Mortgages

define Financial Services and Markets Act 2000 as a method of mortgagor protection

mortgage lenders must not impose excessive charges- mortgagors of residential property given some protection

Civil Justice Council Mortgage Protocol on possession as a mortgagee remedy

mortgagees should follow uniform, clear and structure approach to dealing c/ mortgage arrears leading to possession- are steps to keep mortgagors informed of their indebtness and they should be given every oppurtuntiy to avoid possession e.g altering debt repayments/selling property

why are contracts written to allow mortgagor to remain in possession until default?

mortgages involve transfer of ownership but homeowners want to live in house now, not 25 years later when mortgae paid off

define extortinate credit bargain

extortinate credit bargain= one that requires debtor/relative of his to make payments, grossly exorbitant/grossly contravene ordinary principles of fair dealing (s138(1))

what kind of burden is on mortgagees in UD?

modest burden for banks/lenders as is no more than can be reasonably expected or mortgagor taking guarantee from individual

Kinane v Alimamy

mortgage by estoppel still needs to be in writing

if no class 2(A) relationship, what can do do

, if c proves relationship under which c reposed trust/confidence in d, existence of such relationship raises presumption of UD (class 2(B)) t/f c can set aside transaction

Agarwala v Agarwala

- where business venture between sister in laws and S took legal title and mortgage over property which S would benefit from, b/c S had poor credit rating, as S provided money for conversion of property and mortgage payments, and acted to his detriment on the common understanding he had property, he had the property- Laskar distinguisihed b/c little help J liable for mortgage, when S was conduit of mortgage paments

Barclays v O'Brien

- where husband and wife agree to second mortgage home as security for overdraft, which was extended by mortgagee to company which husband had interest in, wife didn't have interest. bank manager sent doc's c/ instructions to ensure both aware of nature of doc's, and if in doubt should consult solicitors. Wife signed without reading in reliance on ralse repsresentation by husband. Overdraft exceeded and mortgagee sought possession, HoL held no special protection for wives and where wife/equivalent cohabitee was induced to stand as surety for husband's debt by his UD/misrep, she had equity against him to set aside transaction, that right would be enforceable against third party who had actual/constructive notice of circumstances giving rise to her equity. Where wife offered to stand as surety for husband's debt in transaction not to her financial advantage and carried a substantial risk of husband commiting legal/equitable wrong, entitling wife to set aside transaction, mortgagee put on inquiry and would have constructive notice of wife's right unless they took reasonable steps to ensure her agreement to stand surety had been properly obtained- these circumstances occurred here t/f wife could set aside charge on home

how can d rebut no UD in class 2(A) and 2(B)?

-in class 2(A) and 2(B) d then has to prove c entered transaction freely e.g b/c had independent advice

6 rights and remedies of mortgagee

1) action for debt on personal covenant to repay 2) possession 3) Administration of Justice Act 1970 4) power of sale 5) power to appoint a receiver 6) foreclosure

3 critiques of mortgages

1) clash of interests between borrowers and creditors- balancing between them raises policy issues: need to ensure crditors remain willing to lend money to housing consumers, to fund purchase of houses 2) in some cases, priority conferred on creditors above occupiers interests, explained that opportunity to establish home would not have arisen without creditor's capital, t/f creditor must prevail for fairness/justice 3) treatment of creditor/occupier influenced by housing policy of widespread home ownership- as depends on availability of adequate supplies of creditors' capital, creditors intersts prioritised to safeguard flow of capital. Rebuttal- people's home important to their lives, family and health t/f should be protected

4 factors why mortgages important

1) enable consumers to purchase their own home 2) provides important source of financing for commercial transactions b/c have mortgage over land e.g factory could mortgage macihine to get liquid sum to pay off debt, then machine would be used to pay off mortgage debt- bank finance most important source of external capital for small businesses (RBS v Etridge) 3) same land can be mortgaged many times over, only thing that will stop this is economic value of land (Downsview v First) 4) property owning and real property mortgaged to a building society owning, is important part of democracy (Pettitt v Pettitt)

