W8 Freehold Covenants and W9 Mortgages Flashcards
(119 cards)
1
Q
What is a positive covenant?
A
A covenant requiring action - must do something
2
Q
What is a negative covenant?
A
A covenant prohibiting something - cannot do something
3
Q
Shepherd Homes v Sandham 1971
A
Facts: Covenantee sued the covenantor for breach of freehold covenant and sought an injunction. Question was whether Land Tribunal had jurisdiction to modify the covenant.
Significance: Lands Tribunal can alter covenants which run with the land but also which are personal but affect the land.
4
Q
Powell v Hemsley 1909
A
Facts: Freehold purchaser covenanted with vendor not to build private residences and to get their approval on building plans. Then leased the land and the lessors breached the covenant by building without approval. They went bankrupt, he took back the land, covenantee took action to compel removal of the building. Court found it was not a continuing breach.
Significance: Inseverable covenant – not to build on land without approval of neighbour, in which case you look at the covenant as a whole and subsume the positive requirement into the negative and judge as wholly negative
5
Q
Is a freehold covenant an equitable or legal interest in land?
A
Equitable
6
Q
What are the formalities for freehold covenants?
A
Signed writing (s53(1)(a) LPA 1925) and/or Deed
7
Q
What is a dominant tenement?
A
The tenement benefitted by/made more valuable by the covenant
8
Q
What is the servient tenement?
A
The tenement made less valuable/serving the covenant
9
Q
If a freehold covenant is negative, do we use law or equity?
A
Equity
10
Q
If a freehold covenant is positive, do we use law or equity?
A
Law
11
Q
Tulk v Moxhay 1848
A
Facts: Covenant to keep free the land in Leicester Square. Phrased positively but really a negative covenant not to build, was deemed binding on successors.
Significance: Authority for burden of negative covenants passing in equity.
12
Q
What is required for the burden of a freehold covenant to pass at equity?
A
Must be a negative covenant
Must accommodate the dominant tenement
Original parties must have intended the burden to run
Must follow applicable notice rules for registered or unregistered land
13
Q
What does it mean to “accommodate the dominant tenement”?
A
Must benefit the land
Must touch and concern the dominant land
Must have sufficient proximity
14
Q
What are the notice rules for a freehold covenant on registered land?
A
Notice on charges register to bind purchasers (s32 LRA 200)
Otherwise, not bound and cannot be an overriding interest
15
Q
What are the notice rules for a freehold covenant on unregistered land?
A
Requires a class D(ii) land charge to bind third party purchaser
16
Q
LCC v Allen 1914
A
Facts: Owner applied to council for right to build a new street on land they owned. Permission granted subject to a covenant not to build at the end of the street (council did not own this land). Owner sold the land, including the covenant. Council tried to enforce the covenant. Court said they could not enforce.
Significance: Covenantee must have an estate in land to enforce a freehold covenant, otherwise no standing.
17
Q
P&A Swift v CES 1989
A
Facts: Parent company guaranteed subsidiary’s lease, and was liable for outstanding rent. Was found to touch and concern the land.
Significance: Covenant must touch and concern the dominant land for the burden to pass at equity. Rent touches and concerns.
18
Q
Cosmichome v Southampton CC 2013
A
Facts: Land formerly owned by BBC and was subject to a covenant confining use of the land to BBC broadcasting, but the restriction could be lifted on payment of a development charge. Also contained right of pre-emption, where local authority had first refusal on buyback. BBC sold the land, notified the council, who did not respond. Court found the covenant did not pass, as it did not benefit the dominant/adjoining land.
Significance: Covenant must accommodate the dominant tenement for burden to pass at equity.
19
Q
Bailey v Stephens (1862)
A
Facts: Someone cut down a tree they weren’t supposed to.
Significance: Dominant and servient tenements (for easements and covenants) must be proximate to one another.
