Update on Cycle 24 Giuliana de Toma collaborators: Gary Chapman, Angie Cookson, Dora Preminger
MORTGAGES II Jan Cookson. A LEGAL MORTGAGEE’S REMEDIES 1. POWER OF SALE 2 FORECLOSURE 3....
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Transcript of MORTGAGES II Jan Cookson. A LEGAL MORTGAGEE’S REMEDIES 1. POWER OF SALE 2 FORECLOSURE 3....
A LEGAL MORTGAGEE’S REMEDIES
1. POWER OF SALE
2 FORECLOSURE
3. APPOINTMENT OF A RECEIVER
4. SUE ON MORTGAGOR’S COVT.TO REPAY
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)
THE MORTGAGEE’S STATUTORY POWER OF SALE
ARISES UNDER s.101 LPA 25IF BOTH THE FOLLOWING CONDITIONS ARE MET:-
1. the mortgage must have been made by deed; &
2. the mortgage money must be due
THE MORTGAGEE’S STATUTORY POWER OF SALE
BECOMES EXERCISABLE UNDER s.103 LPA 25IF ANY OF THE FOLLOWING CONDITIONS ARE MET:-
1. M’ee has served notice on M’or requiring payment of the mortgage money & M’or 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. M’or is in breach of some other covenant in the mortgage deed
(i.e. other than repayment of mortgage money or interest )
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)
THE MORTGAGEE’S STATUTORY POWER OF 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/mortgagespower-sale.pdf
IS A COURT ORDER NEEDED BEFORE SALE ?
Horsham Properties Group Ltd v Clark and Beech
M. by Clark and Beech to L
Default
L doesn’t take possession &
simply sells to Horsham
No Ct order
No Ct order
Ct order but s.36
AJA 70 doesn’t
apply
Horsham seeks possession onbasis Clark & Beech are now trespassers
Breach of Art.1ECHR
unlawfuldeprivation
of possession?
THE NATURE OF A MORTGAGEE’S 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
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 whetherand when to exercise his power of sale…The mortgagee’s decision is not constrained by reason of the fact that the exercise or non exercise of thepower will occasion loss or damage to the mortgagor…’Silven
2. ?A DUTY AS TO TIMING OF SALE?
‘It is well settled that a mortgagee is not a trustee of the power ofsale for the mortgagor. …the mortgagee is entitled to exercise it for hisown purposes whenever he chooses to do so. It matters not that themoment may be unpropitious…He has a right to realise his security byturning 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
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
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
THE EFFECT OF A SALEBY A MORTGAGEE
s.104(1) LPA 25
1. What estate does the Mortgagee convey?
2. What interests is the sale• subject to?• free from?
3. What happens to Mortgagor’s right to redeem
THE EFFECT OF A SALE BY A MORTGAGEE
s.105 LPA 1925The 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?
C: Charges Register[SPECIMEN]
1. 02.12.2002) REGISTERED CHARGE dated 23rd November 2002
4. PROPRIETOR: CHELSEA BUILDING SOCIETY of Thirlestaine Hall, Thirlestaine Road, Cheltenham, Glos. GL53 7AL
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.’
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 :
M’ee should control sale if it is also seeking one Court can’t postpone a possession order to allow M’or
to apply for a s.91(2) order to sell if it won’t clear the debt