Kreglinger v Patagonia

1) in methods of protection of mortgagor- equity of redemption, provision can be held invalid b/c a) unconscionable b) in nature of penal caluse clogging equity arising on failure to exercise contractual right to redeem or c) in nature of condition repugnant to contractual and equitable rights 2) in methods of protection of mortgagor- mortgage must be free from all conditions in mortgage after redemption, collateral advantage allowed if contracts in substance, two distinct contracts- right to purchase mortgagee's sheepskins was in nature of a collateral bargain the entering into which was a preliminary and separable condition of the mortgage

Silven v RBS

1) in power of sale as mortgagee remedy, unless otherwise indicated, receiver has to be active in protection/preservation of mortgaged property and take reasonable precuations to obtain fair value/proper price at date of sale, not decision to sell. Remedy for breach of this equitable duty is that mortgagee accounts to mortgagor for what he should 2) in power to appoint receiver as mortgagee remedy, primary duty of receiver is to ensure secured debt repaid, but no duty to bring about increase in value of property/improve it

legal mortgage formalities

1) legal mortgage must be wholly in writing- part performance of deposit of title deeds insufficient (United v Kuwait) 2) must be an application for registration of mortgage estate within 2 months of disposition (s4(1)(g)) 3) mortgage over unregistered land which occurred without activating registration requirements needs protection as class C land charge

3 methods of creating equitable mortgage

1) mortgage of an equitable interest must be in writing and CAN be by deed 2) failure to create valid legal mortgage through not following formalities, can create equitable mortgage 3) mortgage by estoppel

Etridge steps to put mortgagee on inquiry

1) mortgagee should contact wife and say requires her solicitor's understanding of docs 2) receive appropriate response from wife and written confirmation from solicitor 3) mortgagee should routinely give solicitor financial info relating to transaction/husband's existing indebetedness

2 methods of creating legal mortgage

1) s23(1) LRA- 1) charge by deed expressed to be by way of legal mortgage 2) charging the land by payment of money

what solicitor has to do in UD

1) solicitor should require confirmation wife wishes him to act for her 2) solicitor can act for wife and mortgagee if no conflict of duty and solicitor satisfied in her best interests to do so 3) solicitor's advice given at personal meeting without husband, and in it should explain docs and its practical consequences/risks based on financial info provided by mortgagee 4) solicitor should state choice whether to proceed is exercised by her, and should check she wishes to continue 5) solicitor assumes professional responsibilities to wife t/f knowledge of advice to wife should not be imputed to mortgagee

10 methods of protection of mortgagor

1) statutory powers of mortgagor 2) equity of redemption 3) right to redeem cannot be rendered illusory 4) mortgagor ust be free from all conditions in mortgage after redemption 5) common law doctrine of restraint of trade 6) control of interest rates 7) index linked rates 8) penal interest rates 9) extortinate credit bargains under Consumer Credit Act 1974 10) Financial Services and Markets Act 2000

why do mortgagees have rights and remedies?

Barclays v O'Brien- danger in sympathisinsg c/ wife who is threatened c/ loss of her home, in suit of bank c/ important public interest- need to ensure wealth tied up in home not rendered economically sterile

Shelter on possession as a mortgagee remedy

Civil Justice Council Mortgage protocol valuable b/c ensures possession action not taken as anything other than last resort by mortgagee

BCCI v Aboody classification of undue influence

Class 1- c proves d actually exerted UD Class 2(A)- UD is presumed b/c in certainrelaitonships as a matter of law, presumption that UD been exerxised raised. Relationships= solicitor and client,doctor and patient, employer and employee (Credit v Burch) Class 2(B)- c proves existence of relationship of trust and confidence which raises presumption of UD

statutory provision for power of sale as a mortgagee remedy

LPA s101

define power to appoint receiver as mortgagee remedy

LPA s101- power arises, s103- power exercisable

define statutory powers of mortgagor as a method of protection of mortgagor

LPA s91- power to redeem mortgage, enforceable by court order

define possession as a mortgagee remedy

LPA s95(4)- mortgagee, whether or not his charge secured by legal tlerlm of years absolute, can take possession of land- but taking possession doesn't convert legal estate of mortgagor into equitable interest

relationship between mortgagors/mortgagees and tenants

LPA s99- mortgagor/mortgagee can lease land provided not contrary contractual agreement

define action for debt on a personal covenant to repay as mortgagee remedy

Limitation Act 1980 s20-as an action on debt, has a limitation period of 12 years

registration requirement of a legal mortgage

S27(2)(f)- grant of first legal charge is disposition of registered estate t/f must be registered to be completed LRA 2002 s4(1)(g)- creation of first legal mortgage of unregistered estate, triggers registration requirement

definition of a mortgage

Santley v Wilde- conveyance of land as security for payment of debt/discharge of other obligation. Security is redeemable on payment/discharge of debt/obligation and you get the interest back

how do registered charges take priority?

