Mortgages And Leases

Question 1

Can mortgages have a legal and equitable interest?

Answer 1

A deed is required to have a legal interest.

Mortgage can be created over an equitable interest as long as it’s in writing and signed.

Question 2

What powers does the lender have?

Answer 2

(A) possession - taking physical possession or where the property is let, directing that the tenants pay their rent to the lender rather than the borrower.
(B) power of sale - mortgage money must be due to exercise this.
(C) debt action - recover debt for repayment on the borrowers covenant to pay - will be used if the lender has already exercised its power of sale and the proceeds were insufficient.
(D) appointment of receiver - if the property subject to the mortgage is producing income e.g. let to tenants.
(E) foreclosure - if the property is worth more than the sum owed, the lender is entitled to keep the surplus. If it’s worth less, the borrower is released from liability.

Question 3

When can the lender exercise its power of sale?

Answer 3

Only if the borrows has missed at least 2 monthly payments.

Question 4

Can a lender end the mortgage by pursuing a debt action?

Answer 4

No, will need to exercise the power of sale too.

Question 5

What type of leases require a deed and what type of leases have no requirements?

How can parol leases be created?

Answer 5

Deed is required for leases more than 3 years.

No formalities required for leases for 3 years or less, but can be created by deed.

Parol leases can be created orally.

Question 6

In what circumstances will equity intervene if the correct formalities are not followed?

Answer 6

Where there is a contract to create or transfer a legal estate or where there is an attempt to use a deed but the deed is not valid.

Question 7

Leases

Answer 7

Creates a proprietary right in land that can bind a purchaser of the freehold estate.

Lease can be assigned to a new tenant and the lease continues to exist.

An occupier with the benefit of a lease may benefit from a range of statutory protections.

Question 8

Licences

Answer 8

Creates only a personal right (permission) that will not bind the purchaser of the freehold estate.

Licence cannot be assigned and a new licence is required if the identity of the parties to the licence changes.

Licences in occupation do do not benefit from statutory protection.

Question 9

Alienation

Answer 9

Disposal of the existing and remaining leasehold estate by the tenant.

Question 10

What are the 4 alienation covenants?

Answer 10

1. Open contract position - if the lease does not contain a covenant against alienation, tenant has complete freedom to deal with the lease as they wish.
2. Absolute prohibition - covenant by the tenant not to deal with the lease.
3. Qualified covenant - covenant not to assign or deal with the lease without the landlords consent.
4. Fully qualified covenant - tenant covenants not to assign or deal with the lease without the landlords consent - such consent cannot be unreasonably withheld.

Question 11

What does it mean if a lease was created before 1st jan 1996?

Answer 11

Considered an old lease.

Privity of contract between the original landlord and tenant.

Original tenant will be bound by the obligations for the duration of the lease.

Question 12

What does it mean if a lease was created on or after 1st jan 1996?

Answer 12

Considered a new lease.

Original tenant is only bound by the covenants of the lease only whilst the lease is vested in them.

Privity of contract does not apply.

Question 13

Authorised guarantee agreements (AGA)

Answer 13

Agreement between landlord and original tenant where the tenant guarantees that the assigne will perform the lease covenants, if the assigns fails to comply then the landlord can sue the original tenant for breach - if the assigne leases it, the AGA ceases to be of effect.

Question 14

When can a tenant request an overriding lease from the landlord?

Answer 14

If the current tenant fails to pay rent and the former tenant pays the sum demand in full (because of the AGA) - they can request an overriding lease from the landlord.

Question 15

What are the landlords remedies for non-payment of rent?

Answer 15

1. Debt action - claim must be brought within 6 years when the arrears became due and must serve a default notice.
2. Commercial rent arrears recovery (CRAR) - landlord entering the premises in order to seize the tenants goods and sell them.
3. Forfeiture - right to re-enter and re-take physical possession of the premises - thereby terminating the lease.

Question 16

What are the landlords remedies for breach of other covenants?

Answer 16

1. Damages - fairly and reasonably be considered.
2. Specific performance - discretionary remedy against the tenant in possession.
3. Forfeiture - peaceable re-entry or a court order for possession.
4. Self help remedy- for landlords in relation to a breach of the tenants covenant to repair.