Loss of property rights in the home - Sale

Question 1

What does sale mean?

Answer 1

That a mortgagee is able to enforce its security and have the mortgage debt repaid

Question 2

What 2 options will the mortgagee enjoy?

Answer 2

Either express power of sale under express terms of the mortgage or by implication under s.101(1)(i) LPA 1925

Question 3

In the event of express power of sale, what will the mortgage agreement do?

Answer 3

Govern how and in what circumstances the power will operate

Question 4

If the lender relies upon implied power of sale…

Answer 4

The power of sale must both arise under s.101 and be exercisable under s.103 LPA 1925

Question 5

Requirements for the power of sale to arise

Answer 5

• Mortgage was made by deed (s.101(1) LPA 1925
• Deed contained no provision excluding a power of sale (s.101(4) LPA 1925
• The mortgage money has become due (s.101(1)(i) LPA 1925
• Requires ALL of these

Question 6

Is the power of sale exercisable? Requirements

Answer 6

• The mortgagor remains in default 3 months after service by the mortgagee of notice requiring payment of the mortgage monies (s.103(i) LPA 1925)
• The mortgagor is 2 months in default in the payment of interest under the mortgage (s.103(ii) LPA 1925
• The mortgagor has breached another term of the mortgage other than as to payment of mortgage monies or interest (s.103(iii) LPA 1925
• Either one of these required

Question 7

What will mortgages that satisfy all the requirements in s.101 LPA 1925 benefit from?

Answer 7

Implied power of sale except to the extent that the power is modified or excluded by the terms of the mortgage

Question 8

Where of the 3 conditions in s.103 are satisfied…

Answer 8

The power of sale becomes exercisable and the mortgagee need not seek a court order to effect sale

Question 9

What happens in the majority of cases?

Answer 9

The mortgagee will have already sought a court order to secure vacant possession of the property

Question 10

What are court orders not required to do?

Answer 10

Exercise a mortgagee’s power of sale

Question 11

What does s.88(1) LPA 1925 do?

Answer 11

Provides that the sale vests legal title in the purchaser

Question 12

What does s.104 LPA 1925 do?

Answer 12

• Ensures the purchaser receives a clean title free from encumbrances to which the mortgage has priority
• A mortgagee exercising their power of sale can convey the property freed from those rights, but subject to any prior encumbrances

Question 13

What does the sale serve to do?

Answer 13

Overreach the mortgagors interests which then sounds in the proceed of sale

Question 14

What happens on sale?

Answer 14

The mortgage and any subsequent charge is extinguished

Question 15

What is given to purchasers of mortgaged land and under what provision?

Answer 15

A measure of protection, so wherever land is sold, the purchaser will get good title and title is unimpeachable under s.104(2) LPA 1925

Question 16

Distribution of proceeds is governed by…

Answer 16

s.105 LPA 1925

Question 17

s.54 LRA 2002 provides…

Answer 17

that the mortgagee is ‘taken to have notice of anything in the register immediately before the disposition of sales

Question 18

The onus (duty) is on…

Answer 18

The mortgagee to make the necessary searches of the register before sale

Question 19

Cuckmere Brick Co. v Mutual Finance (1971)

Answer 19

COA held Mutual Finance owed Cuckmere:
- A duty to act in good faith in conduct of sale
- A duty to take reasonable care in the conduct of the sale
- A duty to obtain a fair and proper price for the land

Question 20

Duties owed by the mortgagee arise…

Answer 20

in equity as a result of the relationship between the mortgagee and the mortgagor

Question 21

The mortgagee is under a duty to…

Answer 21

Act in good faith and obtain a true market value for the mortgaged land at the time of sale. The mortgagee can chose when and if it sells the land at all

Question 22

If the mortgagee fails to obtain a proper price for the land…

Answer 22

• It may have to account to the mortgagor for any shortfall between the price obtained and the market value
• It is allowed if consent from the mortgagor is obtained

Question 23

A mortgagee cannot…

Answer 23

• Sell to itself or its agent

Question 24

What is a mortgagee not required to do?

