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FLK 2: Land Law > Topic 1 - Mortgages > Flashcards

Topic 1 - Mortgages Flashcards

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1
Q

What is a mortgage?

A

An interest in land, a proprietary right in the land

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2
Q

Who is the mortgagee?

A

The lender who loans money to fund the property purchase

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3
Q

Who is the mortgagor?

A

The borrower who grants rights over the property as security for the loan

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4
Q

What does a mortgage provide the lender?

A

Rights to possess and sell the property in the event of default

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5
Q

What are the key topics covered in mortgage law?

A
  • Formalities
  • Enforceability of terms
  • Undue influence
  • Priority
  • Rights of the lender
  • Lender’s duties
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6
Q

What is required to create a mortgage?

A

It must be created by deed and registered at the land registry

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7
Q

What is the ‘equity of redemption’?

A

The collective rights of the borrower to challenge terms of the mortgage

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8
Q

What may happen if a borrower is unduly influenced to enter a mortgage?

A

The mortgage loan can be set aside

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9
Q

What are the consequences of multiple mortgages on the same land?

A

Issues of priority arise when there is not enough money to pay back all lenders

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10
Q

What are the two most important rights of the lender?

A
  • Right to possess the property
  • Power to sell the property
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11
Q

What must a lender do before selling a property after default?

A

Exercise the right to possess the land

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12
Q

What is the legal requirement for a mortgage to be recognized as a legal interest?

A

It must be created in compliance with the formalities for a legal interest over registered land

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13
Q

What is required for a deed to be valid?

A
  • Must be clear it is intended as a deed
  • Must be validly executed
  • Must be delivered
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14
Q

What happens if a mortgage is not registered?

A

It will not take effect as a legal mortgage but could still be an equitable interest

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15
Q

What constitutes an equitable mortgage?

A
  • Mortgages of equitable interests
  • Defective legal mortgages
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16
Q

What is the process to discharge a mortgage?

A

Cancel mortgage entries at the Land Registry using a specific form

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17
Q

What does equity recognize regarding the borrower’s rights?

A

The borrower as the true owner of the property and protects their rights

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18
Q

What are the rights that make up the equity of redemption?

A
  • Equitable right to redeem supplements legal right to redeem
  • No postponement or prevention of redemption
  • No collateral advantages
  • No unconscionable terms
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19
Q

What is a clause that postpones the legal date for redemption?

A

A clause that may be scrutinized and potentially declared void by courts

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20
Q

What was held in Fairclough v Swan Brewery Co Ltd regarding postponement of redemption?

A

The clause postponing redemption was struck out as it prevented the borrower from getting back anything of value

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21
Q

What was the outcome in Knightsbridge Estates Trust Ltd v Byrne?

A

The court upheld the postponement of redemption as the right to redeem was not rendered illusory

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22
Q

What type of property was mortgaged in the case discussed?

A

Freehold of a hotel

The mortgaged property was commercial premises.

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23
Q

How long was the legal date for redemption postponed in the case?

A

40 years

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24
Q

What was the court’s ruling regarding the early repayment of the mortgage?

A

The court upheld the postponement of redemption and would not allow early repayment

