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66 Cards in this Set
- Front
- Back
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General Definition: |
The conveyange or transfer of land as a security for the payment of a debt or the discharge of some obligation. Value of security must always be higher than the loan |
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The parties: |
Mortgagor - Party who borrows the money Mortgagee - party who lends or finances the loan |
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The rights: |
Right to Redeem: Right of mortgagor to pay off the capital, pay back the interest, costs of administration, to get back the property Should never fettered |
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Once a mortgage, always a mortgage |
Santley v Wilde: The mortgagor is always allowed to redeem his property even after contractual date of redemption has passed. Equitable Rights of Redemption |
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Contractual Right of Redemption |
Governed by the common law, mortgage deed/agreement is a contract - date of redemption will be stipulated (usually 6 months) |
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Equity of Redemption: |
The total sum of rights which the mortgagor has for the duration of the mortgage. These rights recognized by the courts and also protecyed. |
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Equity of Redemption: |
The total sum of rights which the mortgagor has for the duration of the mortgage. These rights recognized by the courts and also protecyed. |
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Creation & registration Important in regards to priority of mortgage |
Yes |
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Equity of Redemption: |
The total sum of rights which the mortgagor has for the duration of the mortgage. These rights recognized by the courts and also protecyed. |
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Creation & registration Important in regards to priority of mortgage |
Yes |
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Rights of Mortgagor: |
To prevent the abuse of mortgagors who are often in a vulnerable position Equity has developed a body of case law protecting mortgagor rights There must be “no clog or fetter to the Equity of Redemption” |
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Any provisions or term in a Mortgagee prevents or hinders the mortgagor’s rights would be struck down by the courts and declared void: |
Option to purchase/Right to Buy Postponement of RoR Oppressive/Unreasonable terms Collateral Advantage Restraint of Trade Consumer Credit Act 1974 as amended by Contract Law Act 2006 |
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Option to Purchase/Right to Buy Mortgagee forced mortgagor to accept the option to purchase before loaning |
Samuel v Jarrah Timbers: Option to purchase is “repugnant” to the very essence of a mortgage - thus will be declared void by courts In line with “once a mortgage, always a mortgage” OtP - ultimate authority or dominion over the property of the mortgagee |
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OtP from a separate agreement |
Reef v Lisle Option to purchase is not declared void if it was agreed to in an agreement independent of the mortgage agreement. Facts: 11 days between both agreements - no connection - thus valid Question of fact: 1 day difference may still render them connected |
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Nursing home - morally reprehensible |
Jones v Morgan: Nursing home threatened with repossession - entered into mortgage agreement, lender demanded to buy half the share in property Held: otp was offensive - M’gor (naive, innocent, trusting person and not of business mind) - M’gee took advantage of the M’gor’s weakness |
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Right of Pre-emption / Right of First Refusal |
If provisions include such rights, the courts may allow the OTP to be valid But typically automatically struck off if found in a mortgage agreement - Warnborough v Garmite |
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Right of Pre-emption / Right of First Refusal |
If provisions include such rights, the courts may allow the OTP to be valid But typically automatically struck off if found in a mortgage agreement - Warnborough v Garmite |
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(2) Postponement of Right to Redeem |
Postponement itself - no repugnant. If to such an extent into the future to the point the right becomes illusory, it may be struck down |
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Commercial context: 10 years postponement is very common |
Knightsbridge Estates v Bryne 40 years postponement was deemed valid - Mortgagor held a freehold, and was also his partners were business people |
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Illusory example: |
Fairclough v Swan Brewery: 17 years postponement was held invalid The leasehold was only as long as 17 years and 6 weeks. |
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(3) Oppresive and Unconscionable Terms |
Equity may intervene in contractual bargains and strike down the terms in a mortgage which are oppressive and unconscionable. Courts also meet a balance with the doctrine of the freedom to contract |
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Morally reprehensible |
Courts rarely exercise this jurisdiction as they uphold the freedom to contract - powers are only ever exercised on terms that are morally reprehensible which shocks the conscience of the courts e.g. Jones v Morgan - nursing home |
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Morally reprehensible |
Courts rarely exercise this jurisdiction as they uphold the freedom to contract - powers are only ever exercised on terms that are morally reprehensible which shocks the conscience of the courts e.g. Jones v Morgan - equal bargaining powers = bad bargain > courts unwilling to intervene Term might be unreasonable but not oppressive. |
