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SQE1 - Land Law 🌴 > 9. Mortgages > Flashcards

9. Mortgages Flashcards

1
Q

How must a legal mortgage be made?

A

By deed

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2
Q

Can a legal mortgage that has not been validly registered still be binding on third-parties?

A

yes - will take the form of an equitable mortgage.

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3
Q

What formalities are required to give rise to an equitable mortgage?

A

only need to be in signed writing, but not need for a formal deed.

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4
Q

What formalities are required to give rise to an legal mortgage?

A

1) **Signed writing ** and executed as deed
2) Registered at the Land Registry (reg. land) or class (i) charge on Land Charges Reg (unreg. land) or if first mortgagee, ownership of title deeds.

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5
Q

A contract to create a legal mortgage gives rise to an equitable mortgage from what time?

A

Date of the contract

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6
Q

What is the effect of an unsuccessful attempt to create a legal mortgage?

A

Equitable mortgage

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7
Q

Does an equitable mortgage need to be created by deed?

A

No, but it must be in writing and signed by mortgagor or their agent (s.2 of LP(MP)A)

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8
Q

How is a legal mortgage over registered land protected?

A

It must be registered if the mortgagee wants to exercise power of sale.

Once registered, it has priority over competing interests, unless those are previously registered, or overriding.

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9
Q

How is an equitable mortgage over registered land protected?

A

Placing a notice or restriction on the property’s register of title

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10
Q

In the context of mortgages, who has priority in the unregistered system, and why?

A

The first mortgagee, because they will have custody of the title deeds

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11
Q

How does one protect a subsequent legal mortgage over unregistered land, when they do not have the title deeds?

A

Register a class C(i) puisne mortgage land charge

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12
Q

How does one protect an equitable mortgage over unregistered land, when they do not have the title deeds?

A

Register a class C(iii) general equitable land charge

cf.
C(i) puisne is for legal mortgages in the same situation

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13
Q

What is required if the equitable mortgage is over an equitable interest, e.g. a beneficiary’s interest under a trust?

A

Mortgagee should give notice to the trustees

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14
Q

Within what time period of a company creating a charge must it be filed with Companies House?

A

21 days

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15
Q

What are the two main situations in which a third party may have an interest in land subject to sale?

A
  1. Tenants
  2. Co-owners
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16
Q

Does a legal tenancy of unregistered land bind the mortgagee?

A

Yes

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17
Q

Does a legal tenancy of registered land bind the mortgagee?

A

Yes, as an overriding interest as long as it does not exceed seven years

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18
Q

What is required for a legal tenancy of greater than seven years to be binding?

A

It must be registered with its own independent title

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19
Q

What is required of an equitable tenancy of unregistered land to be binding, and what is the consequence of not doing this?

A

An equitable tenancy of unregistered land must be registered as a class C(iv) estate contract land charge, and failure to do so will render the tenancy void against a bona fide purchaser for value without notice.

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20
Q

Does an equitable tenancy of registered land not exceeding seven years override the mortgage?

A

yes, as an overriding interest.
- provided the tenant is in actual occupation

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21
Q

Where the mortgage deed prohibits creation of tenancies without mortgagee’s consent, is the mortgagee bound by unauthorised tenancies?

A

No

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22
Q

How will a person in occupation with a property interest defeat the mortgagee’s ability to repossess?

A

Court may be willing to allow the occupier to stay in occupation

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23
Q

What is required where an institution is lending money secured by co-owned property, but the proceeds are to be used by only one of the co-owners for a separate purpose?

A

Other co-owner must be:

  1. Separately represented by another solicitor, and
  2. Given full financial information
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24
Q

In this situation, what must the institution ensure the other co-owner understands?

A

The practical implications of the proposed transaction in a meaningful way
- follow the Etridge Protocol

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25
Q

What steps is a lender expected to follow under the Etridge Protocol to safeguard against undue influence in mortgage transactions?

A
  • vulnerable party should be referred to an independent solicitor for advice;
  • lender should provide solicitor with all the relevant financial information on the transaction and any doubts it possesses; AND
  • lender should obtain a post-meeting debrief from the solicitor on the advice given.
26
Q

Which relationships give rise to the presumption of undue influence?

A

Burden is on the lender/party seeking to the enforce mortgage to prove there was no undue influence.

Closed-list of relationships:
- solicitor to client
- trustees to beneficiary
- parent to child (generally not adult, based on whether parent exercises ‘dominion’ over kid)
- religious advisor

NOTE
- Presumption does not apply in marital relationship - must prove ‘actual’ undue influence.

27
Q

When might a mortgage be set aside?

A

if it was entered into as a result of fraud or undue influence.
- courts will consider whether mortgage was ‘put on inquiry’ - must take into account the relationship and purpose of mortgage.

ie. transaction that call for an explanation is generally involves one party guaranteeing another’s debt with no personal benefit to them.

28
Q

What are the five rights a mortgagee has once the legal mortgage is registered as a charge?

A
  1. Right to payment
  2. Right to possession
  3. Power of sale
  4. Right to appoint receiver
  5. Foreclosure
29
Q

Whilst a mortgagee can usually always take possession, the presence of what on the land adds an additional requirement, and what is this step?

A

If there is a dwelling on the land, possession can only be sought through the courts

30
Q

What is the effect of foreclosure and when does the right to it arise?

A

The mortgagee becomes the registered proprietor of the property.
- Right does not arise until after the contractual due date has passed.
- very rarely allowed

31
Q

What are the possible benefits and risks for a mortgagee when exercising their right to foreclosure?

A

If property has increased in value, the mortgagee gets to keep all the proceeds of sale. No longer obliged to pay over excess amount.

