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Mortgages (Definitions (Mortgage/charge - essentially interchangeable…

- - - - Notion of transfer no longer exists - mortgager remains owner but grants substantial proprietary rights as security to mortgagee
      - Lender's claim takes precedence over that of any other creditors - listed in charges register
- - - - S1 LP(MP)A 1989 To be a deed a document must be...
        
        Clear on its face that intended to be a deed
        
        Signed by mortgager and properly witnessed
        
        Delivered
      - Can create a legal mortgage of freehold or leasehold by creating a deed that says you are creating a charge by way of legal mortgage - ss85, 86 and 87
    - - Creation of mortgage over unregistered land kick starts first registration process - s4 LPA 2002
  - - - S2LP(MP)A 1989 - must be...
        
        In writing
        
        Incorporating all terms
        
        Signed by both parties
      - Equity no longer recognises deposit of title deeds as equitable mortgage - United Bank of Kuwait plc v Sahib (1996)
    - - Very common in commercial transactions
      - Usually needs to adhere to s2LP(MP)A - but can also be enforced under s53(1)(c) LPA 1925 #
        
        In writing
        
        Signed by grantor
    - - Registered land - s32 Notice/s29
      - Unregistered land - C(iii) Land Charge/s4(5) LCA 1972
- - - - If unable to pay on that date, borrower must wait until the end of the term - very limited right, so equity intervened to grant additional rights to mortgager
  - - - Negative equity is when there is more outstanding on the mortgage than property is actually worth
    - - a) Equitable right to redeem
        
        Arises AFTER contractual date for redemption has passed
        
        Equity believes mortgager should be able to redeem any time after legal date of redemption until end of term - very flexible
      - b) Prevention/postponement of redemption
        
        Options to purchase
        
        Samuel v Jarrah - general rule - option in deed for lenders to purchase is void
        
        Reeve v Lisle - might be allowed if subsequent to or independent of mortgage transaction
        
        Warnborough v Garmite - looks at substance of transaction
        
        Delaying legal date for redemption
        
        Because if legal right pushed back, so is equitable
        
        Treated differently in domestic and commercial transations - might be allowed commercially if equitable right remains real
        
        Knightsbridge Estates v Byrne - commercial transaction - legal date for redemption set at 40 years after deed granted - court allowed because arms length transaction which borrower knew of
        
        Fairclough v Swan - leasehold mortgage to brewery - couldn't redeem until 6 weeks before end of lease - court struck out because otherwise borrower wouldn't get out what they put in - right to redemption would have been an illusion
      - c) Collateral advantages
        
        Equity sees mortgage as security for loan and nothing more - lender only allowed capital and interest payments - especially applies in domestic situations
        
        Must stop when mortgage is repaid
        
        Noakes v Rice (1901) - solus ties allowed in certain circumstances - here lender was a brewery and borrower only sold their wine and spirits - after mortgage paid brewery couldn't insist on this because court said devalued equity of redemption - became a free house after this
        
        Biggs v Hoddinott (1898)
        
        Unless genuinely independent of mortgage transaction
        
        Krelinger v New Patagonia Meat Company 91913)
        
        Jones v Morgan (2001)
        
        Must not be unconscionable
      - d) Unconscionable terms
        
        Courts can strike down or alter terms if oppressive - there are also statutory regulations in place to prevent them
        
        Cityland Properties v Dabrah (1968) - courts looked at the circumstances and altered the terms - borrower had been a tenant - when lease ender the lender said they wouldn't renew, but suggested borrower buy the property with them as their mortgagee - has no other opinion so accepted - 19% interest, and agreed if he defaulted would pay a 57% premium - court struck down because lender abused bargaining position and there was no reason for extortionate pricing
        
        Multiservice Bookbinding v Marden (1977) - 10 year postponement of redemption - 35% interest because payments were made in Swiss francs - court refused to strike down because parties had equal bargaining power - mortgagor only borrowed to set up business - used lawyer etc. - lender was a private individual who had invested his life savings to lend
        
        Statutes
        
        Financial Conduct Authority regulates all mortgages now (FSA 2012) - not much case law yet - before courts looked for extremely unconscionable conduct
        
        Cases decided under FSMA 2000 and CCAs 1974/2006 apply by analogy
        
        CCA 1974 - "extortionate credit bargain"
        
        CCA 2006 - "unfair relationship"
        
        UTCCR 1999 - "good faith"
        
        Falco Finance Ltd v Michael Gough (1998) - term that if mortgage payments were late by even one date, interest would increase by 5% for whole term - not allowed under old legislation
        
        Darrier v Direct Loans (1986) - high interest rate held to be justified because mortgagor was self-employed with poor credit history - allowed because mortgagee was taking a risk in lending
        
        Paragon Finance v Nash (2002) - high interest rate justified because lender was suffering from financial difficulties - were borrowing the money they lent through international money markets - expensive - passing on costs was deemed allowed
      - e) Undue influence
        
        Where loan secured is not to everyone's benefit - onus on lender to take reasonable steps to make sure joint lender fully informed - if not, mortgage is second to their ownership rights
        
        Barclays Bank plc v O'Brien (1994) - husband wanted to mortgage matrimonial home in order to fund his business - misrepresented the situation to his wife - told her it was a short term loan for a small amount - when wife went to sign the deed the bank official failed to explain the situation - husband's business failed and wife successfully argued that bank had constructive notice of undue influence - should have known husband had not explained fully and taken steps to rectify