Types of Mortgages and Rights of Parties

Question 1

What is a mortgage?

Answer 1

A security interest where an interest in land serves as security for a loan.

Question 2

Right of redemption

Answer 2

The right to go a court of equity and compel the lender to return the property provided the lender has been paid.

It is an equitable property right that can be sold or mortgaged.

Question 3

Application of estoppel to mortgages

Answer 3

Borrowing first, buying second, and giving you the mortgage third.

I can agree that you’re going to lend me money to buy Blackacre, and you will have a mortgage on Blackacre, to secure the loan of the money that you’ve given me to buy it.

Question 4

Pre-2009 Unregistered Legal Mortgages

Answer 4

(i) Conveyance of fee simple
(ii) Demise of a lease
(iii) Assignment of a term of years

Question 5

Pre-2009 Unregistered Equitable mortgages

Answer 5

(i) Mortgages of an equitable interest
(ii) Mortgage of the equity of redemption
(iii) The rule in Walsh v Lonsdale
(iv) Equitable mortgages by deposit of Title Deeds

Question 6

Pre-2009 Registered land

Answer 6

• The Legal Charge Over Land
• Equitable Mortgages by Deposit of the Land Certificate (Abolished s.73 RDTA 2006 – transitional period up to 31 December 2009; still issues)

Question 7

Post-2009 Unregistered land

Answer 7

• s.89 LCLRA 2009 – All mortgages now take effect by way of a charge over the land.
• s.89(6) – This does not effect the equitable mortgage over land
• s.21(3) LCLRA 2009 – equitable mortgage by deposit of deeds is protected from overreaching.

Question 8

Negative equity

Answer 8

Where the debt owed to the bank is greater than the market value of the property right itself.

Question 9

Conveyancing Act 1881

Answer 9

Outlines a series of remedies which go into every mortgage agreement unless there is a clause that excludes them.

Question 10

Rights of the mortgagee

Answer 10

• The Right to Possession
• The Power of Sale
• The Right to Appoint a Receiver
• The Right to Consolidate
• The Right to Marshall

CReMPS

Question 11

Irish Life v Duff

Answer 11

Hogan J suggests that the right to possession does not automatically vest in the mortgagee in Irish law after the Constitution. A person’s dwelling is inviolable save in due course of law (art 40.5).

Question 12

Damache v DPP

Answer 12

A legislative provision which allowed Gardai to obtain a search warrant provided a high enough ranking Garda signed it off was found to be unconstitutional.

Question 13

The mortgagee’s right of possession

Answer 13

Legal mortgages: technically as soon as the ink is dry, but doubts anout this (Duff).

Equitable: no right of possession, but a remedy of possession at the discretion of the court.

Question 14

Irish Permanent v Ryan [1950] IR 12

Answer 14

no RIGHT to Possession – instead there is a REMEDY of possession, at the discretion of the court.

Question 15

S. 7 Family Home Protection Act 1976

Answer 15

Mandates the imposition of a stay for a period of time to allow a spouse to try and regularise the position financially.

Question 16

Right of possession under registered land (pre-2009)

Answer 16

s.62(7) RTA 1964 – discretionary jurisdiction to grant possession.

BOI v Smyth – that order is discretionary.

[Repealed in 2009].

Question 17

Start Mortgages v Gunn

Answer 17

A huge debacle: the repeal of s.62 of the RTA 1964 in 2009 was not retrospective, and so a lot of mortgages were still governed by the pre-2009 law.

The mortgagee had sought to seize possession under s.62 RTA 1964, but that had been repealed.

Dunne J held that the bank had no right to seek an order for possession as they were relying on a provision which didn’t exist.

This meant that financial institutions holding mortgages pre-2009 over registered land could only enforce those mortgages by selling the property through the court process as under the 1891 RTA.

Question 18

LCLRA Amendment 2013 comes to the rescue

Answer 18

S.62(7) of the RTA 1964 is unrepealed and should be treated as though it had never been repealed.

Question 19

s.96 LCLRA 2009

Answer 19

General restriction of mortgagee’s rights to those necessary for enforcing security.

Question 20

s.97 LCLRA 2009

Answer 20

Abolishes the right to possession and replaces it with a court application. Court has a discretion to grant/refuse/grant on terms.

Allows for voluntary surrender: mortgagor can consent in writing but must do so within 7 days before the taking of possession.

Question 21

s.98 LCLRA 2009

Answer 21

Urgent possession cases where the property has been abandoned and the property is at risk – District Court application, can authorise protective works.

Question 22

S.7 Family Home Protection Act 1976

Answer 22

Right to spouses and civil partners: can adjourn possession cases to allow other spouse the opportunity to deal with arrears.

