Mortgages Flashcards
A mortgage is defined as: ‘a conveyance of land … as a security for a payment of a debt or the discharge of some other obligation
Stanley v White
A mortgage is an interest that is capable of being legal
s. 1 LPA 1925
In order to be a legal mortgage it must be created by a deed
s. 23 LRA 2002
An equitable mortgage would arise
- if there is a valid contract to create a mortgage
- if the land-owner only had an equitable interest in the land
A mortgage is a triggering event
It must be registered on the land registry (s. 4 LRA)
As well as the charges register
- Legal (s. 27 LRA)
- equitable (s. 32 LRA)
The date of redemption
The first date that the mortgage can be paid in full.
- It cannot be prevented altogether (Toomes v Consent)
- It can be postponed
Date of redemption postponed until 6 weeks before the end of a 17 yr lease
Fairclough v Swan Brewery
Options to purchase:
Will generally be held void if included in a mortgage Samuel v Jarrah Timber
Options to purchase can only be valid if
granted afterwards in a separate agreement
Reeve v Lisle
Collateral ties
Will be struck out if unconscionable, a penalty, a restraint or a clog on the equity of redemption
A beer tie (could only by their beer) was truck out because it could last the duration of the lease, even after the mortgage had ended
Noakes v Rice
The defendant entered into a agreement where it would distribute the company’s petrol at two of it’s garages
A tying agreement must not amount to a restriction of free trade
- Esso Petroleum v Harper’s Garage
A collateral advantage will be allowed if wholly independent of the mortgage arrangement
Kreglinger v New Patagonia
Even were a collateral tie was made before the mortgage it was still struck out as it was part of a refinancing arrangement and thus integral to the mortgage
Jones v Morgan
The court can strike down a penal rate of interest
Holles v Wyse
A penal rate of interest is one that is
- Exorbitant, extravagant or unconscionable
Cavendish Makdessi
A penal rate may also contradict the statutes of
Consumer Rights Act 2015
Unfair Terms in Consumer Contract Regulations 1999
Consumer Credit Act 2006
An interest rate that doubled on default was held to be unfair under UTCCR
Falco Finance v Gough
Rates of 2-4% above the high street lender was deemed fair
Paragon Finance v Nash
Even though this was above the high street lender, a 21% interest rate was allowed because the mortgagor had a bad credit history
Davies v DirectLoans
An interest rate must not arise from an unfair relationship
Consumer Credit Act 2006
If the wife/partner has not expressly or impliedly consented to a mortgage being taken out over a joint company
She will continue to have an overriding equitable interest in occupation
Williams and Glyn Bank v Boland
Lenders must take care to ensure that consent is not obtained as a result of undue influence
If it is, the contract will be invalid and the mortgage set aside
Avon Finance v Bridger
Son misled elderly parents into thinking that they were singing documentation connected with the original mortgage, not a new one
Avon Finance v Bridger
Husband lied to his wife about the size and term of the loan
Barcleys Bank v O’Brian
Wife only spoke Urdu so the bank had to use her husband, who deliberately mistranslated
Natwest Bank v Amin
Where the loan is not for the wife’s benefit, or where the wife guarantees the debts of a husband or his company
The lender will be put on enquiry
RBS v Etridge (No. 2)
The lender will not be put on enquiry were money is advanced for an apparent joint benefit,
CIBC Mortgages v Pitt
- a loan given for a holiday cottage, but which was actually gambled away by the husband.
- the bank took no knowledge or reason to suspect that the husband had pressured the wife into consenting.