according to when they are created (s48(1))

Union v Charnley

all thats required to create equitable charge is intention to charge property c/ debt

why is foreclosure rarely used now, having once been traditional remedy?

b/c judicial proceedings required and means bank takes property in exchange for debt t/f if property worth more than debt, bank gets windfall, but if property worth less than debt, bank loses out b/c cannot go after remaining money owed b/c in foreclosure, debt ends (courts unwilling to support this approach)

define mortgagee

bank/creditor

Graham v Lees

beneficial share of 25% correct as wife had not pleaded equity of exomineration that her dead partner's mortgage had been solely for his benefit, rather debt was for purchase and as she had derived benefit from partner's earnings, she should also take burden of debt

define mortgagor

debtor/borrower

why was foreclosure developed?

developed by equity to terminate mortgagor's equitable right to redeem

Baker critique of equity of redemption as method of mortgagor protection

doctrine of clogging equity is an anachronism that needs moulding to fit modern conditions- should be limited to cases of oppressive/unconscionable bargains. But times have changed again, still huge difference of bargaining power between mortgagor and mortgagee

Citizen's Advice Bureau on possession as a mortgagee remedy

evidence suggesting considerable variation between mortgagees c/ regard to bringing possession proceedings- some firms avoid it, some begin proceedings very quickly

Leeds v Famini

if fail to register legal mortgage, priority retained as equitable mortgage vis a vis later in time created equitable leas

Barclays v Zaroovabli

if fail to register mortgage, priority lost to later created legal lease

First v Syed

in Administration of Justice Act as a mortgagee remedy, courts cannot require mortgagor go beyond their means

Citibank v Avivor

in Administration of Justice Act as a mortgagee remedy, s36 and s8 not affect general rule that mortgagee's right to possession could not be made subservient to set off on part of mortgagor

Halifax Clarke

in Administration of Justice Act as a mortgagee remedy, s36(2) powers only exercisable if s36(1) complied c/ s8

Canada v Marskham

in Administration of Justice Act s8, as a mortgagee remedy, court cannot suspend possession forever

Western v Schilder

in Administration of Justice Act s8, as a mortgagee remedy, mortgagee had right to possession to protect security where mortgagor failed to pay endowment premium

White v London

in Administration of Justice Act s8, as a mortgagee remedy, mortgagor accountable for greater rent than he would have received had he leased the place as a free house

TSB v Camfield

in UD, bank stipulated wife get independent advice, but failed to ensure this actually occurred t/f wife's understanding remained incorrect and bank had notice

Banco v Mann

in UD, c has to take reasonable steps to ensure UD of husband counteracted b ensuring wife aware of consequences of entered into transaction

First v Anchampong

in UD, mere knowledge wife had legal advice insufficient to put bank on inquiry Abbey v Stringer- mother placed trust and confidence in son, transaction could not be explained by normal motives t/f evidential class 2(B) presumption raised

Northern Rock v Archer

in UD, mortgagee must have known that without further information from them about particular arrangement, solicitors couldn't have guessed at c wife/s need for advice

Barclays v Thomson

in UD, solicitors giving independent advice actively exclusively for c wife, even if introduced/retained by bank

CIBC v Pitt

in UD, where c bank has n actual knowledge/notice of actual/presumed UD and no indication transaction anything other than normal advance for husband and wife joint benefit, c bank not put on inquiry t/f no constructive notice t/f charge enforceable

RBS v Etridge

in UD, wife can raise presumption of UD if can demonstrate she did put trust and confidence in husband regarding her financial affiars, and transaction not explicable in ordinary way. If mortgagee put on inquity, were obliged to take reasonable steps to satisfy that wife had understood and freely entered transaction

Bromwick Wilkinson

in action for debt on personal covenant to repay, as a mortgagee remedy, time runs from when principle money becomes due

