SQE2 Land Mortgages

Question 1

What clause in mortgage will courts strike down?

Answer 1

1. Redemption Date is void if:
   - renders right to redeem illusionary
   - eg. almost as long as lease
2. Clause to allow mortgage to purchase mortgaged estate
   - but could enter into separate agreement
3. Collateral advantages
   - eg have to buy only mortgagors product (ei. pub borrowing from brewery can only sell their beer
   - void if beyond date of redemption
4. Unconscionable clauses
   - excessive interest normally (or excessive increase on default)
   - courts consider unbalance in power between parties

Question 2

Redemption Date meaning

Answer 2

Earlier date when loan can be repaid in full and property is redeemed (you regain all rights over property)
- usually 6 months

NOT same as repayment period

Question 3

What are the situations a mortgage will be wary of third party interests?

Answer 3

If there is default and they want to sell property to redeem mortgage and need vacation possession

1. Tenants
   - only if granted before mortgage and mortgage should include term preventing tenancies after creation (without consent)
   - if equitable and in acctual occupation may be overriding
2. Non-owning occupier who contributed to purchase price
   - MUST have overreached by paying mortgage advice to 2 trustees
3. Undue Influence
   - lending for purpose other than acquisition of property
   - must take reasonable steps to avoid undue influence (separate legal advice and give full financial information)

Question 4

Remedies for breach legal mortgages

Answer 4

1. Sue for debt
2. Take possession
   - only through courts if dwelling
3. Foreclose
   - Right to redeem extinguished and mortgagee becomes owner of property
   - through courts after repayment date
4. Sell
   - After date of redemption
   - if conditions met arises automatically
5. Right to Appoint Receiver

Question 5

What are options for breach of mortgage for equitable mortgages

Answer 5

1. Sue for debt
2. Take possession
   - only through courts if dwelling
3. Foreclose
   - Right to redeem extinguished and mortgagee becomes owner of property
   - through courts after repayment date

Below are different to legal

4. Sell
   - power only arises if there is a deed, so may need to create one to have power to sell and be able to transfer legal title
5. Appoint Receiver
   - have to apply to courts

Question 6

When can mortgagee exercise right to sell

Answer 6

1. Legal Mortgage (by deed)
2. Past date of redemption
3. Either
   - interest payments 2 moths in arrears
   - demand for capital and not paid in 3 months
   - breach of other mortgage term

Question 7

Order of priority of mortgages for registered land?

Answer 7

• ranked by order of registration
• equitable will be higher than legal if registered first

Question 8

Order of priority of mortgages for UN-registered land?

Answer 8

1. mortgagee who has title deeds
2. other mortgages by order of registration as Class C land charge