Rights of the lender Flashcards
If a lender wishes to pursue a remedy for a default, what can it do?
None of the remedies are automatic - lender has to pursue one
If he choses to do so he is under a duty to act fairly and reasonably at a minimum
What are the courses of action available to a holder of an EQUITABLE mortgage?
bring a debt action under the mortgage contract for money owed
apply for foreclosure
appoint a receiver
CANNOT REPOSES OR SELL WITHOUT A COURT ORDER
What are the courses of action available to a holder of a LEGAL mortgage:
Sue on the contract for outstanding debt (debt action)
Reposes
Sell the property
Appoint a receiver
Foreclosure
What is a debt action?
Contractual debt action = personal agains the borrower
An action to sue the borrower for the money outstanding on the mortgage
What is the limitation period for a debt action?
If the mortgage was created by deed the recover period of the debt stated in the deed is 12 years
The limitation period for recovery of interest is 6 years
Why seek a reposession?
To ensure vacant possession so the property is more attractive to sellers = higher price
Lender can manage the property and derive income from it which can be used to reduce the mortgage debt
What does the pre action protocol in residential cases state about reposession?
Must be the last resort!
What happens if there is a surplus after the sale of property?
Must be given to borrower and if there is a shortfall then borrower can be sued personally by the lender for outstanding contractual debt
What are the procedural steps for a power of sale?
The power of sale must have arise in accordance with statutory rules
It must be exercised in accordance with statutory rules and
Lender must fulfil its duties on sale which have largely arisen from case law
What is the role of a receiver?
Manages the mortgaged property if lender does not wish to take possession or sell it
he must get income from the property and apply it to the existing debt
he is the borrower’s agent = LENDER IS NOT LIABLE FOR HIS NEGLIGENCE EVEN THOUGH HE IS APPOINTED BY THE LENDER
What are the duties of a receiver?
Act with due diligence and paying off the mortgage debt
In Medforth -
R in breach of duty for negotiating pig feed which had impact on pig far profitability
What happens in a foreclosure?
Legal title vests in the lender - borrower loses it
Court will often just order a sale in lie of foreclosure, especially if the property is worth more than mortgage debt
Borrower cannot be pursued personally if there is any debt still outstanding of foreclosure is used