Swift v Land Registrar

in equitable mortgage, fraudster executed charge over property occupied by registered proprietor, then executed second charge in favour of s, both were registered. S remedeemed first charge then advanced the loan, s brought possession proceedings after fraudster failed to repay, but accepted has no enforceable security. C altered register to delete s's charges, s claimed indemnity from C

Texaco v Mulberry

in methods of protection of mortgagor, common law doctrine of restraint of trade, parties entered tie for M to only use T's petrol, when T prohibited from delivering petro due to strike, M obtained petrol from another supplier, t/f T could get an interlocutory injunction, justified on basis of bargaining equality and no unreasnoabel restraint on M's liberty to trade

Cityland v Dabrah

in methods of protection of mortgagor, control of interest rates, 57% interest rate unfair and unconscionable, 7% interest rate set instead

Woodshed v Petrou

in methods of protection of mortgagor, extortinate credit bargains under Consumer Credit Act , interest rate of 42% of loan for 6 months until husband could sort out proper long-term borrowing, acceptable to cover poor financial record of mortgagor S173(1)- where mortgage regulated by CCA, mortgagor entitled to repay

Ketley v Scott

in methods of protection of mortgagor, extortinate credit bargains under Consumer Credit Act 1974, annual rate of 48% not extortinate

Alexander v Bromwich

in methods of protection of mortgagor, index linked rates, acceptable for contract to allow variation in mortgage from 2 to 4% over Bank of England rate, b/c of commercial nature of agreement

Multiservice v Marden

in methods of protection of mortgagor, index linked rates, not against public policy to index link to foreign currency. Bargain unconscionable when parties imposed objectionable terms in a morally reprehensible manner which affects his conscience

Nash v Paragon

in methods of protection of mortgagor, penal interest rates, - implied term in mortgage that discretion to alter interest rates should not be exercised dishonestly/for improper purpose/capriciously/arbitrarily/in a way no reasonable mortgagee acting reasonably, would do, to give effect to parties' reasonable expectations- upheld

Wallingford v Mutual

in methods of protection of mortgagor, penal interest rates, no interference where mortgage allowed mortgagor a reduction from normal rate if he made punctual payment

Samuel v Jarrah

in methods of protection of mortgagor- equity of redemption, contactual term of the mortgage cannot be valid if it prevents mortgagor from getting back his property, having paid off what is due on his security

Cretan v Inntrepreneur

in methods of protection of mortgagor- mortgagor must be free from all conditions in mortgage, ECJ held ties to be anti-competitive t/f breach of A81 of Treaty of Rome

Biggs v Hoddinott

in methods of protection of mortgagor- mortgagor must be free from all conditions in mortgage, after redemption, collateral advantage of mortgagor (coventant that during continuance of mortgagor, mortgagor would dtake all their beer from mortgagee) valid b/c independent of redemption and reasonable trade bargain

Fairclough v Swan

in methods of protection of mortgagor- right to redeem cannot be rendered illusory, postponement of mortgagor redeeming payment, void b/c wasting asset, rather court allowed mortgagor to redeem early

Knightsbridge Bryne

in methods of protection of mortgagor- right to redeem cannot be rendered illusory, postponement valid where term of 40 years negotiated for most advantageous terms available

Santley v Wilde

in methods of protection of mortgagor-equity of redemptionL 1) any provision to prevent redemption on payment/performance of debt/obligation, is clog/fetter on equity of redemption, t/f is void. E.g if obligation is payment of debt, security redeemable on payment of that debt. Right to redeem not personal right but equitable interest in property mortgaged 2) repugnant condition= give mortgage on a condition I shall not redeem

Four v Dudley

in possession as a mortgagee protection, mortgagee can go into possession before ink dry on mortgage b/c he has the legal term of years in the property. Can do that unless something expressly/implicitly in contract where he has contracted himself out of that right e.g if contracted that as long as certain payments made, he will not go into possession

Horsham v Clark

in power of sale as mortgagee remedy, contracted bargain involving mortgagee's right to sell did not infringe ECHR P1 A1

Polanski v Lloyds

in power of sale as mortgagee remedy, discretion not limited to financial issues, can take into account social considerations t/f wrong to oppose sale when move for good reason e.g employment and children education

Pak v Mortgage

in power of sale as mortgagee remedy, if sale not best option, mortgagee has to keep in mind mortgagor's liability