If property decreased in value, foreclosure waives mortgagee’s contractual recourse for any outstanding amount/debt.

32
Q

Prior to exercising their right to foreclosure, what does the pre-action protocol require of first mortgagees?

A

Must first engage in open dialogue + agree (where possible) to repayment plan.
- aim to avoid litigation where possible.

cf. others can proceed straight proceedings stage.

33
Q

What requirement must be met before a legal mortgagee can sell the property without applying to court?

A

Contractual date set to redeem the mortgage has passed (usually six months after creation)

34
Q

What are the three instances where a mortgagee’s can enforce their power of sale?

A

1) Notice of default is served on mortgagor + 3 months have elapsed since w/out full repayment of debt; or
2) Interest due is in arrears + left unpaid for 2 months after being due; or
3) breach of any other “material” term

35
Q

What is a mortgagee under a power of sale subject to and what is it free of?

A

Subject to any prior mortgages, but free of any interest over which the mortgagee has priority

36
Q

What duty does the mortgagee owe the mortgagor in exercising their power of sale?

A

Duty to act in good faith and ensure it obtains true market value.

  • ensure full information about the property is available to prospective buyers.
37
Q

What function does appointing a receiver serve, and where is this power generally exercised ?

A

More common in the commercial context.
- mortgagee’s appointee is tasked with collection income and takes over the management of the property.
- income is then used to pay off debt, and any surplus is paid out to mortgagor (cf. foreclosure)

38
Q

What are the five rights an equitable mortgagee has?

A

Same fives rights as legal mortgage, subject to some differences for sale and receiver

39
Q

Whilst an equitable mortgage will generally have the power of sale, what do they not have?

A

Power to convey or transfer the legal estate

40
Q

What is required for an equitable mortgagee to have the right to appoint a receiver, and what is required in the absence of this?

A

Equitable mortgage must have been created by deed, otherwise an application must be made to the court

41
Q

Unless there is anything on the register to the contrary, what will a legal mortgage have priority over when it is entered on the register of title?

A

Any interest whose priority is not protected

42
Q

What two things will have priority over a properly registered legal mortgage in the registered system?

A
  1. Charge registered before it, and
  2. Overriding interest if it existed before it
43
Q

When an equitable mortgage in the registered system is protected by placing a notice or restriction on the property’s register of title, what will the equitable mortgage have priority over?

A

Any later dealing with the legal estate, even a later legal mortgage

44
Q

In the unregistered system, which legal mortgage will have priority?

A

Whichever one is protected by deposit of the title deeds with the lender

45
Q

For all legal mortgages in the unregistered system other than the first protected by the title deeds, what is the main factor in determining priority?

A

The date of registration as a legal charge

46
Q

In the unregistered system, how should (1) a legal mortgage not protected by deposit of title deeds and (2) an equitable mortgage be protected?

A

Legal mortgage: Class C(i) puisne mortgage land charge

Equitable mortgage: Class C(iii) general equitable interest land charge

47
Q

What are the priority rules for equitable interests in both systems?

A

Generally, first in time has priority

48
Q

What is postponement?

A

Process whereby lenders agree between themselves to vary the priority of their respective charges

49
Q

What limitations is a mortgagee subject to when exercising their power of sale?

A
  • must obtain a court order first.
  • Mortgagor can object - via s.36 AJA
  • connected person - rely on court’s equitbale jursidiction (where discretion/postponent is more limited).
50
Q

What must a mortgagor show the court when contesting a mortgageer’s right to possession via s.36 AJA?

A

demonstrate that they have a realistic prospect of repaying their debts.
- court may then post-pone right for a reasonable period.

51
Q

What factors will the court consider when reviewing a s.36 AJA application to post-pone repossession?

A

1) How much mortgagor can afford to repay
2) Whether any temporary difficulties (ie. sick leave) affected its ability to make repayments;
3) Reasons for arrears
4) Contractual terms of mortgage

52
Q

What effect does the doctrine of clogs and fetters have in safeguarding mortgagor’s right to redemption?

A

protective mechanism against unfair conditions that seek to restrict or limit a borrower’s right to redeem mortgage.
- court will refuse to give effect to any such terms that render right to redemption ‘merely illusory’?
- whether term is ‘oppressive’ is assessed objectively.

53
Q

What are three instances where a term will be deemed unfairly fetter a mortgagor’s right to redem?

A

1) unfair condition that prevents full repayment of mortgage;
2) term that changes the nature of the mortgagee/mortgagor relationship

54
Q

When will a collateral advantage amount to a fetter on a mortgagor’s right to redemption?

A

Where collateral advantage lasts longer than duration of mortgage.

55
Q

What purpose does the UK Finance Mortgage Lenders’ Handbook serve?

A

It provides a standard set of mortgage instructions to a solicitor acting for a lender.

56
Q

When is a lender expected to comply with the Pre-Action Protocol for Possession Claims 2008?

A
  • where seek to repossess residential premises.
  • first mortagee
57
Q

When will a lender be bound by interests predating the registration of its charge?

A

1) another registered charged;
2) notice on register of rights
3) overriding interest

58
Q

How is the right to foreclosure obtained by the mortgagee?

A

lender must go to court to obtain interim order fixing date borrower should pay outstanding money.
* if borrower fails, then lender can seek final order to foreclose.

59
Q

What is a key limitation to a mortgagee’s right to foreclose?

A

LPA 1925, s.91(2)
Allows any person interested either in the mortgage money or in the right of redemption to request that court order for sale instead of foreclosure

60
Q
A

SQE1 - Land Law 🌴 (9 decks)

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