20
Q
s79 LPA 1925
A
Covenants relating to the land will bind successors in title, if covenant was made after commencement of the LPA 1925
Implies the intention of original parties to allow the burden to run
21
Q
Morrells of Oxford v Oxford United 2000
A
Facts: Oxford United FC were purchasing land that once belonged to a pub, and as such was subject to a covenant prohibiting licenses premises within half a mile of the pub. The covenant did not include words expressly binding successors, but other covenants in the same agreement did. Court found that the absence of words in this covenant, where present in other covenants, conveyed an intention not to bind successors.
Significance: s79 LPA binds successors unless contrary intention expressed. Contrary intention does not need to be explicit.
22
Q
What is required for the benefit of a freehold covenant to pass at equity?
A
Must touch and concern the land
Successor covenantee must have legal or equitable estate in the land of the original covenantee
Must pass through annexation, assignment, or scheme of development
23
Q
What are the types of annexation of freehold covenant?
A
Express annexation - words making it clear the benefit passes
Implied annexation - implied by court
Statutory annexation - s78 LPA 1925
24
Q
Marten v Flight Refuelling 1962
A
Facts: Sale of a farm, with covenant that it was for agricultural purposes only. Was later acquired by the MOD via compulsory powers rather than conveyance. Were the covenants binding on the MOD? Burden and benefit had passed, but could not prevent defence work.
Significance: Successor covenantee can enforce against successor covenantor, provided existence can be demonstrated.
25
Federated Homes v Mill Lodge Properties
Facts: Two parcels of land subject to an original covenant that no more than 300 houses could be built on them, ended up being owned by same company. One had successive chains of assignment, the other did not. Court found that since the covenant touched and concerned the land, it ran with it and was annexed to every part of the land.
Significance: A restrictive covenant which touches and concerns the land annexes the benefit of the covenant to the covenantee's land.
26
Roake v Chadha 1984
Facts: Language of the covenant specifically said that the benefit did not pass unless expressly assigned. Court found that complied with s78 LPA 1925 - the Act only implies where silent.
Significance: s78 LPA annexes covenant to land unless clear intention otherwise
27
Crest Nicholson v McAllister 2004
Facts: Home owner tried to enforce a covenant. Court found that the dominant land was not sufficiently identifiable from the original conveyance, so the covenant had not annexed to the land.
Significance: Dominant tenement must be identifiable in the originating Deed.
28
How does assignment of a freehold covenant work?
Assignment does not glue the covenant to the land
The covenant must be assigned at each stage of the chain of successive assignments
29
Miles v Easter
Facts: Land with a covenant was split up . Court found no evidence that the benefit had been either assigned or annexed to the land.
Significance: Authority for chain of assignment
30
What are the requires for assignment of a freehold covenant?
The benefit of the covenant must be assigned each and every time the land is sold
Benefitted land must be properly identifiable
Assignment must coincide with conveyance
Must comply with s53 LPA 1925
31
What is a scheme of development?
Where a single vendor laid a housing estate into plots, all subject to similar covenants
32
What are the requirements for a scheme of development to pass benefit of freehold covenants?
Restrictions must intend to benefit all land sold
Area of scheme must be clearly defined
Claimant and defendant derive title from common vendor
33
Elliston v Reacher 1908
Facts: Scheme of development with covenant not to use as a hotel. Covenant was found to run with the land.
Significance: Authority for scheme of development covenants.
34
What are the remedies for breach of freehold covenant?
Injunction
Specific performance (if positive)
Damages
Declaration/modification by court
35
Wrotham Park v Parkside 1974
Facts: Land sold to a developer subject to a covenant requiring prior approval of layout. Broke the covenant, built houses, covenantee sued. Covenant was found to be enforceable, but injunction (i.e. demolition) would be unfair, so damages awarded instead. Damages equated to a reasonable sum to relax the covenant, so 5% of profits.
Significance: Damages in lieu.
36
What are the differences in remedy for freehold covenants between common law and equity?
