Topic 4 Principles of Mortgage & Property Law Flashcards
Mortgage law & practice has evolved over time to who’s benefit?
Borrowers or property owners?
Borrowers
What is “Conveyance”?
Transfer of property rights
Who is the Mortgagor?
The borrower
Who is the “Mortgagee”?
Lender
In Scotland the “Mortgagor” is called?
The Debtor
In Scotland the “Mortgagee” is called?
The Creditor
1925 was a significant one for property owners but what acts were brought in?
- Law of Property Act
- Land Registration Act
- Land Charges Act
What did the 1925 property acts do?
Made it simpler to create mortgages through a “Legal Charge”
The 2 forms of property ownership are what?
- Freehold
- Leasehold
What does “Fee Simple” mean in relation to property ownership?
Right for property to be inherited on death
What does “Absolute” mean in relation to property ownership?
No limits on ownership
What does “In Possession” mean in relation to property ownership?
Immediate entitlement to occupation. Nobody else has a prior claim
What does “Term of Year Absolute” mean in relation to a Leasehold estate?
Limited duration must be fixed & certain
What do the 1925 Acts mean for a lender regarding a claim of insurance over a mortgaged property?
They have a right to determine how the proceeds of insurance claim are used
What is a legal charge know as in Scotland?
Standard security
The first charge holder (Mortgagee) will hold what Security?
The title deeds
Other charge holders will be recorded where?
Land Charges Registry
Second or subsequent charges are normally offered by who?
Lenders who specialise in higher risk secured lending
How many owners can be registered as legal owners of a property?
4
What is an “Equitable (Beneficial) owner”?
Have a right to a share in a property but not a legal owner
What is “a trust of land”?
Created when a property is jointly owned legal owners become trustees
How many legal owners do there need to be to for jointly owned property to be sold?
2 legal owners
According to the Law of Property Act 1925 what is the term to describe joint owners of property?
Tenant/Tenancy
If a property is owned on a “Joint Tenancy” basic what happens with the ownership of the property if one of the owners dies?
The ownership is automatically transferred to the other owner
What is a “Tenant in common”
Where each person has a share in a property that is passed down to dependants on death
For a “Tenancy in common” joint legal owners are regarded as owners?
1 Legal owner (trustees of the land)
For a property held in a “Tenancy in common” can a property be sold if there is one legal owner?
No there must be at least 2 legal owners
On the death of a property held in a “Tenancy in common” which of the below can be left to beneficiaries on the death of an owner?
Legal Ownership
Beneficial Interest
Beneficial Interest
What is required to set up a “Tenancy in common”?
Notice of Severance (written notice of change) which is issued to other owners
What does a “Form A Restriction” on a property do?
Stops a co-owner selling their share of a property without agreement from the co-owner
The surviving owner in a “Tenancy is common” is responsible for any mortgage on the property?
True or False
True (joint & several) basis
A “Tenancy in common” is good for the many people because?
It will would form part of the nil rate band for IHT purposes
The Commonhold & Leasehold Reform Act 2002 introduced a third way in which property could be owned what is this?
Commonhold
What these factors are a way that affect what type of property ownership?
- Requirement to meet local authority conditions
- Owner is subject to local & national planning legislation
- There may be covenants or easements that apply to the land
Freehold
What these factors are a way that affect what type of property ownership?
- Title itself may contain restrictions imposed by an earlier owner
- Former utilities may have rights over the land
- Owner has obligations to those who enter or pass the property
Freehold
What type of Freehold property might a lender be reluctant to hold security over?
Freehold flats
What is the definition of “Freehold”
Permanent & absolute occupation of land/property
A part of a property that extends above or below another person’s property but is not next to or touching the ground
Is a description of what type of Freehold property?
Flying Freehold
What is a “Leasehold”?
A form of estate where a person has rights over land for a specified period
What is a “Lessor/Freeholder” in relation to Freehold property
Person offering the land for lease
What is a “Lessee/Leaseholder” in relation to Freehold property
Person renting/leasing the land
What is this in relation to a “Leasehold”?
