MORTGAGES II

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MORTGAGES II

• Jan Cookson

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A LEGAL MORTGAGEES REMEDIES

• 1. POWER OF SALE
• 2 FORECLOSURE
• 3. APPOINTMENT OF A RECEIVER
• 4. SUE ON MORTGAGORS COVT.TO REPAY

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THE MORTGAGEES STATUTORY POWER OF SALE
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IN ORDER FOR THE MORTGAGEE TO SELL USING ITS
STATUTORY POWER-

• THE POWER
• SHOULD HAVE BOTH
• 
  AND

ARISEN (s.101 LPA 25)
BECOME EXERCISABLE (s.103 LPA
25)
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THE MORTGAGEES STATUTORY POWER OF SALE

• ARISES UNDER s.101 LPA 25
• IF BOTH THE FOLLOWING CONDITIONS ARE MET-
• 1. the mortgage must have been made by deed
• 2. the mortgage money must be due

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THE MORTGAGEES STATUTORY POWER OF SALE

• BECOMES EXERCISABLE UNDER s.103 LPA 25
• IF ANY OF THE FOLLOWING CONDITIONS ARE MET-
• 1. Mee has served notice on Mor requiring
  payment of the mortgage money Mor has failed
  to pay for 3 months after receiving the notice
  or
• 2. Interest under the mortgage is 2 months or
  more in arrears or
• 3. Mor is in breach of some other covenant in
  the mortgage deed
• (i.e. other than repayment of mortgage
  money or interest )

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THE MORTGAGEES STATUTORY POWER OF SALE

• THE IMPACT OF THE MORTGAGEE SELLING-
• Before power of sale has arisen
• After arisen but before exercisable
• After arisen and exercisable
• The position of a purchaser (s.104(2) LPA 25)

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Note there is very likely to beAN EXPRESS
POWEROF SALE CONTAINEDIN THE MORTGAGE DEED
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IS A COURT ORDER NEEDED BEFORE SALE ?

• Horsham Properties Group Ltd v Clark and Beech
• 2008 EWHC 2327 (Ch)
• Mortgages Power of Sale and Residential Property
• Consultation Paper
• Open date 29 December 2009
• Closed date 28 March 2010
• http//www.justice.gov.uk/consultations/docs/mortg
  agespower-sale.pdf

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Horsham Properties Group Ltd v Clark and Beech

• ? No Ct order
• ? No Ct order
• ?Ct order but s.36
• AJA 70 doesnt
• apply

• M. by Clark and Beech to L
• Default
• L doesnt take possession
• simply sells to Horsham

Breach of Art.1 ECHR unlawful deprivation of
possession?
Horsham seeks possession on basis Clark Beech
are now trespassers
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THE MORTGAGEES CONDUCT OF A SALE
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THE NATURE OF A MORTGAGEES DUTIES IN THE
CONDUCT OF A SALE

• LEADING CASE
• SILVEN PROPERTIES v RBS LTD 2004 1WLR 977
• A MORTGAGEE IS NOT A TRUSTEE OF THE POWER OF SALE
  FOR THE MORTGAGOR
• But
• MUST ACT IN GOOD FAITH
• HAS A DUTY AS TO PRICE OBTAINED

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WHAT DUTIES EXIST?
1. ?A DUTY TO EXERCISE POWER OF SALE? A
mortgagee has no duty at any time to exercise his
powers as mortgagee to sell, to take possession
or to appoint a receiver and preserve the
security or its value or to realise his security.
He is entitled to remain totally passive.
Silven A mortgagee is not a trustee of the
power of sale for the mortgagor he is at all
times free to consult his own interests alone
whether and when to exercise his power of
saleThe mortgagees decision is not constrained
by reason of the fact that the exercise or non
exercise of the power will occasion loss or
damage to the mortgagor Silven

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• 2. ?A DUTY AS TO TIMING OF SALE?
• It is well settled that a mortgagee is not a
  trustee of the power of
• sale for the mortgagor. the mortgagee is
  entitled to exercise it for his
• own purposes whenever he chooses to do so. It
  matters not that the
• moment may be unpropitiousHe has a right to
  realise his security by
• turning it into money when he likes. Cuckmere
  Brick Co. Ltd
• Cuckmere Brick Co. Ltd v. Mutual Finance Ltd
  1971 Ch
• 949.
• China and South Sea Bank Ltd v Tan soon Gin
  1990 2
• WLR 56

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• 3. DUTY AS TO PRICE
• the mortgagee must take reasonable
  precautions to obtain
• the true market value of the mortgaged
  property at the date
• on which he decides to sell it Cuckmere
  Brick Co. Ltd
• ?Duty to inform buyers of matters that improve
  the price?
• Cuckmere Brick Co. Ltd.
• ?Duty to improve the property or increase its
  value for sale?
• Silven

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• 4. A DUTY AS TO WHO THE PURCHASER IS?
• TO THE MORTGAGEE?
• TO AN ASSOCIATED PERSON?
• Tse Kwong Lam v. Wong Chit Sen 1983 1 WLR 1349
• Corbett v Halifax 2003 4 ALL ER 180

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4. ?A DUTY AS TO PURITY OF MOTIVATION FOR SALE?
Meretz Investments NV v ACP Ltd 2007
Ch.197
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THE EFFECT OF A SALE BY A MORTGAGEE
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THE EFFECT OF A SALEBY A MORTGAGEEs.104(1)
LPA 25

• What estate does the Mortgagee convey?
• 2. What interests is the sale
• subject to?
• free from?
• 3. What happens to Mortgagors right to
  redeem

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THE EFFECT OF A SALE BY A MORTGAGEE

• s.105 LPA 1925
• The Mortgagee must apply the sale proceeds to
• 1. Pay off any mortgage with
• priority to which the sale is not
• made subject
• 2. Pay costs properly incurred in
• arranging sale
• 3. Discharge own mortgage debt
• 4. Pay any balance to the
• Mortgagor or the other person
• entitled to the mortgage property

• ILLUSTRATION
• Abbey National has a charge
• registered in 2000
• Bradford Bingley has a charge registered in
  2001
• The Chelsea has a charge
• registered in 2002
• What happens if B B sells the property?

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CAN A MORTGAGOR SELL AGAINST THE MORTGAGEES
WISHES?

• THE USE OF
• s.91(2) LPA 1925

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C Charges RegisterSPECIMEN

• 1. 02.12.2002) REGISTERED CHARGE dated 23rd
  November 2002
• 4. PROPRIETOR CHELSEA BUILDING SOCIETY of
  Thirlestaine Hall, Thirlestaine Road, Cheltenham,
  Glos. GL53 7AL

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s.91(2) LPA 1925

• In any action, whether for foreclosure or
  for redemption or for sale.. the court, on the
  request of the mortgagee, or of any person
  interested either in the mortgage money or in the
  right of redemption and notwithstanding that any
  other person dissents may direct a sale of the
  mortgaged property on such terms as it thinks
  fit.

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s.91(2) LPA 25

• NEGATIVE EQUITY CASES-
• Palk v Mortgage Services Funding PLC 1993 2 WLR
  415
• Polonski v. Lloyds Bank Mortgages Ltd 1997
  Times 6th May
• Barrett v. Halifax Building Society 1996 28 HLR
  634
• BUT
• C G PLC v Krausz 1997
• Mee should control sale if it is also seeking
  one
• Court cant postpone a possession order to allow
  Mor to apply for a s.91(2) order to sell if it
  wont clear the debt

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Palk

• Figures
• Mortgage debt increasing
  43,000.00 p.a.
• Proposed rental income
  13,000.00 p.a.
• Debt would grow annually by
  30,000.00