Common law: damages more likely
Equity: Court is more discretionary
37
How can a freehold covenant be extinguished?
Express agreement
Implied agreement (long usage)
Common ownership
38
When would a court modify or discharge a negative freehold covenant?
If the covenant is obsolete, impeding reasonable use, or the person with the benefit would suffer no loss
39
Does the burden of a positive freehold covenant transfer at common law?
Generally, no, unless a workaround is in use
40
Austerberry v Oldham 1885
Facts: A road was subject to a covenant of repair. Was later declared a street, which moves the maintenance responsibility to the inhabitants. Court found the covenantee could not enforce the covenant - does not pass the burden of positive covenants.
Significance: Positive covenants don't typically bind successors.
41
Rhone v Stephens 1994
Facts: Covenant to repair part of a roof which overhung the dominant tenement. Roof started to leak, tried to enforce.
Significance: Positive covenants don't bind successors.
42
What are the workarounds to pass the burden of a positive freehold covenant in common law?
Sue the original covenantor under s79 LPA 1925
Chain of indemnity covenants
Forced re-covenant
Enlarge a long lease into freehold
Mutual benefit and burden rule
43
What is a forced re-covenant?
Servient land cannot be sold unless the dominant land consents, with the condition that new servient owner re-covenants
Becomes a contractual right of enforcement
44
s40 LRA 2002
Allows entry onto land registry restrictions relating to dispositions of registered land
45
s153 LPA 1925
Allows a lease with at least 200 years left to run (with no rent) to be converted into a freehold
46
What does it mean to enlarge a long lease into a freehold?
Leases of at least 300 years, with at least 200 years left (with no rent) can be converted into a freehold
47
What is the mutual benefit and burden rule?
Allows enforcement of a payment obligation for a connected benefit
48
What is required for the mutual benefit and burden rule to work?
1) Correlated benefit and burden
2) Hypothetical element of choice
3) Benefit and burden were conferred in or by same transaction
49
Halsall v Brizell 1957
Facts: Buyers of plots covenanted to contribute to the cost of repairs of sewers used by owners of all the plots. Was found to be binding.
Significance: Mutual benefit and burden rule: burden of positive covenants will pass if associated with a benefit, and would be unfair for successor to reap benefit without burden.
50
Goodman v Ellwood 2013
Facts: Purchasers of industrial units were liable to contribute to cost of maintaining a road.
Significance: Authority for benefit and burden - but there must be correlation between benefit and burden for the covenant to pass.
51
How does the benefit of a positive freehold covenant pass at common law?
Express assignment (s136 LPA 1925)
Implied assignment (P&A Swift v CES 1989)
52
s136 LPA 1925
Allows assignment of covenants in writing
53
What is required for implied assignment of a positive freehold covenant to work?
Must touch and concern the land
Original parties must have intended the benefit to run
At time of covenant, covenantee had legal estate
At time of enforcement, successor holds a legal estate
Potentially, dominant land needs to be clearly identified
54
Smith and Snipes Hall Farm v River Douglas 1949
Facts: Land prone to flooding, covenantor promised to do some work to prevent flooding and maintain it for all of time. Was found to touch and concern the land, with intent to bind future successors. Note: the benefit passed, but the burden (the covenantor) remained the same party throughout.
Significance: Example of implied assignment of benefit ("for all time").
55
Structure for freehold covenant questions
1. Introduction – define land (dom v serv), parties (cov and cov), formalities for creation, explain issue
2. If negative covenant: do the burden and benefit each pass in equity?
3. If positive covenant: do the burden and benefit each pass in common law?
4. Conclude – remedies
5. Any other issues (e.g. discharge, modification)
56
What is a mortgage?
A mortgage is a charge over land given in exchange for a loan;
It grants a proprietary interest in the land which takes effect as specific remedies available for default on loan
57
What are the two types of mortgage in relation to ownership?
Acquisition mortgage: money is lent pre-ownership to buy the property
Mortgage for finance: post-ownership loan
58
What are the two types of mortgage repayment?