Question 23

Mortgagee’s Power of Sale

Answer 23

LCLRA and Conveyancing Acts 1881-1911 provide a basic template for terms of sale in a mortgage contract. The mortgagee can vary the statutory terms in commercial mortgages, but not for a residential mortgage.

Question 24

Conveyancing Acts 1881-1911 (on power of sale)

Answer 24

s.19 – Power of Sale ARISES when the monies become due

s.20 – Power of Sale is EXERCISABLE after notice and expiry of time

Question 25

s.100 LCLRA 2009

Answer 25

- Abolishes the concept of the power arising - Retains the conditions on exercise - Requires a court order for sale (discretionary order—court can refuse sale). - Sale by and under the supervision of the Court

Question 26

Section 107 LCLRA 2009

Answer 26

Power to appoint a receiver. The role of a receiver is usually to take possession of the property and either sell it or manage it in order to pay down the secured debt.

Question 27

Foreclosure

Answer 27

Abolished by the LCLRA. Had allowed the mortgagee to put an end to the equity of redemption.

Question 28

Consolidation

Answer 28

Allows the mortgagee to treat both properties as though they were the one property under the one mortgage; can combine a windfall and a shortfall to secure their debt.

Question 29

Marshalling

Answer 29

Multiple properties and multiple lenders. The law of equity will compel the first lender to act in such a way that the second lender’s losses are minimised.

Question 30

Redemption

Answer 30

The mortgagee can redeem a mortgage at any time by paying the principal, the interest and the costs.

Question 31

Clogs on the equity of redemption.

Answer 31

Any term of a contract that interferes with the equity of redemption is void.

Question 32

Browne v Ryan

Answer 32

Once a mortgage, always a mortgage. If you have a secured loan over your property, you have a mortgage and therefore right to redeem your property.

Question 33

Sheehan v Breccia

Answer 33

Courts now take a much more hands off approach to the equity of redemption. Finlay Geoghegan J suggested that the clog doctrine may no longer be absolute in Ireland.

Question 34

The Floyd case

Answer 34

There was a historic jurisdiction to review mortgage loans for unconscionable bargains. Ms Floyd secured a bridging loan to purchase a house, before she could, the housing market collapsed. Was being charged 17%. Held: Laffoy J says that the usury statutes have been repealed, the amount of interest you agree to pay is a matter of contract between the parties, if the Oireachtas wants to regulate here it can do so, but it is not for the court to legislate in its stead. No unconscionable bargain jurisdiction in Ireland post-Floyd.

Question 35

Penalty clauses

Answer 35

Unenforceable unless a genuine pre-estimate of costs. The bank can place a penalty on the amount outstanding, but not on the principal.

Question 36

Collateral Advantages

Answer 36

A further subset of the clog doctrine: A mortgagee is allowed to recover from the mortgage transaction only three things: the principal, the agreed interests, and the cost of enforcing the mortgage. Everything else is either a clog on the equity of redemption or a collateral advantage that goes beyond that core bargain. Today: these issues are mainly dealt with in competition law.

Question 37

Kreglinger

Answer 37

Encapsulates the collateral advantages rule. A mortgage agreement in which a meat company could only ship its produce on the mortgagee's ships. Held: on the facts, a collateral advantage, but was within the nature of the contract and was permissible. Established that collateral advantages are permissible provided they are not: 1. unfair and unconscionable, 2. in the nature of a penalty clogging the equity of redemption, or 3. inconsistent with or repugnant to the contractual or equitable right to redeem. Lord Mersey: clog doctrine is an “unruly dog.”

Question 38

s.38 RTA 1964 (Priority)

Answer 38

Unregistered land: priority is in order of registration of memorials (by order of serial number). Exceptions: unregistrable transactions (e.g. deposit of deeds) and if the mortgagee has prior knowledge of unregistered transactions.

Question 39

s.74 RTA 1964 (priority)

Answer 39

- Land charges rank in order of their registration - Whoever is named as owning the charge owns the charge - Takes priority over any other section 69 burden

Question 40

Salvage

Answer 40

Money expended by a secured creditor to preserve the secured property from destruction takes priority over all other advances.

Question 41

Re: Cobden’s Estate

Answer 41

Island off Shannon estuary where a person had built structural work to prevent flooding. The mortgagee's repairs on the structural work were considered salvage money.

Question 42

Tacking

Answer 42

Allows a mortgagee, when there are several mortgages affecting land, to secure greater priority on the mortgage by attaching or “tacking” it onto an earlier mortgage in the series and gaining priority over intervening mortgages.

Question 43

Tabula in naufragio

Answer 43

"Plank in a shipwreck". If A had a legal mortgage and B and C had equitable ones, C could acquire A's interest to enforce his interest ahead of B's. Abolished in 2009.

Question 44

Tacking of further advances

Answer 44

s.111 LCLRA 2009 – A second lender can put an end to the first lender's right to tack by express notice in writing.