Transcript Document

MORTGAGES II
Jan Cookson
A LEGAL MORTGAGEE’S
REMEDIES
1. POWER OF SALE
2 FORECLOSURE
3. APPOINTMENT OF A RECEIVER
4. SUE ON MORTGAGOR’S COVT.TO REPAY
THE MORTGAGEE’S STATUTORY
POWER OF SALE
IN ORDER FOR THE MORTGAGEE TO SELL
USING ITS STATUTORY POWER:THE POWER
SHOULD HAVE BOTH
ARISEN
(s.101 LPA 25);
AND
BECOME EXERCISABLE
(s.103 LPA 25)
THE MORTGAGEE’S STATUTORY POWER
OF SALE
ARISES UNDER s.101 LPA 25
IF BOTH THE FOLLOWING CONDITIONS ARE MET:-
1. the mortgage must have been made by deed; &
2. the mortgage money must be due
THE MORTGAGEE’S STATUTORY POWER OF SALE
BECOMES EXERCISABLE UNDER s.103 LPA 25
IF ANY OF THE FOLLOWING CONDITIONS ARE MET:1.
M’ee has served notice on M’or requiring payment of the
mortgage money & M’or has failed to pay for 3 months after
receiving the notice; or
2.
Interest under the mortgage is 2 months or more in arrears;
or
3. M’or is in breach of some other covenant in the mortgage deed
(i.e. other than repayment of mortgage money or interest )
THE MORTGAGEE’S STATUTORY POWER OF SALE
THE IMPACT OF THE MORTGAGEE SELLING: Before power of sale has arisen
 After arisen but before exercisable
 After arisen and exercisable
 The position of a purchaser (s.104(2) LPA 25)
Note: there is very likely to be
AN EXPRESS POWER
OF SALE CONTAINED
IN THE MORTGAGE DEED
IS A COURT ORDER NEEDED BEFORE SALE ?
 Horsham Properties Group Ltd v Clark and Beech
[2008] EWHC 2327 (Ch)
 Mortgages Power of Sale and Residential Property
Consultation Paper :
Open date: 29 December 2009
Closed date: 28 March 2010
http://www.justice.gov.uk/consultations/docs/mortgagespower-sale.pdf
Horsham Properties Group Ltd v Clark and
Beech
M. by Clark and Beech to L
Default
L doesn’t take possession &
 No Ct order
simply sells to Horsham
 No Ct order
Horsham seeks
possession on
basis Clark & Beech
are now trespassers
Ct order but s.36
AJA 70 doesn’t
apply
Breach of Art.1
ECHR
unlawful
deprivation
of possession?
THE MORTGAGEE’S CONDUCT OF A
SALE
THE NATURE OF A MORTGAGEE’S DUTIES
IN THE CONDUCT OF A SALE
LEADING CASE:
SILVEN PROPERTIES v RBS LTD 2004 1WLR 977
 A MORTGAGEE IS NOT A TRUSTEE OF THE POWER OF
SALE FOR THE MORTGAGOR
But
 MUST ACT IN GOOD FAITH; &
 HAS A DUTY AS TO PRICE OBTAINED
WHAT DUTIES EXIST?
1. ?A DUTY TO EXERCISE POWER OF SALE?
‘A mortgagee has no duty at any time to exercise his powers as
mortgagee to sell, to take possession or to appoint a receiver and
preserve the security or its value or to realise his security.
He is entitled to remain totally passive.’ Silven
‘A mortgagee is not a trustee of the power of sale for the mortgagor… [he]
is at all times free to consult his own interests alone whether
and when to exercise his power of sale…The mortgagee’s decision is not
constrained by reason of the fact that the exercise or non exercise of the
power will occasion loss or damage to the mortgagor…’
Silven
2. ?A DUTY AS TO TIMING OF SALE?
‘It is well settled that a mortgagee is not a trustee of the power of
sale for the mortgagor. …the mortgagee is entitled to exercise it for his
own purposes whenever he chooses to do so. It matters not that the
moment may be unpropitious…He has a right to realise his security by
turning it into money when he likes’. Cuckmere Brick Co. Ltd
Cuckmere Brick Co. Ltd v. Mutual Finance Ltd [1971] Ch
949.
China and South Sea Bank Ltd v Tan soon Gin [1990] 2
WLR 56
3. DUTY AS TO PRICE
the mortgagee must ‘take reasonable precautions to obtain
the true market value of the mortgaged property at the date
on which he decides to sell it’ Cuckmere Brick Co. Ltd
• ?Duty to inform buyers of matters that improve the price?
Cuckmere Brick Co. Ltd.
• ?Duty to improve the property or increase its value for sale?
Silven
4. A DUTY AS TO WHO THE PURCHASER IS?
•
TO THE MORTGAGEE?
•
TO AN ASSOCIATED PERSON?
Tse Kwong Lam v. Wong Chit Sen [1983] 1 WLR 1349
Corbett v Halifax [2003] 4 ALL ER 180
4. ?A DUTY AS TO PURITY OF MOTIVATION FOR SALE?
Meretz Investments NV v ACP Ltd [2007] Ch.197
THE EFFECT OF A SALE BY A
MORTGAGEE
THE EFFECT OF A SALE
BY A MORTGAGEE
s.104(1) LPA 25
1.
2.
3.
What estate does the Mortgagee convey?
What interests is the sale
• subject to?
• free from?
What happens to Mortgagor’s right to redeem
THE EFFECT OF A SALE BY A MORTGAGEE
s.105 LPA 1925
The Mortgagee must apply the
sale proceeds to:
ILLUSTRATION
Abbey National has a charge
registered in 2000
1. Pay off any mortgage with
priority to which the sale is not
made subject
Bradford & Bingley has a charge
registered in 2001
2. Pay costs properly incurred in
arranging sale
The Chelsea has a charge
registered in 2002
3. Discharge own mortgage debt
4. Pay any balance to the
Mortgagor or the other person
‘entitled to the mortgage property’
What happens if B & B sells the
property?
CAN A MORTGAGOR
SELL
AGAINST THE MORTGAGEE’S
WISHES?
THE USE OF
s.91(2) LPA 1925
C: Charges Register
[SPECIMEN]
1. 02.12.2002) REGISTERED CHARGE dated 23rd November 2002
4. PROPRIETOR: CHELSEA BUILDING SOCIETY of Thirlestaine
Hall, Thirlestaine Road, Cheltenham, Glos. GL53 7AL
s.91(2) LPA 1925
‘In any action, whether for foreclosure or for
redemption or for sale.. the court, on the
request of the mortgagee, or of any person
interested either in the mortgage money or in the
right of redemption and notwithstanding
that …any other person dissents … may
direct a sale of the mortgaged property on
such terms as it thinks fit.’
s.91(2) LPA 25
•
•
•
NEGATIVE EQUITY CASES:Palk v Mortgage Services Funding PLC [1993] 2 WLR 415
Polonski v. Lloyds Bank Mortgages Ltd [1997] Times 6th
May
Barrett v. Halifax Building Society [1996] 28 HLR 634
BUT

C& G PLC v Krausz 1997 :
 M’ee should control sale if it is also seeking one
 Court can’t postpone a possession order to allow M’or
to apply for a s.91(2) order to sell if it won’t clear the
debt
Palk
Figures
Mortgage debt increasing:
p.a.
Proposed rental income:
p.a.
Debt would grow annually by
£43,000.00
£13,000.00
£30,000.00