Mortgages

Question 1

Santley v Wilde (Mortgage definition)

Answer 1

Loan of cash secured by the mortgagee being given rights over the property offered as security by the mortgagor

Question 2

Legal Mortgage Formalities

Answer 2

1) Created by deed
- signed
- witnessed
- dated
- headed as a deed
2) Must be registered on the charges register to be protected against a purchaser for valuable consideration

Question 3

Equitable Mortgage Formalities

Answer 3

1) Failed legal mortgages
- No legal requirements, but valid estate contract (in writing, signed by both parties and containing all agreed terms)
2) Mortgages of equitable interests

Question 4

Contractual Right to Redeem

Answer 4

1) First right of mortgagor / borrower
2) Arises 6 months after loan starts, if not repaid in next 24 hours can’t do until end of the term
3) Not of most practical importance, not much use to the borrower

Question 5

Equity of Redemption

Answer 5

Umbrella term describing rights of borrowers:

1) Equitable right to redeem
2) Prevention / postponement of redemption
3) Collateral advantages
4) Unconscionable terms
5) Undue influence

Question 6

Equitable Right to Redeem (borrower rights)

Answer 6

More generous; arises as soon as contractual right to redeem ends.

Question 7

Prevention / postponement of redemption (borrower rights)

Answer 7

1) Cannot prevent redemption date (the first date the mortgage can be repaid in full) entirely, but can be postponed if the date is not so far in the future as to render the right to redeem illusory - which is a question of degree

Question 8

Collateral Advantages (borrower rights)

Answer 8

1) Must stop when mortgage is repaid
2) Unless genuinely independent of mortgage transaction
3) Must not be unconscionable

Question 9

Options to Purchase (borrower rights)

Answer 9

1) Will generally be held void if included in a mortgage (Samuel v Jarrah Timber)
2) Can only be valid if granted afterwards in a separate agreement.

Question 10

Contrast ‘Kreglinger v New Patagonia Cold Storage’ with ‘Jones v Morgan’

Answer 10

Relates to collateral ties under borrowers rights in a mortgage.

1) K v N established that a collateral advantage will be allowed if wholly independent of the mortgage arrangement.
2) in J v M, even though the mortgage agreement was entered into three years after the mortgages it was void because it was part of a refinancing arrangement and thereby integral to the mortgage.

Question 11

Unconscionable Terms (borrower rights)

Answer 11

1) Court can strike down an exorbitant, extravagant or unconscionable rate of interest

Question 12

Cityland & Property Holdings v Dabrah

Answer 12

1) Example of an ‘unconscionable term’ in the context of borrowers rights within mortgages.
2) The court reduced a 19% interest rate (that increased to an effective rate of 38% if the borrower defaulted) to 7%.

Question 13

Undue Influence (borrower rights)

Answer 13

1) Loan must be be for the benefit of all borrowers
2) Trust & Confidence: lender must take reasonable steps to explain the risks of consenting to other parties and insist they take independent legal advice.

Question 14

Barclays Bank v O’Brien

Answer 14

1) Example of ‘undue influence’ in the context of borrowers rights within mortgages.
2) Husband lied to his wife about the size and term of the loan.

Question 15

Rights of Mortgagee / Lender

Answer 15

1) Right to possess
2) Right to sale
(CHECK DETAILS FOR BOTH IN CORE BOOK)

Question 16

Power of Sale

Answer 16

Excerciseable under s.103 LPA 1925

1) 3 months have passed since Notice to repay
2) Some interest is at least 2 months in arrears
3) Breach of another mortgage term
4) Lender has duties when selling re price
- true market value, not necessarily best price (Cuckmere Brick Co v Mutual Finance)

Question 17

Four Maids v Dudley Marshall

Answer 17

Established that a lender can take possession ‘as soon as ink is dry’ on the documents, i.e. immediately

Question 18

Right to Possess

Answer 18

1) Lenders can take possession as soon as the mortgage is signed
2) Lender could apply for a ‘court order’; possession will be postponed if the borrower can repay within a reasonable period
3) The court will postpone an order of possession if the mortgagor has a sound financial plan to repay the installments..