Bristol v Ellis

in power of sale as mortgagee remedy, initial suspension of possession order inocorrect as repayment terms not reasonable to mortgagor

Parker v Dunbar

in power of sale as mortgagee remedy, mortgagee exerxising power of sale does know owe known holder of equitable interest, independent duty above that owed to mortgagor

Standard v Walker

in power of sale as mortgagee remedy, mortgagee has duty to exercise reasonable care in choosing time of sale

China v Tan

in power of sale as mortgagee remedy, mortgagee owed no duty to surety to exercise power of sale. mortgagee does not become trustee of mortgaged securtities/power of sale for surety until mortgagee paid in full, and is entitled to a transfer of securities to procure recovery of sum he has paid to mortgagor. mortgagee not obliged to do anything- if mortgagee does nothing and mortgagor declines into bankrupycy, mortgaged securities become valueless t/f mortgagee loses his money, but if surety remains capable of repaying debt, mortgagee loses nothing. If surety worried mortgaged securtiies will decline in value, can reqest mortggeee to sell, and if they don't surety can pay off the debt/take over benefit of securities and sell them

Tse v Wong

in power of sale as mortgagee remedy, no fixed rule against mortgagee purchasing mortgaged property, but mortgagee has to show sale in good faith and he took reasonable prectuations to obtain best price reasonably obtainable

Corbett v Halifax

in power of sale as mortgagee remedy, where employee of mortgagee secretly purchases property at undervalue, equity will only intervene if was element of bad faith on part of mortgagee in exerxise of power, and this was known to sub-purchaser

Cheltenham v Gloucester

in power of sale as mortgagee remedy, where mortgagee arranged for sale to defeat mortgage, court should not exerxise power to order sale

Cuckmere v mutual

in power of sale as mortgagee remedy: 1) ,mortgagee has duty to obtain proper price, as an example of judicially-imposed obligations surrounding sale 2) mortgagee has duty to take reasonable care to obtain proper price/true market value

Graves v Capital

in power to appoint receiver as mortgagee remedy, essentially commercial nature of buy-to-let mortgage meant not unfair for mortgagee to have included power to appoint receiver, fact power of sale had to become exerisable for receiver to be appointed, did not itself make inclusion of such a power unfair

Stroud v Dealmont

lease by mortgagor/mortgagee, to tenant, void without consent

Scotland v Waugh

legal charge void where borrowers fail to have signatures attested, but still valid as equitable mortgage

Mortgage Repossessions Act 2010, in relationship between mortgagor/mortgagee and tenant

most radical reform since Administration of Justice Act b/c provides relief for unauthorised tenants whose ladnlords default on their mortgage, as against mortgagee's attempts to obtain possession. But limited b/c only protects tenants subject to court proceedings for possession by lenders- as lenders retain right to obtain possession without court order (Ropaigelach), remains possibility tenants not protected (O'Neill)

what happens when legal mortgage over unregistered land which occurred without activating requirements

needs protection as land charge, and creditor has just a contract for valuable consideration to create equitable charge

Consumer Credit Act 1974 on extortinate credit bargains, as method of mortgagee protection

s137- if bargain found to be extortinate, courts can reopen agreement to do justice to parties s140A- court can make order when it determines relationship between mortgagor and mortgagee arising out of agreement, is unfair to mortgagor- impact of this provision not entirely mapped

define Administration of Justice Act as a mortgagee remedy

s36 and s8

what LPA section deals c/ sale without possession, in power of sale as a mortgagee remedy

s91(2)

duty on mortgagee in power of sale

standard of care

why is there a relationship requirement in classes 2 of UD?

to make it fair to presume d abused relationship to make c enter transaction

Mortgage v Nationwide

unregistered charge merely equitable mortgage

Flegg v Sood

where mortgage obtained to purchase hosue, all occupiers benefit from mortgage t/f cannot assert rights against mortgagee, regardless of whether occupeirs consulted.

R v Cornelius

where solicitor provided bridging loans to buyers, buyers applied for buy-to-let mortgages, and solicitor represented was clear title, not fraud by false representation as truste deed not trust by way of security

Laskar v Laskar

whre property purchased by mother and daughter as investment, no presumption of joint ownership, but as both jointly liable under mortgage, appropriate to treat

is a mortgage a type of charge?

yes

is an equitable charge a precarious form of security and very informal?

yes