Land - Mortgages

Question 1

Formalities for a legal mortgage

Answer 1

Deed, which only has to be signed by the grantor/borrower + Registration

Question 2

mortgagee

Answer 2

lender

Question 3

mortgagor

Answer 3

borrower

Question 4

Who needs to sign a mortgage deed?

Answer 4

grantor/borrower only, not the lender

Question 5

priority of repayment for mortgages

Answer 5

all mortgages must be repaid in the order in which they are registered

Question 6

If a mortgage intended to be legal is not created properly, what is the consequence?

Answer 6

The mortgage will be equitable provided that it is in writing, contains all the terms and is signed by both parties.

Question 7

Equitable mortgage

Answer 7

applies where the borrower only holds an equitable interest in the land or has a defective legal mortgage

Question 8

Formalities for equitable mortgage

Answer 8

in writing + signed by the grantor (the borrower)

Question 9

defective legal mortgage

Answer 9

Equity will recognise “a contract to grant a legal mortgage” if in writing, contains all agreed terms and signed by mortgagor/mortgagee

Question 10

Requirements for a deed

Answer 10

intended to be a deed, validly executed + delivered

Question 11

When does the borrower’s equitable right to redeem arise?

Answer 11

On the day after the legal date for redemption has passed

Question 12

irrebuttable presumption of ascendancy

Answer 12

parent/child, solicitor/client, trustee/beneficiary, guardian/ward

Question 13

relationships where undue influence must be positively shown

Answer 13

parent/adult child; husband/wife

Question 14

2 types of undue influence

Answer 14

(1) overt acts of improper pressure
(2) ascendancy over another, which is taken advantage of

Question 15

Why are options to purchase in a mortgage agreement likely to be struck down?

Answer 15

can be struck down as a “clog” on equity of redemption - the court will look at “substance” rather than “label” to decide whether it is substantially a mortgage

Question 16

solus tie

Answer 16

a collateral advantage in a commercial transaction eg obligation to source supplies from the lender. usually upheld.

Question 17

Elements required to successfully prove undue influence

Answer 17

A relationship of trust and confidence
A transaction which requires explanation

Question 18

Burden of proof for undue influence

Answer 18

on the alleged victim/claimant

Question 19

Remedies for undue influence

Answer 19

the contract may be set aside (on a discretionary and equitable basis)

Question 20

When are banks/lenders put on inquiry of undue influence?

Answer 20

whenever one party in a non-commercial setting is standing as surety for the other party

Question 21

When is a lender NOT put on notice of undue influence?

Answer 21

if the purpose of the loan is for the joint benefit of the co-owners

Question 22

Etridge guidelines

Answer 22

Where the bank is put on notice of undue influence, they must:
(1) Write to the spouse who is granting the mortgage not for their benefit, explaining that it needs confirmation from an independent solicitor that they have explained the transaction to the spouse;
(2) Ask that party to nominate an independent solicitor, provide all information to that independent solicitor; and
(3) Must not proceed to lend until confirmation is received from the independent solicitor that the transaction has been fully explained

Question 23

Priority of legal mortgages depends on

Answer 23

order of registration

Question 24

Priority of equitable mortgages depends on

Answer 24

order of creation

Question 25

how can an equitable mortgage over registered land be protected?

Answer 25

by entering a notice on the charges register

Question 26

an interest which is protected takes priority over all

Answer 26

subsequent transactions

Question 27

How is priority of equitable mortgages determined?

Answer 27

always determined by creation, regardless of being protected by notice

Question 28

An equitable mortgagee has fewer remedies available to it than a legal mortgagee. What can they not do?

Answer 28

An equitable mortgagee does not have the right to repossess or sell without a court order.

Question 29

negative equity over a mortgage

Answer 29

If the value of the mortgaged property is less than the outstanding mortgage debt

Question 30

Limitation period for a contractual debt for a legal mortgage

Answer 30

12 years for capital 6 years for interest

Question 31

The Pre-Action Protocol sets out what expectation for lenders re possession?

Answer 31

an expectation that lenders will explore alternative arrangements with a borrower before taking possession of residential properties

Question 32

Can the court limit the right to possession?

Answer 32

The court can postpone possession of residential properties only and has discretion as to timing and conditions

Question 33

possession of residential property should be a

Answer 33

last resort

Question 34

if the mortgagor is likely to be able within a reasonable period to pay any sums due, the courts have a power to

Answer 34

postpone the date for delivery of possession for such period as the court thinks reasonable

Question 35

A borrower requesting a postponement of possession should present what to the court?

Answer 35

a detailed financial plan to the court, showing how the loan and arrears will be paid off before the term expires.

Question 36

strongest right which the lender can use against a defaulting borrower

Answer 36

the power of sale

Question 37

when does the lender's power of sale arise?

Answer 37

when the mortgage money has become due

Question 38

when does the power of sale arise for a capital repayment mortgage?

Answer 38

the first instalment of capital is due

Question 39

For the lender to exercise right to sell, the right to sell must

Answer 39

exist, have arisen and become exercisable

Question 40

Lender’s duties when exercising the right to sell

Answer 40

the lender cannot simply consider its own interests: these must be balanced against the interests of the borrower

Question 41

A receiver

Answer 41

an administrator whose function is to get an income from the land. appointed by the lender but deemed to be the borrower‘s agent.

Question 42

Receivership only applies to

Answer 42

commercial properties

Question 43

Foreclosure

Answer 43

lender takes the mortgaged property in satisfaction of the debt, meaning that the freehold will vest in the lender, and the borrower will lose all rights to the property (draconian, rarely used in practice)

Question 44

If lender pursues foreclosure, what duty do they owe to borrower?

Answer 44

a duty to take reasonable care to obtain the ‘true market value’ or ‘proper price’ for the property

Question 45

Endowment mortgage

Answer 45

The mortgage is linked to a life assurance policy that matures at the end of the mortgage term. During the term, the borrower pays interest only on the loan, plus monthly premiums on the life assurance policy.

Question 46

AJA 1970, s 36 enables a court to postpone an order for possession provided that the borrower can pay ‘any sums due’ within a ‘reasonable period’. What must the borrower demonstrate?

Answer 46

The borrower must show it can pay the arrears before the end of the mortgage term in addition to the usual monthly payments