The lender that takes possession is under struct requirements to account for any profit made out of the property
Swan Brewery
- they must give the credit back to the borrower
Powers of the lender
- Debt Action
- Right to Possession
- Power of Sale
- Personal Recall Remedy
- Appointing a Receiver
- Foreclosure
Debt Action
The lender’s first option: tho reclaim the loan + interest
- usually the borrower will not be able to pay so consider the other options
Right to possession
Lenders can take possession as soon as the mortgage is signed (Four Maids v Dudley)
Self-help is possible under the right to possession
But entry must not be forced so this is risky (Ropaigealach v Barcleys)
The Lender can apply for a court order for the right to possession
This gives the mortgagor extra protection under s. 36 AJA 1970
Possession can be postponed at a court’s discretion
IF the borrower can repay within a reasonable period
Cheltenham and Gloucester BS v Norgan
The court will postpone an order for possession if the mortgagor has a sound financial plan to repay the instalments
National and Provincial v Lloyd
Postponement is less likely to be awarded by the court if the lender is prejudiced by falling property prices
Bristol and West BS v Ellis
The lender is liable to account to the mortgagor for any rent they could have made whilst in possession
White v City of London Brewery
Power of Sale
under s. 101 LPA 1925
- a power of sale is implied into every mortgage by deed
- only becomes exercisable upon default
The power of sale arises as soon as the first capital instalment is due
Payne v Cardiff RDC
The power of sale can only be exercised if notice is served, and if the rent is in arrears or there is some other breach
s. 103 LPA 1925
Personal Recall Remedy
the lender can sue the borrower for the debt
- Alliance and Leicester v Slayford
There is a limitation period of 12 years in regards to the personal recall remedy
Cannot sue after this (West Bromwich BS v Wilkinson)
Appointing a receiver
someone who oversees the sale and prevents the lender being liable for a negligent sale
Northern Properties v Clarke
Foreclosure
An equitable remedy (very rarely) awarded at the court’s discretion.
The borrower could challenge on a ground of a human right to a home
The lender’s rights in law will most likely override this claim (FJM v UK)
The lender cannot take possession if there is an overriding interest on the property
Williams and Glyn’s Bank
If the borrower can immediately redeem the entire mortgage they can apply for a ‘stay of possession’
BPBS v Caunt
S. 91 LPA 1925 allows a court to order a sale of the property to anyone interested in the land
A way of keeping the lender out of the property and for the occupier to manage the sale of the property.
Palk v Mortgage Services
A suspension of possession order may be given by the court if the borrower can pay any sums due under the mortgage
S. 36 AJA 1970
The suspension of possession only applies when the mortgagee (lender) applies
Horsham Properties v Beech
The application for a suspension of possession must be for a dwelling
Definition of a dwelling
URATEMP v Collins
A suspension only applies when the borrower is able to pay any sums due within a reasonable time
Norgan
The lender must take care to obtain a proper price for the property
i.e. the true market value of the land
Bishop v Blake
Lenders are not allowed to sell the house themselves
Halifax v Thomas
The lenders cannot sell the property to a connecting company
Lipman v Jones
Lenders can sell whenever they choose, even if they could have obtained a higher price by waiting
Cuckmere
- but they must do so in good faith
Lenders can choose how to sell the property
Auctions help to show that a proper price was obtained in good faity
Cuckmere
A property was sold at auction, without it having been advertised that it had extensive planning permission, meaning the sale was much lower.
Cuckmere Brick v Mutual Finance
Salmon LJ
- mortgagee had not taken reasonable precautions and so had breached it’s duty to the mortgagor
The mortgagee sold the claimant’s property by auction where price fixing sold the house at a loss to the mortgagee.
Tse Kwong Lam v Wong Chit Sen
- Court held there was a conflict of interest and that the mortgagee had failed in his duties
- an example of a mortgagee failing to obtain a proper price of sell in good faith.
The mortgagee had sold the property directly to a company, without putting it on the market, leading to a lower sale price
Bishop v Blake
- an example of a mortgagee failing to obtain a proper price.
The receiver appointed by RBS sold properties as they were.
Silven Properties v RBS
- The court held that the receiver and the bank were not under any obligation to incur expenses that would delay a sale.
- the bank is entitled to improve a property but is under no duty to do so.
The duty to obtain a proper price is not necessarily breached if the court merely has misgivings about the price - the market value is not an exact figure
Meah v Home Money Finance
Priorities of Mortgages
- who gets maid first
Legal Mortgages
Equitable Mortgages
Mortgages of unregistered land
The money received from a sale needs to be used in this order
s. 105 LPA 1925
- To pay the costs fo the sale
- Any accrued costs
- The principle debt
- The debt of any other mortgages
- The surplus back to the borrower
If a lender is put on inquiry, it is reasonable to suggest to the wife (usually) that she takes independent legal advice in the husband’s absence.
RBS v Etridge (No. 2)
- the lender is entitled to assume that the solicitor has done his job properly in advising his client and so can still enforce the mortgage even the solicitor hasn’t.
Restitutionary Subrogation
Equity and Home Loans v Prestidge
- when you re-mortgage then the 2nd mortgage takes the shoes of the first mortgage.
Where a property is bought with a mortgage, the mortgage will be considered to have come ‘first in time’
Abbey National v Cann
Restitutionary Subrogation
Equity Home Loads v Prestidge