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High premiums May be rewrote to a lower rate Premiums = lumpsums paid immediately with base loan |
City Land & Property Holding v Dabrah One term of mortgage included a high premium of 57% Term was oppressive and the terms were written to a reasonable interest rate |
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Commercial context: Determined by question of fact |
Multiservice Bookbinding v Marden Small company borrowing money to expand - 10 years, 2% interest rate above normal bank rate - Index-linked with Swiss Francs. £ suffered devaluation, borrower had to pay 2 and a half times than the amount that would be owed in £s. Browne-Wilkinson J: unreasonable but not oppressive - not morally reprehensible |
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Bonus points! |
Depends on how well you argue: Remember that link-lending is a common thing in the commercial world - unlikely to be argued as oppressive or morally reprehensible (unless reeeealy obscure) |
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Equal Bargaining powers: |
Carringtons v Smith: If the borrow is a man of intelligence with equal bargaining power, it becomes difficult to challenge the terms of the mortgage |
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Equal Bargaining powers: |
Carringtons v Smith: If the borrow is a man of intelligence with equal bargaining power, it becomes difficult to challenge the terms of the mortgage |
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Varied interest rates: Genuine market pressures |
Paragon Finance v Pender Varying interest rates - Mortgagee is allowed to vary the interest rates (depending on country’s economy) in the mortgage Power must not be exercised dishonestly, improperly, arbitrarily or grossly exorbitant Only allowed if in response to genuine market pressures |
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Equal Bargaining powers: |
Carringtons v Smith: If the borrow is a man of intelligence with equal bargaining power, it becomes difficult to challenge the terms of the mortgage |
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Varied interest rates: Genuine market pressures |
Paragon Finance v Pender Varying interest rates - Mortgagee is allowed to vary the interest rates (depending on country’s economy) in the mortgage Power must not be exercised dishonestly, improperly, arbitrarily or grossly exorbitant Only allowed if in response to genuine market pressures |
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(4) Collateral Advantages |
Mortgage may contain certain terms which give the mortgagee some additional advantages other than interests - question is whether the value added advantage was valid Biggs v Hoddinott - |
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Equal Bargaining powers: |
Carringtons v Smith: If the borrow is a man of intelligence with equal bargaining power, it becomes difficult to challenge the terms of the mortgage |
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Varied interest rates: Genuine market pressures |
Paragon Finance v Pender Varying interest rates - Mortgagee is allowed to vary the interest rates (depending on country’s economy) in the mortgage Power must not be exercised dishonestly, improperly, arbitrarily or grossly exorbitant Only allowed if in response to genuine market pressures |
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(4) Collateral Advantages |
Mortgage may contain certain terms which give the mortgagee some additional advantages other than interests - question is whether the value added advantage was valid Biggs v Hoddinott - |
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Biggs v Hoddinott Pub tied to to buy the beer from the mortgagee. |
Term was valid as it was only limited to 5 years - terms was not oppressive, not unconscionable and not unreasonable. Parties entered the mortgage with equal bargaining powers. |
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Illustrations of oppressive / unconscionable collateral advantages: |
If there is also a price increase of 10-20% above market rate If the beer was of an especially lousy quality - oppressive If the beer factory sells the best beer but the prices are increased above market price - it could offset any oppressive or unconscionable factors |
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Illustrations of oppressive / unconscionable collateral advantages: |
If there is also a price increase of 10-20% above market rate If the beer was of an especially lousy quality - oppressive If the beer factory sells the best beer but the prices are increased above market price - it could offset any oppressive or unconscionable factors Equal bargaining power = bad bargain |
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Permanent advantage: |
Noakes v Rice A permanent collateral advantage is prima facie oppressive and unconscionable |
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Permanent advantage: |
Noakes v Rice A permanent collateral advantage is prima facie oppressive and unconscionable |
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Courts will not intervene c/f with Noakes |
Kreglinger v New Patagonia Meat & Cold Storage It was for a short time - being bought and sold at the best market value - if contract was entered by business people with open eyes: Courts wil not intervene Collateral Advantage can persist even after the Mortgage (but short time) |
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(5) Restraint of Trade |
Restrictions on the mortgagor’s freedom of trade can be struck down if it goes against Public Policy Notdenfelt v Maxim Nordenfdlt Guns |
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Question of fact: |
Esso Petroleum v Harpes Garage: have to buy & sell on Esso’s pricing - cannot give any discounts - garage must be kept open at certain times Held: 4 years restraint of trade valid - Esso was entitled to protect their own interest (but the 21 year restraint was too long) |
