Mortgages LPA 1925 S 91
the mortgagee (the lender) obtains a charge over the mortgaged property and has the power of sale in respect of the estate which has been so charged (ss.87-108)
If the mortgage pertains to an unregistered estate, the mortgage must be created by a deed (s.52(1)).
(Parker-Tweedale v Dunbar Bank plc [1991]: once their power of sale has accrued, the mortgagee is prima facie entitled to exercise it for their own purposes at any time of their own choice
under s.91(2):a mortgagor can set a date for sale that is earlier than the mortgagee would have intended.
Palk v Mortgage Services Funding plc [1993]
Their mortgagee refused to agree to the sale, because the total debt amounted to £358,000, i.e. almost £100,000 more than the private sale amount
The mortgagee proposed instead to let the property on short-term leases until such time as the housing market improved; placing the borrowers in debt by a further $30,000 per year
The husband and wife (H and W) had defaulted on their mortgage, but had managed to negotiate a private sale for £283,000
in the event the housing market did not improve, it will exacerbate the difference between the private sale amound and the debt
Therefore, W sought a court-directed sale under s.91(2) to prevent further substantial increases in the debt owing.
The Court of Appeal ordered the sale, notwithstanding that H and W were in negative equity (meaning the debt exceeded the value of the property) and that £75,000 of the mortgagee’s debt was left unsecured and outstanding.
Nicholls V-C considered it a ‘manifest unfairness’ in allowing the mortgagee to gamble on a rising market while also levelling the risk almost solely on the part of the borrowers.
Summary
This does not however extinguish the debt obligations. H and W in this case still had to pay the debt owing.
Foreclosure:
S.91(2) provides a kind of lifeline to mortgagors who are otherwise finding it difficult to escape a mortgage
leaves the entire value of the mortgaged land in the hands of the mortgagee, thereby taking from the mortgagor any of their equity in the land
Foreclosure is only available on an application to the court (ss.88(2), 89(2)); rare nowadays
Paragon Finance v Nash [2001]
Whilst the lenders had not reduced their interest rates in line with other lenders, they had a commercially legitimate objective in doing so; therefore their rate was satisfied
Under the provisions of the Consumer Credit Act 1974, ates could not be capricious, dishonest, improper or unreasonable
Whether or not Paragon were entitled to continue charging rates at their discretion; Whether or not the terms could be considered unfair under the Consumer Credit Act 1974 or the Unfair Contract Terms Act 1977
Mr and Mrs Nash obtained a mortgage from Paragon Finance for their matrimonial home, the agreement allowed Paragon to set the rate of interest at their discretion. Rates dropped, Paragon kept the same rate, charged a significant amount and the Nashs could not keep up. Paragon applied for an Order for Possession