mortgages Flashcards
(15 cards)
mortgages
-proprietary in nature (runs with the land and can normally be enforced against subseqent owners of the land)
-its a form of security for the repayment of a loan
-gives the lender rights over the land
-if not repaid-
-enetitlement to the land
(more benficial than suing through contract if cant pay mortgage then likely cant pay damages)
mortgagor (borrower)- gives the security
law governing
law of Property act 1925 s85- 120
-s85- mortgage of a fee simple (freehold)
-s86- mortgage of a term of years absolute (leasehold)
mode of mortaging
sc85(1)- (freeholds)
a mortgage of an estate in fee simple shall only be capable of being effected at law by either
-a demise for a term of years absolute (for unregistered land)
-a charge by deed expressed to be by way of legal mortgage
s86(1)- (leaseholds)
-subdemise for a term of ears absolute, less than one day at least than the term vested in the mortgagor and subject to provision for cesser or redemption
-a charge by deed expressed to be by way of legal mortgage
summary:
2 ways under both sections
1. mortgage by demise or (granting a lease subject to a clause that once repaid the lease is terminated)
2. mortgage by charge (gives an entitledment which is only active when loan not repaid)
mortgage by demise only for unregistered land- and will fade as mortgaging unregistered land will trigger first registration and convert it into registered land
position since land registration act 2002
-mortgages by lease can only arise in relation to unregistered land
-for registered land only mortgage by charge
most mortgages are legal (made by deed and recorded on the land register)- binds the entire world
-some may be equitable- made by contract in writing not deed (but enforceable under contract and against persons who do not give valuable consideration when buying the land- equitys darling)
-also if made by deed but not registered will also be equitable
legal proprietary interests
LPA 1925 s1(2)-
lists of legal interests
-charge by way of legal mortgage
mortgagor (borrower)
law seeks to strike a balace of fairness between the 2 parties
- the right of redemption (getting the charged remove from the land) LPA s101-103,
and administration of justice act 1970 s36- court can suspend the power to sell if the default is a short term problem
must be able to repay the loan and be free of the debt
(the lender cannot sell the mortgaged land unless a default in payment)
-equity of redemption (if mortgage not paid on specific date and time still can be repaid late)
Halsbury laws of Egland defintion- this right “permit[s] the debtor to redeem the mortgage on perfromance of the conditions, notwithstanding failure to do so by the specified date
reflected in Thornborough v Baker 1675
“At one time, if the mortgagor did not redeem on the legal date for redemption, the property was lost”- Dixon (before the refom so more beneficial)
“here there was a great opportunity for abuse and unfairness”- DIxon
-benefits from increase in value (also if land increases in value, this value belongs to the borrower not lender)
-court has the powet to strike down unconscionable terms in mortgage agreements (the terms are unfair and represent repressive conduct)- Multiservices Bookbinding v Marden 1979
cityland properties v Dabrah 1968- 57% interest rate was unfair and unconscionable
jones v morgan 2001- 50% interest rate fair and not unconsionable, as c was advised and expect to undertand the terms of the agreement
-right to request an order for sale LPA s91- where borrower failed to pay and lender decides to take control and take possession, but if value is now less than loan lender may wish to delay selling, borrower has the right to request that the courts order the land be sold
-statutory regulation of mortgages- standardised advice, forms, terminilogy etc for mortgages
financial services and markets act 2000
mortgage credit directive order 2015
rights of the mortgagee (more extensively protected by statute than the mortgagor)
majority of rights come from LPA
-right to sue the covenant (contracts)- the lender has the right to sue for the money owed when it becomes due (in reality not that useful as likely dont have the money)
-insurance against the risk of fire, at the mortgagors expense- lender can assist by vertue of LPA s101(1)(ii) that the borrower insures the property
-consolidating mortgages and tacking advances
consolidating mortgages s93 LPA- can insist that they cannot redeem the mortgage on a second house until repaid the loan on the first house (mortgages treated as 1 entity)
tacking advances s94 LPA- further loans are treated as an extension of the original loan, effects the order of repayment
-restricting the right to lease s99 LPA- if a lease is created it can make it difficult to sell
terminating a mortgage
3 ways
-redemption- paying the loan and charge is removed
-foreclosure LPA s88(2) (freehold), s89(2) (leasehold)- where the land is taken in full satisfaction of the debt no matter the value of the land (straigh swap)
-possession and sale- lender has right to take possesion of land, more common to do so by way of a court order (to prevent issues), also gives the courts flexibility to suspend if temporary issues with payment
power of sale arising and becoming exercisable
LPA s103-
repayment of loan is late if after 6 months, then power of sale arises and give good titile to the land
but power cannot be exercised unless and untill one of the conditions below are satisfied
1. notice requiring payment has been served and default has been made in payment or of part therefore, for 3 months after such service
2. some interest under the mortgage is in arrear and unpaid for 2 months after becoming due or
3. there has been a breach of some provision contained in the mortgage deed or in this act and on the part of the mortgagor to be observed or perfromed other than besides a covenant for payment of the mortgage money or interest thereon
priority of mortgage repayments
(lower down the list, less likely you are to be paid)
- shares that pre-date the mortgage- williams and glyns bank v bolan 1981 (e.g an equitable interest in the house)
- costs of the sale (e.g auctioneers fees)
3.The first registered mortgage plus interest (first on land register)- but see LRA s49 tacking and further advances - the subsequent registered charges plus interest (in the order of registration not creation LRA s48)
- any charges that are not recorded on the land register (e.g equitable mortgages)
- balamce to the mortgagor
