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Mortgages - Coggle Diagram

- - - - Registered s. 27(2)(f)
      - Order of ENTERED ON THE REGISTER
    - - Order of CREATION (s. 28 LRA 2002)
      - Notice on charges register (s. 32 LRA 2002)
        
        Priority over subsequent LEGAL mortgage (s. 29(1) LRA 2002)
- - - - Sell with vacant possession, free from any rights of the borrower (more attractive, higher price)
      - Manage the property and derive income from it (income used to reduce debt)
      - s. 95(4) LPA 1925
      - Right arises as soon as the mortgage is granted "before the ink becomes dry" on the mortgage deed (Four Maids v Dudley Marshall)
      - A RIGHT of the lender, not simply a remedy
      - Limits
        
        Criminal Act 1977 s. 6
        
        Exercising right to possess by "self-help" is risky, unless certain property is unoccupied
        
        Criminal offence to use or threaten violence for the purpose of gaining entry to property
        
        Prudent lender make application to court for an order for possession
        
        Pre-Action Protocol for Possession Claims 2008
        
        Discuss dent with borrower and accept reasonable requests for a new payment plan
        
        Suffer delays in obtaining possession and ordered to pay borrower's legal costs if NOT observed
        
        Steps Court will expect lender to have taken before resorting to possession of RESIDENTIAL property (LAST RESORT)
      - s. 36 Administration of Justice Act 1970
        
        POSTPONE date for delivery of possession of RESIDENTIAL premiers for such period as the court thinks REASONABLE- any postponement may be subject to such payment conditions regarding payment as the court thinks fit
        
        Does NOT
        
        Prevent lender from executing its right to possess altogether
        
        Enable court to postpone possession in cases where there has been no application for an order for possession
        
        Prevent lender from exercising power of sale without first obtaining a court order
        
        DOES
        
        Must appear to the court that borrower is likely to be able to pay any sums due (remedy any default) within reasonable period
        
        Adjorn possession proceedings OR stay/ postpone execution of possession order
        
        Property is wholly or partly RESIDENTIAL, but does not need to be borrower's home
    - - Borrower loses all rights to the property
      - Sale proceeds applied to debt: SURPLUS forwarded to borrower, SHORTFALL borrower sued personally
      - Procedural steps
        
        Must have ARISEN in accordance with statutory rules
        
        Capital and interest repayment mortgage: arises as soon as ONE PAYMENT IS DUE
        
        "When the mortgage money has become due" s. 101(1)(i) LPA 1925
        
        Interest-only mortgage: LEGAL REDEMPTION DATE
        
        Sells AFTER power ARISEN but BEFORE its EXERCISEABLE
        
        Innocent purchaser VALID
        
        Lender liable in damager to borrower s. 104 LPA 1925
        
        Must be EXERCISEABLE in accordance with statutory rules
        
        IMPLIED: 3 circumstances in s.103 applies
        
        Notice served for full repayment and lender defaulted
        
        Interest is unpaid and arrears for at least 2 months (some interest outstanding for 2 months)
        
        Breach of another mortgage provision e.g., covenant to keep property insured
        
        EXPRESS: wording set out in what circumstances
        
        Lender must fulfil its DUTIES on sale which have arisen from case law
        
        Duty to take reasonable care to obtain the true market value
        
        Perfection as to price is not required- within the correct bracket
        
        After sale, lender is trustee of surplus proceeds of sale (s. 105 LPA 1925) and must hand them to the person next entitled- lender or borrower
        
        Duty to take expert advice as to the method of sale, marketing strategy and the reserve price
        
        Lender has "unfettered discretion" as to when to sell not expected to delay
        
        Does it exist
        
        Implied, or statutory, power of sale
        
        s. 101(1)(i) (unless excluded/ modified)
        
        Express power of sale
      - RIGHT of the lender, no court order required
    - - Used in addition to, not instead of, one of the other remedies
      - NEGATIVE EQUITY: value property is LESS that outstanding debt
      - Personal action against the borrower
      - Take possession and sell property BUT sale process NOT cover debt can pursue a personal debt action against borrower for SHORTFALL
      - Limitation period
        
        Mortgage created by deed (legal)
        
        Capital: 12 years
        
        Interest: 6 years
        
        Contractual debt actions many years after repossession
    - - Receiver is an administrator whose function is to get an income from the land e.g., continuing existing business and apply it towards debt
      - Power to appoint a receiver arises under LPA 1925 s. 101(1)(iii)
      - Receiver is BORROWER'S agent (appointed by lender) so lender NOT liable for receiver's negligence- safer option than possession
      - Receiver act with due diligence, subject to main duty of paying off debt
    - - Lender's point of view
        
        Lengthy and complex procedure
        
        Court may order a sale in lieu of foreclosure (especially if property worth more than debt)
        
        After final decree of foreclosure, borrower can re-open case if he can show he has the means to pay
      - Borrower's point of view
        
        Extinguishes ALL other mortgages secured on property
        
        Extinguishes the mortgagor's contractual debt, so lender cannot pursue the borrower for surplus debt over and above the value of property
      - Lender take mortgaged property in satisfaction of debt- freehold will vest in lender and borrower lose ALL rights to property (even if small debt outstanding)
      - Rarely used nowadays: draconian remedy
- - - - s. 53(1)(c) in writing, signed by the grantor
    - - s. 2 LP(MP)A 1989
      - Contract to grant a legal mortgage
- - - - Subsequent transanction UPHELD IF INDEPENDENT
      - Same time INVALID
      - Same day but SEPARATE UPHELD AS IRRELEVANT
  - - - Upheld if end WITHIN the mortgage term