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Question of Fact: C/F Esso Petroleum v Harpe Garage |
Alec Lobb v Total Oil of Great Britain 21 year restraint was valid: no pressure on the parties - parties taken advise from solicitors and accountants Agreement was entered with open eyes (opposite: blind-sided - did not know/expect the term that hit him) |
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(6) Consumer Credit Act 1974 as amended by Consumer Credit Act 2006 |
Main aim - protecting borrowers with low credit ratings (find it difficult to obtain proper financing) Court has power under statute to open up unfair credit bargains, extortionate credit bargains, and try and do justice between parties Finding there is unfair relationship between M’gor and M’gee - terms can be set aside |
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(6) Consumer Credit Act 1974 as amended by Contract Law Act 2006 |
Main aim - protecting borrowers with low credit ratings (find it difficult to obtain proper financing) Court has power under statute to open up unfair credit bargains, extortionate credit bargains, and try and do justice between parties Finding there is unfair relationship between M’gor and M’gee - terms can be set aside |
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“Dual interest rate” |
Falco Finance v Gough Knew G was desperate - Falco lent money at 8% interest rate - if failed to pay on time, increases to 14% immediately Such clauses were extortionate - courts recognised it as almost impossible for any borrower to make payments exactly on time |
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Rights of the Mortgagee “Realise the Security” |
If debt is not repaid, lender can sue on the contract to recover the loan. If M’gor is in financial difficulty, course of action may not be appropriate How to enforce the security? (only two are relevant) |
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M’gree Rights: Right to Possession |
As legal mortgage, the mortgagee can go into possession of the property as soon as the mortgage is created |
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M’gree Rights: Right to Possession |
As legal mortgage, the mortgagee can go into possession of the property as soon as the mortgage is created |
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Four Maids v Dudley Marshall |
“The M’gee can go into possession before the ink on the mortgage runs dry” |
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White v City of London Brewery |
Uncommon for M’gee to go into possession except as a prelude/preliminary to sale |
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Vacant Possession: Where the mortgagee wants the property vacant. |
Common Law right to take possession: Four Maids (must be done peaceably If the property is domestic premises and the M’ger is occupying it: a court order to evict m’gee must be obtained - otherwise mortgagors are criminally liable - Art 8 HRA in question |
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Court order for Possession: |
Courts have power to suspend, adjourn or postpone the possession proceedings s.36 Administration of Justice Act 1970 (AJA 1970) |
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Court order for Possession: |
Courts have power to suspend, adjourn or postpone the possession proceedings s.36 Administration of Justice Act 1970 (AJA 1970) |
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Court powers: |
Can use if the property is a dwelling house Can postpone the possession priceedings for such a time as the court feels is reasonable (usually 2 years) Court must be satisfied M’gor can repay within reasonable time. |
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Can go up to 13 years: |
Cheltenham & Gloucester v Norgan - Courts allowed 13 years postponement of possession (prospect that 13 years he could repay the loan) |
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Right of Mortgagee: Right to Sell |
s.101 LPA 1925 - M’gee has power to sell subject to: s.103 LPA 1925 - only exerciseable if 3 conditions are satisfied |
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Right of Mortgagee: Right to Sell |
s.101 LPA 1925 - M’gee has power to sell subject to: s.103 LPA 1925 - only exerciseable if 3 conditions are satisfied |
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s.103 LPA 1925 - 3 Conditions Either one only needs to be satisfied |
1) Notice for payment sent to M’gor - after 3 months, still defaulted 2) if interest is unpaid for 2 months after it was due - can sell it 3) if there is a breach of some other term |
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Right of Mortgagee: Right to Sell |
s.101 LPA 1925 - M’gee has power to sell subject to: s.103 LPA 1925 - only exerciseable if 3 conditions are satisfied |
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s.103 LPA 1925 - 3 Conditions Either one only needs to be satisfied |
1) Notice for payment sent to M’gor - after 3 months, still defaulted 2) if interest is unpaid for 2 months after it was due - can sell it 3) if there is a breach of some other term |
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s.105 LPA 1925: how proceeds of sale will be distributed - there is a priority |
1st: Cost of the sale (administration costs) 2nd: the mortgagee - Party who did not mortgage his share is paid before the bank 3rd: Parties who mortgaged the property Some of the duties or conditions placed upon the m’gee when he sell. |
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Cuckmere Bricks v Mutual Finance |
To sell, they must advertise all information regarding the land and it’s interests. |
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Cuckmere Bricks v Mutual Finance |
To sell, they must advertise all information regarding the land and it’s interests. |
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Standard Charter Bank v Walker |
To sell, they must take reasonable steps to find the best market price for the property. |