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25
What advantage did the borrower receive in the mortgage deal?
A favourable low rate of interest
26
What is a freehold estate?
An enduring estate that rarely loses value
27
What distinguishes a mortgage over domestic property from one over commercial property?
Domestic borrowers are often 'locked in' for a shorter period, typically a few years
28
What is a 'solus tie' in mortgage transactions?
A condition requiring the borrower to buy all supplies from the lender
29
In which case was a solus tie declared void?
Noakes & Co Ltd v Rice
30
Under what condition can a solus tie be upheld?
If it ends within the mortgage term
31
What must courts consider when determining if a mortgage term is unconscionable?
The term must be more than simply 'unfair' or 'unreasonable'
32
What is the significance of the case Cityland and Property Holdings Ltd v Dabrah?
It established that high interest rates can be unconscionable
33
What did the court rule regarding the interest rate in Cityland and Property Holdings Ltd v Dabrah?
The interest rate was reduced to 7% due to unconscionability
34
What is the basic rule of priority for equitable mortgages?
Equitable mortgages rank in order of creation
35
How can an equitable mortgage be protected?
By entering a notice on the charges register
36
What happens if an equitable mortgage is not protected by notice?
It loses priority to a subsequent registrable disposition
37
What is the effect of a postponement agreement on priority rules?
It allows a mortgage to take priority over a pre-existing interest
38
What must be included in a mortgage agreement for the lender to enforce security?
An express waiver or postponement of the rights of any person living at the mortgaged property
39
What is the lender's inherent right in a mortgage?
The right to repayment of the loan secured against the mortgaged property
40
What is a 'clog' on the equity of redemption?
Terms preventing the borrower from redeeming the property free of the loan
41
What is the test established by Multiservice for determining unconscionable terms?
Has the term been imposed in a 'morally reprehensible' manner?
42
What is the consequence of a term being declared void?
It will not be enforceable on the borrower, but the remainder of the agreement remains in force
43
What is inherent in the nature of a mortgage regarding the lender's rights?
The lender's right to repayment of the loan is secured against the mortgaged property itself. ## Footnote This security is crucial for lenders to mitigate risks when advancing large sums of money.
44
What are the remedies available to a lender in case of borrower default?
* Debt action * Possession * Sale * Receiver * Foreclosure ## Footnote The choice of remedy is at the lender's discretion based on specific circumstances.
45
Does a lender have an obligation to exercise any particular remedy?
No, there is no obligation for a lender to exercise any particular remedy. ## Footnote The lender must act fairly and reasonably when pursuing a remedy.
46
What is the difference between a legal mortgage and an equitable mortgage regarding remedies?
A legal mortgagee has a wider choice of remedies compared to an equitable mortgagee. ## Footnote An equitable mortgagee has limited rights, generally requiring a court order for repossession or sale.
47
What is a debt action in the context of mortgages?
A personal action against the borrower for the outstanding debt. ## Footnote This action is often pursued in addition to other remedies.
48
What does 'negative equity' mean?
The value of the mortgaged property is less than the outstanding mortgage debt. ## Footnote In such cases, a lender may pursue a personal debt action for any shortfall after a sale.
49
What is the limitation period for recovering a debt stated in a mortgage deed?
Twelve years for the capital and six years for interest. ## Footnote Borrowers may face contractual debt actions long after repossession.
50
Why might a legal lender take possession of a mortgaged property?
* To sell with vacant possession * To manage the property and generate income ## Footnote Vacant possession makes the property more attractive to potential buyers.
51
What does the power of sale allow a lender to do?
The lender can sell the property, applying proceeds towards the outstanding debt. ## Footnote If there is a surplus, it is returned to the borrower; if there is a shortfall, the borrower may face a personal debt action.
52
What must a lender do when exercising the power of sale?
Adhere to procedural steps as mandated by statutory rules and case law. ## Footnote This includes ensuring the power of sale has arisen and is exercisable.
53
What is the role of a receiver in mortgage enforcement?
To manage the mortgaged property and generate income to apply towards the outstanding mortgage debt. ## Footnote The receiver acts as the borrower's agent and is not liable for negligence.
54
What is foreclosure in the context of mortgages?
A historic method allowing a lender to take the mortgaged property in satisfaction of the debt. ## Footnote It is rarely used today due to its complexity and draconian nature.
55
What does LPA 1925, s 95(4) state about a legal mortgagee's right to possess?
It acknowledges the right of a mortgagee to take possession of the mortgaged property. ## Footnote This right arises immediately upon granting the mortgage.
56
Under what circumstances can a lender exercise the right to possess?
When the borrower is in default with little hope of repayment. ## Footnote Mortgage deeds often include terms that postpone this right as long as payments are made.
57
What does the Criminal Law Act 1977, s 6 prohibit?
Using or threatening violence to gain entry to property. ## Footnote This makes 'self-help' repossession risky for lenders.
58
What is the purpose of the Pre-Action Protocol for Possession Claims 2008?
To outline steps a lender must take before resorting to possession of residential property. ## Footnote Possession should be a last resort, and lenders are expected to discuss debts with borrowers.
59
What does AJA 1970, s 36 allow the court to do?
Postpone the date for delivery of possession if the borrower is likely to pay sums due. ## Footnote The court may impose conditions regarding payment.
60
What does 'any sums due' refer to in the context of AJA 1970, s 36?
Arrears and accrued interest, not the entire mortgage debt. ## Footnote This allows for more manageable repayment terms for the borrower.
61
What is the lender's strongest right against a defaulting borrower?
The right to sell the mortgaged property. ## Footnote This right does not require a court order to be exercised.
62
What must a mortgage document include to grant an express power of sale?
Clear terms outlining how and when the power will be exercised. ## Footnote Duties on sale still apply even if relying on express powers.
63
When does the lender's statutory power of sale arise?
When the mortgage money has become due. ## Footnote This occurs as soon as any portion of capital is due.
64
When does the lender’s statutory power of sale arise?
When the mortgage money has become due, LPA 1925, s 101(1)(i).
65
In a capital and interest repayment mortgage, when does the power of sale arise?
As soon as one portion of capital is due.
66
When does the capital become due in an interest-only mortgage?
At the legal redemption date, usually about six months from the start of the mortgage.
67
Is a sale valid if it occurs after the power has arisen but before it is exercisable?
Yes, but the lender will be liable in damages to the borrower, LPA 1925, s 104.
68
What must be served for the power of sale to become exercisable under LPA 1925, s 101(1)(i)?
A notice requiring payment of the whole loan.
69
What are the criteria for the power of sale to be exercisable?
* Notice requiring payment has been served and borrower has defaulted * Interest is unpaid and arrears for at least two months * Breach of another mortgage provision
70
What is the lender’s primary duty when exercising the right to sell mortgaged property?
To recover the debt due, meaning the capital sum, interest, and costs.
71
What must the lender balance when exercising the right to sell?
The lender's interests against the interests of the borrower.
72
After the sale, what is the lender considered in relation to the surplus proceeds?
Trustee of the surplus proceeds of sale, LPA 1925, s 105.
73
What was the principle established in Cuckmere Brick Co Ltd v Mutual Finance Ltd?
The lender owed a duty to take reasonable care to obtain the 'true market value' for the property.
74
What did the court decide in Michael v Miller regarding the lender's liability for sale price?
Perfection as to price is not required; the lender will not be liable if the price is within an acceptable margin of error.
75
What principle was established in Tse Kwong Lam v Wong Chit Sen regarding sales to associated buyers?
The court will scrutinize a sale closely where the property is sold to a buyer closely associated with the lender.
76
What did the court rule in Silven Properties Ltd v Royal Bank of Scotland plc about lender's discretion?
A lender has an ‘unfettered discretion’ as to when to sell and cannot be expected to delay for improvements.

FLK 2: Land Law (8 decks)

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