effect on third parties
-effect of mortgage on co-owners in equity- william and glyns bank v bolan 1981 (person is co owner in equity can prevent lender from selling the land)
cases that tried to limit the effect that equitabe co-owners can have on lenders-
-bristol and west building society v henning 1985- court decided entitlement was dependant on the loan so couldnt argue that her share defeated the entitlement on the lender to sell
-city of london building society v flegg 1988- court relied on principle of overreaching (did not prevent the sale)
-waiver- lender will ask adults living in house to sign a waiver not to sue against lender when selling
green v wynn 1869- equitable co-owner does have the right to pay mortgage if the owner fails
non owning spouses (or civil parters)
- family law act 1996 s30(3)- allows a non owning spouse to make mortgage payments if fail
tenants-
-lender may but a cluase in agreement ot prevent leasing or ask for consent before leasing
- keech v hall 1778- a lease without consent does not bind the mortgagee (lender can evict tenants)
-mortgage repossessions act 2010- can postpone sale for 2 months and notice to tenants that the land is going to be sold
overreaching LPA s2
-if 2 trustees who are legal owners of land, the buyer can pay the purchase money to the 2 trustees who can give a good recipt for purchase money
(covers equitable co-owners share in the land into a proportional share of the proceeds of the trust)
-land can be lawfully sold as no overriding interest attached to the land itself
effect of undue infuence
if the borrower was unduely influenced into entering into the mortgage by the lender
- court can set aside mortgage or modify relevant terms
2 form of undue influence- BCCI v aboody 1990
- actual undue influence
-claiamnt must prove UI actually exerted
-either by mortgagee or third party
-and UI brought about the mortgage - presumed undue influence
- relationship of trust and confidence between the parties and
-transaction is one that calls for an explanation but
-presumption is rebuttable
further decided- royal bank of scotland v etridge 2001-
-class 2A- specfic relationships (solictors and client, trustee and beneficiery, guradian and ward…)- irreputably presumed there was influence but still need to show that the transaction is one that calls for an explanation (ehich is rebuttable)
-class 2B- particular relationship
was one of trust and confidence so
rebuttable presumption that transaction is one that calls for an explanation
(can include husband and wife)
rebutting the presumption- by showing that the transaction was entered into only after full, free and informed thought about it- Zamet v Hyman (why they agreed to enter into mortgage)
thrid parties- doctrine of notice
(how 3rd parties are effected by UI)
the lender who is a 3rd party to the agreement but not to the influence between the husband and wife
Barclays bank plc v o’brien 1993-
2 ways in which a bank surety could be affected by UI and the charge be set aside-
1. the husband acted as the banks agent to obtain the execution of the charge or
2. the bank has actual or constructive notice of the facts giving rise to the wifes claim (can prevent this by insisting the other party takes independant legal advise- etridge)
discussion
creation of a mortgage-
-as summarised by DIxon, since LPA 1925 a mortgage is not created through the transfer of the borrowers entire interest in the land to the lender but instead “the mortgagee is goven some lesser proprietary right in the mortagagors land appropriate to the ype of mortgage created”
the right of the mortgagor (borrower)-
-equity of redemption (if mortgage not paid on specific date and time still can be repaid late)
Halsbury laws of Egland defintion- this right “permit[s] the debtor to redeem the mortgage on perfromance of the conditions, notwithstanding failure to do so by the specified date
reflected in Thornborough v Baker 1675
“At one time, if the mortgagor did not redeem on the legal date for redemption, the property was lost”- Dixon (before the refom so more beneficial)
“here there was a great opportunity for abuse and unfairness”- DIxon
-the right of redemption (getting the charged remove from the land) LPA s101-103,
-court has the powet to strike down unconscionable terms in mortgage agreements (the terms are unfair and represent repressive conduct)- Multiservices Bookbinding v Marden 1979
cityland properties v Dabrah 1968- 57% interest rate was unfair and unconscionable
jones v morgan 2001- 50% interest rate fair and not unconsionable, as c was advised and expect to undertand the terms of the agreement
lender-
“the ultimate goal of asny mortgagee will be to recoverpayment of the capital debt, plus interest and relevant costs if the mortgagor is unable to pay normally”- Dixon
as part of a mortage, the mortgagor will promise to pay the sum of the loan and addiional pay an interest previously agree
-the power of possesion and sale is either expressly stated in the mortgage agreement, or if not will be implied into the agreement by virtue of s101(1)(i) LPA 1925
-the right to possession and sale- the lender has the right to take possession and sell the land if the borrower defaults in the payments, and the power of sale becomes exercisable s103 LPA.
-This allows the lender to use the funds from sale to repay the loan debt
-The power of sale arising is reflected in Twentieth Century banking v Wilkinson 1977
-“if it were otherwise, the mortgage as a secured debt would be meangingless”- Dixon
however- administration of justice act 1970 s36- court can suspend the power to sell if the default is a short term problem by delaying the payment process aslong as it can be made in a reasonable time period
-reflected in Cheltnham and Gloucester Building Society v Norgan 1995- the court allowed the suspension of possession and sale at the time aslong as it would be paid back in a reasonable period. the judge in this case stated that the starting point for the reasonable period should be the outstanding term of the mortgage.
-consolidating mortgages and tacking advances
consolidating mortgages s93 LPA- can insist that they cannot redeem the mortgage on a second house until repaid the loan on the first house (mortgages treated as 1 entity)
tacking advances s94 LPA- further loans are treated as an extension of the original loan, effects the order of repayment
-remedy of foreclosure LPA s88(2) (freehold), s89(2) (leasehold)- where the land is taken in full satisfaction of the debt no matter the value of the land (straigh swap)
