Topic 29: Lenders legal rights and remedies Flashcards
What are Lenders legal remedies (England and Wales)?
Established by the Law of Property Act 1925, the legal options available to a lender when a borrower is in default on a mortgage.
What is Sue for possession?
The lender petitions the county court for a possession order.
What is an Outright possession order?
The court rules that the lender can take possession, usually within 28 days.
What is a Suspended possession order?
The court suspends possession as long as the borrower meets payment obligations set out by the court. The possession order becomes enforceable if the borrower fails to meet those obligations, at which point a final possession order will be required from the court.
What is an Adjournment or suspension of the case?
The court may adjourn or suspend an application for possession if the lender cannot demonstrate it has done everything possible to sort out the problem with the borrower. The court may also dismiss the case in some circumstances.
What is Sue on the borrowers covenant?
A mortgage deed contains a personal covenant (promise) from the borrower to repay the mortgage. If they fail to do so, the lender can sue them for breaching the covenant.
What is the Right to appoint a receiver?
Only applicable if there is a paying tenant in the property. The lender can appoint a receiver to collect the rent to pass on to the lender. The rent is applied to the mortgage account.
What is Foreclosure?
Never used today. The lender takes possession, sells the property and keeps all the proceeds, even if the proceeds are more than the mortgage debt. A complicated process: requires a petition to the Chancery Division of the High Court of Justice.
What is a Calling up notice (Scotland)?
Served by the lender’s solicitor, requiring the whole debt to be repaid.
What is a Notice of default (Scotland)?
Served by the lender’s solicitor, requiring arrears to be brought up to date or correction of another breach of the mortgage conditions.
What is a Court warrant (section 24 application)?
Allows the lender to carry out necessary maintenance or sell the property to settle the mortgage debt.
What is Mortgage Rights (Scotland) Act 2001?
Legislation to protect debtors and their family from lenders exercising remedies on default. Allows the debtor to apply for a suspension of enforcement proceedings.
What is Equity of redemption?
The right of a borrower in default to settle the mortgage, plus arrears, at any time before a lender in possession exchanges contracts with a new buyer.
What is Nursing a property?
A lender in possession delays selling the property until a predetermined price is achieved, regardless of how long it takes
What is a Subrogation?
The right of a mortgage indemnity guarantee (MIG) insurer to sue the borrower for repayment of any money paid to the lender due to a claim on the policy.