Answer 24

Incur expenses or take positive actions to secure a higher price for the land

Question 25

When the mortgagee breaches any of its duties...

Answer 25

The mortgagor can seek an order of the court that the sale be set aside, or seek an order that the mortgagee account for the shortfall between the price paid and the price reasonably obtainable for the land

Question 26

A sale will only be set aside when...

Answer 26

there is a degree of impropriety such as fraud. Even if, the court will refuse to set aside a sale where the mortgagor has itself caused an 'inexcusable delay' or where to do so would cause undue hardship

Question 27

When can a mortgagor seek an order for sale?

Answer 27

Under s.91 LPA 1925, which endows the court with a wide discretion to order sale at request of 'any person interested either in the mortgage or in the right of redemption

Question 28

Case law for the mortgagor seeking order of sale

Answer 28

Palk v Mortgage Services Funding Plc

Question 29

What is foreclosure and under what provision can it be used?

Answer 29

The mortgagor's equity of redemption is extinguished by an order of the court and the mortgaged property is transferred to the mortgagee free of all rights of the mortgagor which are brought to an end s.91(2) LPA 1925

Question 30

What did the Law Commission recommend?

Answer 30

That foreclosure be abolished

Question 31

What is a reciever?

Answer 31

A manager/administrator of the mortgaged land

Question 32

What provision allows for a reciever to be appointed?

Answer 32

s.101 and 103 LPA 1925

Question 33

When is a receiver typically appointed?

Answer 33

To 'receive' rents or profits generated from the mortgaged land and harness this income to repay sums owed under the mortgage

Question 34

What happens if the reciever is found to have acted negligently?

Answer 34

Liability will NOT fall on the mortgagee.

Question 35

What must the reciever act with?

Answer 35

Due diligence subject to a primary obligation of paying down the mortgage debt

Question 36

Unless created by a deed...

Answer 36

Equitable mortgages will not enjoy an implied power of sale under s.91 LPA 1925

Question 37

Where no deed is used...

Answer 37

Equitable mortgages will still be able to rely on the court's discretion to order sale of mortgaged property under s.91 LPA 1925

Question 38

Is is possible for landowners to grant more than one mortgage over her land?

Answer 38

Yes

Question 39

Where there is more than one registered charge over the same parcel of land...

Answer 39

s.48(1) LRA 2002 provides that priorty is to be governed by the order in which the charges were registered

Question 40

Under s.29(1) LRA 2002...

Answer 40

A registered legal charge will also take priority over any pre-existing interests in the land which weren't protected by way of a notice in the register and which do not constitute overriding interests under Sch.3 LRA 2002

Question 41

A registered legal mortgage will enjoy...

Answer 41

Priority over prior, unprotected interests including unprotected equitable mortgages

Question 42

A registered legal mortgage will lose priority where...

Answer 42

a beneficial interest holder is in actual occupation of the land and overreaching has not taken place

Question 43

What is a registered charge also capable of?

Answer 43

Overreaching pre-existing equitable interests in the land such as beneficial interests

Question 44

What are overriding interests?

Answer 44

These are unregistered interests that, despite not being on the Land Register, can still bind a subsequent purchaser or mortgagee.

Question 45

What are overreaching interests?

Answer 45

- A process where an equitable interest is transferred from the land to the purchase money paid by a buyer - "overreaches" the beneficial interests of the beneficiaries, converting them to a claim against the purchase money.

Question 46

When can overreaching take place?

Answer 46

Even if the beneficial holder is in actual occupation and where the grant of mortgagee does not generate capital monies

Question 47

What is the starting point for more than one equitable mortgage over registered land?

Answer 47

s.28 LRA 2002

Question 48

What does s.28 LRA do?

Answer 48

Priority is determined according to the order in which the mortgages were granted

Question 49

What is the difference between express and implied power of sale?

Answer 49

- Express power of sale is a right to sell property that is explicitly granted in a legal document, such as a mortgage agreement. - An implied power of sale, on the other hand, is a right that arises not from a specific statement in the agreement, but from the nature of the relationship or applicable laws.