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Law Notes Land Law Notes

Remedies Of The Mortgagee Notes

Updated Remedies Of The Mortgagee Notes

Land Law Notes

Land Law

Approximately 987 pages

Land Law notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB land law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).

These were the best Land Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through dozens of LLB samples from outstanding law students with the highest results...

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Remedies of the Mortgagee:

1. Foreclosure

  • Traditional right of mortgagee is to ask the court to put end to equitable right to redeem

    • This is inapplicable until after the legal date for redemption has passed

    • And mortgagor normally has six months to pay off the mortgage

  • Smith: However, power is rarely exercised these days

    • If property is worth more than the debt, than it is more advantageous that the mortgagee sell the property

      • Which will ensure that the debt and other expenses are paid off

        • With the remaining balance given to the mortgagor

    • If property is worth less than the debt

      • Then foreclosure will bar the mortgagee from claiming anything more than the value of the property sold from the mortgagor

        • Because the mortgagor has lost the right to redemption

          • The mortgagee will lose the right to sue for the balance of the debt

            • And the value of the property will have to suffice.

2. Possession

  • The mortgagor’s possession

    • Mortgagees can technically take possession immediately after mortgage agreed

      • But mortgagors will generally be in possession

        • Thus, where possession is sought or taken, the mortgagor must be allowed the opportunity to redeem

        • Smith: regardless, possession not normally taken until default b/c point of taking possession is to exercise power of sale – which isn’t available until default.

Court’s jurisdiction to postpone possession under common law

  • Birmingham Citizens BS v Caunt [1962]

    • Russell J:

      • Where mortgagee is entitled to possession by reason of default of mortgagor -and the whole money has become payable –

        • The court has no jurisdiction to decline to make the order or to adjourn the hearing.

      • The sole exception is where a short adjournment would afford the mortgagor a chance to pay off the mortagee in full or otherwise satisfy him;

        • but it should not be done if there is no reasonable prospect of this occurring

  • Quennell v Maltby [1979]: wife of mortgagor bought mortgage from bank, tried to use it to evict tenants by taking possession when bank had previously refused to do so.

    • Lord Denning:

      • Equity should be able to step in and restrain a mortgagee from getting possession unless it is

        • bona fide

        • and is reasonably for the purpose of enforcing the security

          • Not for any ulterior motive as in the present case.

Statutory Discretion via Administration of Justice Act 1970

  • S.36: if court considers that if it exercises powers, the mortgagor is likely to be able within a reasonable period to pay any due sums under the mortgage

    • Then the court has the power to adjourn proceedings, or suspend/postpone execution of a possession order

      • BUT must be a dwelling, not a business.

  • Problem:

    • Halifax BS v Clarke [1973]: Mortgage had default clause that on default, whole payment of debt (not just instalment) would be due – hence “any due sums” would be full amount and therefore no prospect of being able to pay full amount.

    • Administration of Justice Act 1973 s.8:

      • Where mortgagor pays in instalments but clause provides for default that full payment due

        • Then for purposes of AJA 1970 s.36 court may treat as due only such payments expected as if no such clause

  • Cases which fall into s.36 AJA 1970 and s.8 AJA 1973:

    • Earlier payment on default clauses

      • S’all good.

    • NOT Overdrafts

      • Habib Bank Ltd v Taylor [1982]: D wanted to defer payment of overdraft using s.36 and s.8.

        • Oliver LJ:

          • For s.8 to apply you need two things:

            • A provision that mortgagor entitled to pay the principal by instalments or defer payment.

            • AND a provision for earlier payment in the event of any default by mortgagor

          • Here, there is no provision for earlier payment

            • Because realistically, there can be nothing earlier than the bank’s demand for payment when payment can be demanded.

    • BUT Endowment Mortgages are allowed

      • Problem = no instalments for payment of such a mortgage – thus no deferment as capital not due until policy matures

        • Bank of Scotland v Grimes

          • Griffiths LJ:

            • Point of Act was to give some relief if looks likely that X will be able to continue to pay in the future.

              • Not permitting postponement for common endowment mortgages would defeat this point.

  • Role of arrears

    • AJA s.38 and AJA 1973 s.8 assumes that

      • Will be no possession attempt if arrears paid

      • Will be no possession attempt if no arrears to pay

        • Problem = assumptions bear no relationship to right to possession

    • Western Bank Ltd v Schindler [1977]: defective drafting meant no interest due til end of nine years and that failure to pay was not a breach. WBL attempted possession when no payments made.

      • Scarman LJ (maj):

        • Sometimes would be appropriate to impose time limit upon a mortgagee seeking possession only of his common law right.

          • Danger to security which makes mortgagee take possession may be exaggerated.

            • Therefore sense in applying subsection (2) to cases where the mortgagee relies only on his estate and alleges no arrears or default

      • Goff LJ (dis):

        • AJA s.36 only applies to cases where mortgagee is in default

          • Seems odd to try and approgate common law right to possession by the back door.

        • Even if it is absurd that possession can be deferred for default but not for non-defaults

          • The power of sale can only be made where there is a default

            • And possession will only be very rarely sought except for the purposes of making a sale b/c of the default

      • Smith: argument of Goff LJ overlooks case where X defaults but then resumes payments – if AJA doesn’t apply then X still has power of sale against him even if can succeed on possession.

  • Exercise of discretion

    • Over what time period must the arrears be paid?

      • Cheltenham & Gloucester BS v Norgan: terms of mortgage where for instalments to be paid over period of 22 years

      • Waite LJ: has been suggested that period of 2-6 years postponement is “reasonable”

        • But if mortgagor can pay back everything at end of mortgage, reasonable period could be whole length of mortgage.

          • ...

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