Week 8 - Mortgages

Question 1

In legal terms, a mortgage is the amount of money that you borrow to buy a house. True or False?

Answer 1

False. Legally, a mortgage is the interest in the land,

exchanged for a sum of money.

Question 2

Name two types of mortgage and briefly explain them.

Answer 2

Instalment: Capital repayment by instalment over time.
Standing: Regular interest payments, with single capital
repayment at end of term.

Question 3

There are seven remedies for equitable mortgagees. True or False.

Answer 3

False.

Question 4

What are the seven remedies for legal lenders.

Answer 4

Possession;
Sale;
Appointment of a receiver
Foreclosure;
Action on personal covenant;
Consolidation;
Holding title deeds (unregistered land);
‘Tacking’.

Question 5

Four-Maids Ltd. v. Dudley Marshall (Properties) Ltd. (1957) is used as authority for which remedy?

Answer 5

Possession. The principle states that unless a term of contract express prevents it, the legal mortgagee has the right to take possession.

Question 6

s.36 of the Land Registration Act 2002
allows courts to determine a period of
redemption in claims for possession of
residential properties. True or false?

Answer 6

False. It is.36 of the Justice Act 1970 (as amended).

Question 7

Which three sections of the Law of Property Act 1925 specifically affect power of sale?

Answer 7

s.101 – there must be mortgage deed; s.101 must not be
excluded; and the redemption date must have passed.
s.103 – At least one of the following must be true: mortgagor is 3 months (or more) in default; the interest is at least 2 months overdue; or another mortgage term has been breached.
s.105 – the priority of proceeds is: prior mortgage; sales
expenses; capital and interest due; other mortgages; the
mortgagor.

Question 8

A court order is needed before the mortgagee can sell the land. True or false?

Answer 8

False, although it is common practice for a court order to be obtained, this is not required provided the s.101 and s.103 conditions are met.

Question 9

Name the three key cases used as authority for duties when exercising the power of sale.

Answer 9

China & South Seas Bank v. Tan (1990)
Tse Kwong Lam v. Wong Chit Sen (1983)
Cuckmere Brick Ltd. v. Mutual Finance Ltd. (1971)

Question 10

What is the principle in the case of China & South Seas Bank v. Tan (1990)?

Answer 10

The sale must be at the market rate applicable at the point of sale, but when to sell is a decision for the seller.

Question 11

What is the principle in the case of Tse Kwong Lam v. Wong Chit Sen (1983)?

Answer 11

The seller must take, and provide supporting evidence

demonstrating they have taken, reasonable steps to protect the interests of the mortgagor.

Question 12

What is the principle in the case of Cuckmere Brick Ltd. v. Mutual Finance Ltd. (1971)?

Answer 12

Where reasonable steps are not taken, the lender must

provide the shortfall between the value achieved and the true value.

Question 13

When appointing a receiver, s.103 conditions apply. True or false?

Answer 13

False. It is s.101 conditions that apply – there must be
mortgage deed; s.101 must not be excluded; and the
redemption date must have passed.

Question 14

Name the two leading authorities giving rise to principles regarding the duties of receivers.

Answer 14

Medforth v. Blake (2000) and Silven Properties v. RBS (2004).

Question 15

What is the principle in the case of Medforth v. Blake (2000)?

Answer 15

Receivers owe more than a ‘duty of good faith’, they must actively manage the business to support the paying off of the debt.

Question 16

What is the principle in the case of Silven Properties v. RBS (2004)?

Answer 16

However, receivers need not improve or develop properties. Their duties are not the same as those of mortgagees.