Topic 29 - Lenders' legal rights and remedies Flashcards
Legal remedies available to a lender in England on a borrower defaulting are contained in which legislation?
Law of Property Act 1925.
Housing Act 1988.
Land Registration Act 2002.
Law of Property Act 1925. - The Land Registration Act 2002 covers the requirements for a property to be registered with the Land Registry. The Housing Act 1988 covers the rights of landlords renting out properties.
The Pre-Action Protocol for Possession Claims was established by:
a)
the Financial Conduct Authority.
b)
the Ministry of Justice.
c)
the Building Societies Association.
b) the Ministry of Justice. - The Ministry of Justice established the Pre-Action Protocol for Possession Claims.
The court has granted a suspended possession order to a lender. This means that:
the lender has 30 days to make possession arrangements with the borrower.
possession is suspended to allow the borrower time to sell the property.
possession is suspended as long as the borrower makes court-ordered payments.
possession is suspended as long as the borrower makes court-ordered payments. - The court can grant a suspended possession order, imposing on the borrower an obligation to make payment in accordance with the court’s decision. The suspended possession order becomes enforceable if the borrower fails to keep up the repayments. The court will have to grant a final possession order in this situation.
A lender would exercise its right to appoint a receiver in the case of a borrower in arrears when:
suing for the borrower’s bankruptcy.
there is a tenant in the property.
taking possession of the property.
There is a tenant in the property. -
The right to appoint a receiver is exercised when there is an income from the property. The receiver collects the rent and any other income from the property on behalf of the lender, and this money is applied to the mortgage account to reduce the overall debt.
A calling-up notice, notice of default and court warrant are legal remedies in:
a)
Wales.
b)
England.
c)
Scotland.
Scotland - A calling-up notice, notice of default and court warrant are legal remedies in Scotland.
Which document contains the contractual obligation that gives a lender the right to sue on the borrower’s covenant? The:
a)
mortgage contract.
b)
legal charge.
c)
court order.
b) legal charge. - The legal charge contains the contractual obligation that gives a lender the right to sue on the borrower’s covenant. Taking this action is often futile because, even if the court makes an award to the lender, the borrower may not have the resources to pay it.
Once the lender has taken possession of a property, the ‘equity of redemption’ gives the borrower the right to:
settle the arrears and regain possession before the lender completes the sale of the property.
settle the mortgage plus arrears and regain possession before the lender exchanges contracts on the sale of the property.
negotiate an equitable amount to settle the debt and take the property back.
settle the mortgage plus arrears and regain possession before the lender exchanges contracts on the sale of the property. - The equity of redemption is the borrower’s right to settle the mortgage debt in full at any time until the lender exchanges contracts with a new buyer. ‘In full’ means the settlement must include any arrears.
Many lenders in England demonstrate they have met their duty of care to obtain the best price reasonably obtainable for a repossessed property by:
a)
commissioning at least two valuations from independent RICS-qualified valuers.
b)
seeking best and final offers after an acceptable offer has been received by advertising in a local newspaper.
c)
always selling repossessed properties through property auctions.
b) seeking best and final offers after an acceptable offer has been received by advertising in a local newspaper. - Many lenders in England demonstrate they have met their duty of care to obtain the best price reasonably obtainable for a repossessed property by seeking best and final offers after an acceptable offer has been received by advertising in a local newspaper.
Which of the following is untrue of a claim made under a mortgage indemnity guarantee (MIG) policy?
The insurer has the right to claim back from the borrower all money paid to the lender.
The policy may not cover the entire mortgage shortfall.
The lender has no right to reclaim from the borrower any policy excess deducted by the insurer.
The lender has no right to reclaim from the borrower any policy excess deducted by the insurer. - The insurer can exercise its right of subrogation to claim from the borrower all money paid to the lender. The MIG covers the difference between the amount lent and the normal loan-to-value threshold, but any further shortfall is not covered. The lender has the right to sue the borrower for the amount of the excess deducted from the MIG claim.
Arvos Bank has taken possession of George’s house, but George has left various curtains and rugs behind. What action should the lender take?
a)
Sell the items for the best possible price and pay the proceeds to George.
b)
Allow George to enter the property to collect the items.
c)
Hold the items in trust for George for a specified period.
Hold the items in trust for George for a specified period. - Any fittings, such as curtains and rugs left behind by the borrower, are held in trust on their behalf. If the borrower reclaims them, the lender must take care not to readmit them to the property, or a new possession order may be required.
Which of the following legal remedies is no longer used in the UK?
a)
Exercising the power of sale.
b)
Suing on the borrower’s personal covenant.
c)
Appointing a receiver.
d)
Foreclosure.
Foreclosure is no longer used in the UK.
Once a possession order has been granted, the lender can usually take possession within:
a)
7 days.
b)
14 days.
c)
28 days.
d)
60 days.
28 days - Once a possession order has been granted, the lender can usually take possession within 28 days.
Appointing a Law of Property Act (LPA) receiver is a legal remedy available where a property is let to tenants. True or false?
True. The LPA receiver collects and applies rental income to the mortgage account to ensure that the mortgage payments are maintained.
Once a property has been taken into possession, the borrower has the right to regain possession by:
a)
paying off the arrears, up to the point at which the lender exchanges contracts with a new buyer.
b)
paying off the full mortgage debt, up to the point at which the lender markets the property for sale.
c)
paying off the full mortgage debt, up to the point at which the lender exchanges contracts with a new buyer.
d)
paying off the full mortgage debt, up to the point of completion of the sale to a new buyer.
c) paying off the full mortgage debt, up to the point at which the lender exchanges contracts with a new buyer. - The borrower has the right to regain possession by paying off the full mortgage debt, up to the point at which the lender exchanges contracts with a new buyer.
Once a lender has taken possession of a property, it can delay a sale until it feels it will get the highest possible price. True or false?
False. The lender cannot ‘nurse’ the property to get the best price. It must sell as quickly as possible for the best available price.