Repayment mortgage: each payment is part interest and part capital
Endowment mortgage: recurring payments are interest-only and whole capital is paid back at the end of the term
59
What are the formality requirements for a legal mortgage?
Deed (s52 LPA 1925)
Registration (s4 LRA 2002/s27.2.f LRA 2002)
60
How can an equitable mortgage arise?
Walsh v Lonsdale formality failure + s2 LPMPA compliant contract
Equitable mortgage of equitable interest (s53.1.c LPA)
Deposit of title deeds + s2 LPMPA compliant contract
Fraud/forgery in co-ownership
Proprietary estoppel
61
Why does it matter whether a mortgage is legal or equitable?
Affects the available remedies
Legal mortgage is automatically binding, while equitable mortgages require protection
62
Structure for Mortgage Questions
1) Legal or equitable - formalities
2) Clogs or fetters?
3) Unconsionable terms?
4) Lender remedies
5) Mortgagor strategies
6) Undue Influence
7) Priority (if multiple)
63
Mnemonic device for mortgage question structure
Lucy
Climbs
Up
Lucy's
Monument
Upwards
Prettily
64
What are three examples of clogs/fetters?
Options to purchase
Collateral advantages
Postponement of ability to redeem
65
What is mortgage redemption?
Ability to clear the charge on the land upon repayment of the mortgage
66
What is a clog/fetter?
Anything that prevents redemption or renders it value-less
67
Samuel v Jarrah Timber 1904
Facts: A limited company borrowed money, using their stock as a security subject to the lender having the option to purchase the stock at a 60% discount. Court ruled the option to purchase was void, although even the judges seemed to not like their own conclusions.
Significance: Option to purchase as a clog to redemption - commercial scenario.
68
Reeve v Lisle 1902
Facts: Mortgage of a ship (commercial), and when mortgagor was not in a position to repay, he negotiated more time with an option for the lender to buy the ship (at their discretion) and enter into a business partnership with the mortgagor. When the lender exercised the option, the mortgagor did not comply so they brought an action for specific performance or breach of contract. Question for the court was whether the sale option was a separate transaction (as they were on separate documents) or part of the mortgage. Court ruled sufficient time had passed between the two documents, the conditions of the discussion were different enough, that they were two separate transactions.
Significance: Option to buy not a clog/fetter on redemption if separate transaction/circumstances.
69
Jones v Morgan 2001
Facts: Mortgagor wanted to develop property into a nursing home, so lender granted a mortgage. Development never happened, so mortgagor tried to sell off some of the land, requiring lender's consent to relieve the encumbrance. Lender agreed, in exchange for half the shares of the remaining property. When he applied for specific performance, court declared the agreement void as a clog on redemption.
Significance: Purchase of mortgaged land was a clog to redemption. Court considered that had the purchase been in the original agreement, it would have been part of the mortgage, not collateral contract. They saw the later negotiations as splitting one mortgage into two distinct mortgage loans which were not independent.
70
Bradley v Carritt 1903
Facts: Tea company mortgaged shares for a loan, promising the lender that they would always be their broker. Once they paid off the mortgage, the tea company changed their broker, and the lender sued. Was found to be a clog/fetter since it impeded redemption by continuing to bind the mortgagor after paying off the loan.
Significance: Once a mortgage, always a mortgage. Indefinite exclusivity is a clog/fetter.
71
Biggs v Hoddinott 1898
Facts: Hotel mortgaged to a brewer with an exclusivity agreement during the term of the mortgage. Court found that since it was limited to the term of the mortgage, it did not clog redemption or grant the lender unfair advantage. Both parties negotiated on equal footing.
Significance: Exclusivity agreements can be valid if fair and contained to the length of the mortgage.
72
Kreglinger v New Patagonia 1914
Facts: Woolbrokers lent money for up to five years, and agreed for full five years the mortgagor would give them first refusal on sheepskins and a cut of sales. The sheepskin deal was found to be collateral to the mortgage and did not affect redemption.
