stands as surety for another’s debt in a non-commercial transaction changes the focus from analysing the relationship between the parties to focusing on the nature of the transaction intended

67
Q

What is Andrew’s (2002) opinion on the impact of Etridge (No. 2) on undue influence?

A
  • Decision favours the lenders but provides for the limited safeguards of equity to be triggered more easily and frequently.
  • Easy for lenders to discharge obligations
  • Argues that requirement that transaction where wife stands as surety for husband’s debts should be situation where presume undue influence as wife not protected enough (this should be something that calls for an explanation of itself)
68
Q

What factors did Evans LJ suggest considering in Norgan when deciding whether to exercise postponement of sale power in s.36 AJA 1970?

A
  • how much the borrower can reasonably afford to pay now and in the future
  • how long the temporary difficulty is likely to last?
  • reasons why the arrears have accumulated?
  • how long is left of the original mortgage term?
  • is it reasonable to expect lender to extend repayment period?
69
Q

What case is authority for the fact that the repayment schedule ordered under s.36 AJA 1970 could be for less than is left of the mortgage?

A

Bank of Scotland Plc v Zinda [2012]

70
Q

What does the Council of Mortgage Lenders policy document suggest to mortgagees?

A
  • possession should be last resort
  • provides guidance for when mortgagor is in arrears and suggests extending term or loan or deferring payments of interest if shortfall of income
71
Q

Which case is authority for the fact that where a husband failed to disclose a material fact (his affair) prior to re-mortgage to pay off his debts this was UI because breached obligation of candour so that wife could not make informed decision?

A

Hewett v First Plus Financial Group Plc [2010]

Land Law (4 decks)

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