- Sets out the term of lease
- Amount of ground rent
- Rights & obligations of the “Lessee/Leaseholder
Head lease
What is the typical ground rent on a leasehold property?
£50-£200 per year
What is a “Sub Lease”?
Where a leaseholder creates another lease to another person
The below are examples of what in relation to Leaseholders?
- Specific conditions relating to property maintenance & repair
- Constraints on the use of the property
- Requirement to insure using a specified company
Restrictions & Responsibilities of a Leaseholder
When someone buys a Leasehold property what are they buying?
- The land or the bricks & mortar
- Buying the right to lease the property
Buying the right to lease the property
As a lease runs towards expiry the property value decreases. What must a lender do?
Insist that a lease has 30-40 years left more than the mortgage
How many years does a person owning a leasehold property need to have owned it for before they have an automatic right to extend the lease?
2 years
What do lenders do if a leasehold mortgage customer fails to comply with the lease (forfeiture) and the lease is terminated?
- Clause in the legal charge to say the condition of the lease can be fulfilled by the lender
- Have insurance policies in place to cover them against forfeiture
What is a commonhold?
New tenure type to provide flexibility for those who own a property in a larger development (Multi-unit property)
What is each individual property called in a “Multi-unit property”?
Unit
Who owns the overall estate and manages the overall estate in a Commonhold?
Commonhold association (company)
If a developer intends to build flats on a Commonhold basis what must they do first?
Register a Commonhold association?
Register the property?
Register a Commonhold association
What did the Commonhold & Leasehold Reform Act 2002 do?
- Made it easier for leaseholds to purchase the freehold of their building (collectively)
- Easier for individuals to extend their lease
The name of the term that allows owners of leasehold properties to join together to buy the freehold of their building is called what?
Enfranchisement
In order to qualify to buy the freehold of a flat how long must the original lease be?
21 or more
What are these in relation to buying the freehold of a flat?
- Building must contain 2 or more flats
- 2/3 of the flats must be on a long term lease
- No more that 25% internal floor can used for non-residential purposes
- 50% of the Leaseholders must agree
Criteria needed for a building for its freehold to be purchased
A situation where a property has been converted with 4 or less flats & they or a family member have lived in the property for the last 12 months restricts leaseholders from purchasing the land. What is this Freeholder called?
Resident Landlord
To extend a long lease on a leasehold property how long does the Leaseholders need to have owned the lease?
2 years
If a leaseholder chooses to extend their lease on a flat how long will it extend their lease by?
90 years
When a lease is extended the ground rent is replaced by what?
Peppercorn rent
What is the “Right to Manage” (RTM) in relation to the Commonhold & Leasehold Reform Act 2002?
Qualifying leaseholder the right to take over management of the building from the freeholder
How does a leaseholder take control over the building from the Freeholder?
Setting up a “Right to Manage” RTM company
These are what in relation to a “Right to Manage”
- Building must contain at least 2 flats
- 2/3 of the Leaseholders must be on a long lease
- 50% of the Leaseholders must agree
Qualifying criteria to set up a “Right to Manage”
If a freeholder does not challenge the “Right to Manage” (RTM) notice within how many months can the RTM company manage the building?
4 months
When Leaseholders issue a right to claim within how many weeks must this be sent to the freeholder?
2 Weeks
If the freeholder challenges a “Right to Manage” (RTM) how long do they have to respond?
1 month
The “Leasehold Reform (Ground Rent) Act 2022” means what?
No money can legally be charged or paid as ground rent on leases covered by the act
These are the key elements of what act?
- Increase the standard lease extension for houses and flats
- Removal of “Marriage Value” on expiring leases
- Removal of the requirement for a leaseholder to have owned their property for 2 years before extending the lease
The Leasehold & Freehold Reform Bill
If a leaseholder chooses to extend their lease on a house how long will it extend their lease by?
50 years
These are the key elements of what act?
- Increase in “Non-residential” Limit from 25% to 50%
- Strengthened legislation to ensure freeholders & developers cannot escape liability to fund building development
- Ban the sale of leasehold houses
The Leasehold & Freehold Reform Bill