Significance: Example of collateral agreement being upheld
73
What will the court consider when deciding to strike down a clog/fetter?
The extent to which it was connected to the mortgage
If lender has an additional advantage over a vulnerable borrower
Is the collateral advantage contained to the mortgage term
Commercial vs domestic context
Is the collateral advantage unconscionable
74
Fairclough v Swan 1912
Facts: Mortgage of a leasehold. Final mortgage payment due six weeks before end of lease. Court found the mortgagor was entitled to redeem earlier, as otherwise redemption would be fettered/valueless.
Significance: Something which makes redemption valueless is a fetter.
75
Knightsbridge Estates v Byrne 1939
Facts: Commercial situation with a minimum mortgage term of 40 years - no early repay. Given it was a commercial situation with no inequality of bargaining power, no reason for equity to step in.
Significance: Courts won't step in to rectify a bad but ultimately fair deal.
76
Multiservice v Marden 1979
Facts: Mortgage interest linked to value of Swiss franc, which unforeseeably tripled over the term. Court found it was not a clog to redemption as both parties were of equal bargaining power.
Significance: Court won't rewrite an unreasonable but fair contract.
77
Cityland Properties v Dabrah 1968
Facts: Rather than agreeing an interest rate, the mortgagor would owe the lender a fixed sum of nearly double the capital over the term. In the event of default, the whole sum was payable. As such, about 60% of the owed amount was premium, equating to about 19% interest per annum. Was found to be a collateral advantage, was an unfair amount, and the term requiring all of it to be paid back on default was unreasonable. Court stepped in to change the agreement to a 7% interest rate.
Significance: Example of court re-writing an unfair contract.
78
Paragon Finance v Nash 2002
Facts: Mortgagor fell into interest arrears and lender tried to possess. The mortgage had included a variable interest clause, and mortgagor tried to argue that the rates set were unfair as were not in line with market rates. Court found that the rates were not grossly unfair.
Significance: Variable rates don't have to match market rates. Bar for grossly unfair is quite high.
79
Paragon Finance v Pender 2005
Facts: Mortgage with variable interest set by the lender. Lender set it high as they were in administration. Mortgagor fell into arrears; continued to make partial payments but the arrears continued to accumulate. Tried to argue against possession based on the Consumer Credit Act (same as PF v Nash) but court upheld Nash, saying lenders could set interest rates above market rates for genuine business reasons.
Significance: Lenders have freedom to set interest rates well above market rates without being deemed unfair, as long as it's for a fair business reason.
80
What are a lender's remedies in case of unpaid mortgage?
Possession
Sale
81
When can a lender take possession?
Technically, any time once the mortgage has begun -s95(4) LPA 1925
In reality, only after a serious default
82
s95(4) LPA 1925
Mortgagee taking possession does not convert the legal estate of the mortgagor into an equitable interest
83
Four Maids v Dudley Marshall 1957
Facts: A mortgage contained a provision saying that as long as interest payments were up-to-date, the money would not be called in before a certain date. Mortgagor fell into capital (but not interest) arrears and the lender made a summons for possession. By the time the hearing occurred, mortgagor was in arrears of both interest and capital. Court held that the possession was valid but required notice.
Significance: Lender has right of possession any time after execution of mortgage unless a term (express or implied) of the mortgage limits that.
84
Does a lender need a court order to take possession?
No, but it is recommended
85
Ropaigealach v Barclays Bank 2000
Facts: Mortgagor failed to pay; lender sent notice of sale but mortgagor did not receive it as was not residing at the property at the time. House was sold, mortgagor appealed against it, arguing s36 of the Administration of Justice Act. Court decided that s36 did not protect the mortgagor from peaceable re-entry.
Significance: Court orders are not strictly necessary prior to peaceable re-entry/sale.
86
Does a lender need to take possession before selling?
Not strictly, but unusual to sell without possessing first
87
Horsham Properties v Clark 2009
Facts: A mortgaged house was sold by the lender while the mortgagors were still living there, effectively making them trespassers in their own home. Mortgagors claimed that to evict them would violate their right to peaceful enjoyment of their possessions under the ECHR/HRA. Court found that the ECHR was not engaged as the lender had acted in accordance with the mortgage contract.
Significance: Human rights and mortgages. Also a bill was introduced to require a lender to always obtain a court order prior to enacting power of sale, and court would have discretion to grant. However, bill did not pass.
88
Power of sale may be __________ ___________ in mortgage deed
Expressly limited
89
s101 LPA 1925
Gives the mortgagee the power of sale (among others)
90
When does the power of sale arise (unless limited by mortgage deed)?
When mortgage monies become due
91
Payne v Cardiff 1932
Facts: Leasehold became charged with a fee similar to a mortgage. Once instalments became due, the lender was entitled to sell the premises.
Significance: Power of sale is exercisable when an instalment of the mortgage money becomes due.
92
How to determine when mortgage monies become due
Either legal date for redemption has passed (6 months into term) OR
If repayment mortgage, payment of capital has become due
93
When is the power of sale exercisable?
Any of the following (s103 LPA 1925):
3 months default on capital following notice to repay
Interest unpaid for 2 months
Other breach of mortgage terms
94
s103 LPA 1925
Stipulates when power of sale is exercisable
95
What happens if a lender exercises their power of sale and sells the land for more than the remaining loan amount?
Excess is returned to the mortgagor (S105 LPA 1925)
96
s105 LPA 1925
Money arising from mortgagee's sale goes first to pay for costs of sale, then to discharge mortgage, then any residual goes to mortgagor
97
Can the lender accept any offer on the property when exercising power of sale?
No - must obtain a proper price/best price reasonably obtainable
98
Cuckmere Brick v Mutual Finance 1971
Facts: Property development of houses and flats, lender was selling and incorrectly advertised. Refused to postpone sale and correct advertisement, accepted a low offer. Court found the lender had owed a duty of care to obtain a proper price and had breached that duty.
Significance: Lender has duty to obtain a proper price when exercising power of sale.
99
Michael v Miller 2004
Facts: Exercise of sale of agricultural property. Mortgagors argued against how the lender advertised the property and the acceptance of a low offer. Court held that lender's duty is to make informed decisions re: advertisement and acceptance of offers. There is an acceptable margin of offers to accept.
Significance: When exercising power of sale, lender can determine what the "best price" is and court will assess based on a bracket of acceptable valuations.
100
If house prices are going up, is the lender allowed to wait to sell?
Yes - timing of sale is up to lender
101
Silven v RBS
Facts: Mortgagor was a property company, taking action against lenders for selling under value by not taking advantage of planning permissions.
Significance: A lender exercising power of sale is entitled to sell property in current condition - does not need to fulfill planning permissions.
102
China and South Sea Bank v Tan
Facts: Mortgagor defaulted on payments for mortgaged shares (with a guaranteed repayable sum), which had become worthless. Mortgagor argued that the bank ought to have known of the declining value of shares and should have exercised power of sale earlier. Privy Council held that the bank had no such duty.
Significance: Lender can decide when to exercise power of sale, regardless of falling value of property.
103
What can a mortgagor do to fight possession?
If residential, can apply for postponement under s36 Administration of Justice Act 1970
Can request postponement to allow mortgagor to sell on their own
104
Cheltenham & Gloucester v Norgan 1996
Facts: Residential case about a farmhouse. Mortgagor was in arrears, terms of mortgage allowed possession but policy was to try and help borrowers facing financial difficulty. Possession was suspended during an alternate payment plan, but mortgagor failed to comply to new payment plan. The Administration of Justice Act allowed the court to suspend possession if the mortgagor was likely to be able to pay off the arrears within a reasonable period, but needed to define "reasonable period". Court determined the starting point for "reasonable period" is the remaining term of the mortgage, with other factors like the cause of the financial difficulties, how much arrears have accumulated, how much of the term is left, etc.
Significance: Courts can post-pone orders for possession at their discretion if mortgagor is likely to pay off the mortgage over the original term.
105
National & Provincial Building Society v Lloyd 1996
Facts: Commercial context. Estate agent defaulted on interest-only/endowment mortgage, but appealed against the order for possession with an affidavit stating he intended to sell the properties and pay off the debt within 12 months. Was granted a suspension, lender appealed. Court ruled that their discretion to suspend to allow mortgagor to sell did not require the sale to be in a short time, only a "reasonable period", determined on the facts of each case. However, the affidavit was found not to be enough evidence that the mortgagor would be able to pay back the sums, as it was only evidence of intent to put the property on the market.
Significance: No hard limits on when you need to be able to pay back the mortgage re: postponing possession, but do need clear evidence.
106
C&G v Krausz 1997
Facts: Possession was delayed four times with new mortgage payment terms, and mortgagor defaulted every time. Fifth warrant for possession fell due and mortgagor had turned down an offer on the house for £65k, believing it to be worth £90k (debt was about £83k). Tried to suspend again saying he'd found a buyer. Court found that they could suspend the order again but it looked like funds were insufficient to discharge the mortgage debt.
Significance: Order for possession won't be suspended if mortgagor's sale is unlikely to discharge the debt.
107
What can a mortgagor do to fight power of sale?
Apply to sell themselves (s91 LPA 1925)
108
Mortgage Services Funding v Palk
Facts: Residential mortgage, owning couple decided to sell their house when facing financial difficulty. Offer was less than outstanding amount, so lender didn't agree to sale. Lender wanted to take possession and let until housing market improved (although the letting revenue would still be less than mortgage accruals). Court allowed the owners to sell, as otherwise it would be unfair.
Significance: Court may order sale even if it's not what the lender wants, if it's the only fair solution.
109
s91 LPA 1925
Allows mortgagor to apply to sell themselves
110
What are the two types of undue influence?
Actual and presumed
111
What is actual undue influence?
Clear evidence of coersion, e.g. physical threat
112
What is presumed undue influence?
Relationship of trust and confidence between victim and other party
Transaction calls for an explanation/is manifestly disadvantageous to one party
113
What is the lender's responsibility re: undue influence?
Must ensure potential victim gets fully independent legal advice
Must ensure provision of advice is certified to lender
114
What is the effect of undue influence?
If undue influence is proved, and bank was aware/didn't take full precautions, then the mortgage is unenforceable against the innocent co-owner, so there is no power of possession/sale
115
RBS v Etridge (No 2)
Facts: 8 cases where a wife's interest in her home was a security for her husband's debt.
Significance: Authority for undue influence (both actual and implied) and the lender's responsibilities to prevent it.
116
If there are multiple legal mortgages on a property, how do they rank?
By date of registration
117
If there are multiple equitable mortgages on a property, how do they rank?
By date of creation
118
Albany Home Loans v Massey 1997
Facts: Man was wrongfully dismissed from his job; employer was also the lender. Argued against order for possession until received his compensation. Also, wife had applied for relief due to undue influence, so she was permitted to stay in the home but husband had been asked to vacate.
-
Significance: Can't ask one of two joint borrowers to leave home - the other has a right to visitors
119
Barclays Bank v Zarroovabli 1997
Facts: Bank failed to register the mortgage. Owners then granted a six month tenancy without bank's permission, violating terms of mortgage. Eventually bank registered mortgage and tried to take possession - tenant appealed. Normally tenant would have overriding interest, but they did not have occupation at the time of the mortgage execution.
Significance: Priority of third party rights. Contractual tenancy takes priority over mortgage, as does statutory tenancy, but timeline is important. Tenancy would have to be in existence when charge is registered.
