mortgages 1.ppt

8/10/2019 Mortgages 1.ppt

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MORTGAGES I


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Mortgage by Deposit of Title

deeds It is known as Equitable mortgage, Essentials :

-Existence of a debt, either existing or future ,-Deposit of Documents Of Title:

Original Sale Deed, Gift Deed , Partition Deed ,Allotment Letters ,etc- Notified Centres : All taluka Centres- Intention of the Mortgagor to deposit the deedsas a security for the Debt,- The deposit must be by the Mortgagor or by his

authorised agent , Now , it has to Registered with the Registrar of

Property, & required STAMP DUTY has to be paid.

This type of mortgage is very popular amongstBankers ,


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SECURITIES

The function of a security

Unsecured loans vs. secured loans

A security can link to:

People Property

Personal Land

The Mortgage = one form of security over land.


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Lord Diplock in Pettitt v Pettitt (1970) AC 777 HLBritain has become a property, particularly

a real-property-mortgaged-to-a-building-

society-owning, democracy

Figures for 2009 from Communities & Local Govt.Website

14.6 million households in England (68 per cent of

the total households) own their home 11.1 million have mortgages


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PRE-1926 DEVELOPMENT OF THE LAW

Creation of a mortgage

Effect of failure by mortgagor to repay loan on the fixed date At law

In equity

The Decree of Foreclosure


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TERMINOLOGY

A mortgage is an interest in property granted by amortgagor to a mortgagee as security for repayment of a

debt, with a provision for redemption.

The mortgagoris the Borrower

The mortgageeis the Lender

Redemption is the process of freeing property from amortgage by repayment of the debt.


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POPULAR ABUSE OF TERMINOLOGY

In lay terms, aspiring property owners get a mortgage (a

valuable commodity) from a bank or building society (which

is in the business of offering mortgages to borrowers),

And the bank or building society may then allow the owners

to keep the mortgage when they move house

from Clarke and Kohler [2005]

What is wrong with lay terminology?!

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THE CREATION OF A

LEGALMORTGAGE


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THE CREATION of a LEGALMORTGAGE

I. LONG LEASEwith a provision for cesser on redemption

s.85(1) LPA 1925:

Mortgage of fee simple by grant of long lease

s.86(1) LPA 25:

Mortgage of lease by grant of a sub-lease


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II. A CHARGE BY DEED by WAY OF LEGAL MORTGAGE

s.87(1) LPA

Sample clause in mortgage deed:

The Borrower charges the property by way of legal mortgage with

payment of all the money payable to the Lender under the mortgageconditions.

s.87 LPA 25 : The charge gives the Lender

the same protection, powers & remedies as if the mortgage

had been created under s.85(1) or 86(1) LPA 25

The only method in registered land s.23(1) (a) LRA 2002


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FORMALITIES NEEDED FOR ACTUAL LEGAL STATUS

A deed (s.52 LPA 1925)

Registration at Land Registry if Borrowers title to the land

is registered

Registration at Land Registry if it is a FIRST mortgage ofan unregistered title (triggers first registration)


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Example of a legal charge entered on a

registered title

C: Charges Register

[SPECIMEN]------------------------------------------------------------------------------------------

1. (02.12.2002) REGISTERED CHARGE dated 23rd

November 2002

2. . PROPRIETOR: CHELSEA BUILDING SOCIETY

of Thirlestaine Hall, Thirlestaine Road,

Cheltenham, Glos. GL53 7AL


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THE CREATION of an

EQUITABLEMORTGAGE

1. Where there is a contract for the grant of a mortgage:

an actual contract; or

a written mortgage made by no/defective deed;

which

complies with s.2 LP (MP)Act 1989 +

is specifically enforceable

2. Failure to register a legal mortgage in registered land

3. A mortgage of an equitable interest


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A MORTGAGORS RIGHTS &

PROTECTIONS


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include:-1. The Right to Redeem

at law

in equity

significance of legal redemption date?

2. The Equity of Redemption

3. No clogs on the Equity of Redemption


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TYPICAL PROVISIONS IN A MORTGAGE

Include:

For repayment of the loan

Covenants by the Mortgagor relating to the propertyitself, e.g.

maintenance

insurance

leasing

Rights & remedies of the Mortgagee


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A MORTGAGEES

RIGHT TO POSSESSION


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A MORTGAGEES RIGHT TO POSSESSION

An inherent right

The mortgagee may go into possession beforethe ink is dry on the mortgageunless there issomething in the contract, express or by implication,whereby he has contracted himself out of that right.

He has the right because he has a legal term ofyears in the property or its statutory equivalent.

Four Maids Ltd v Dudley Marshall Properties [1957]Ch 317

Inhibitions on its exerciseWhite v City of London Brewery Co [1889] 42 Ch.D

Reason for its exercise


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IS A COURT ORDER NEEDED TO REPOSSESS?

Residential Premises

s.1(2) Protection from Eviction Act 1977If any person unlawfully deprives the

residential occupier of any premises of his occupation of the premises or any part

thereof, or attempts to do so, he shall be guilty of an offence unless he proves that

he believed, and had reasonable cause to believe, that the residential occupier had

ceased to reside in the premises.

Ropaigealach v Barclays Bank plc1999 3 WLR 17

Residential and Commercial premises

s.6 Criminal Law Act 1977

any person who, without lawful authority, uses or threatens violence for the

purpose of securing entry into any premises for himself or for any other person is

guilty of an offence, provided that

(a) there is someone present on those premises at the time who is opposed to the

entry which the violence is intended to secure; and

(b) the person using or threatening the violence knows that that is the case.


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CAN A MORTGAGOR POSTPONEA MORTGAGEE OBTAINING

A POSSESSION ORDER?

1. s.36 ADMINISTRATION

OF JUSTICE ACT 1970

2. THE COURTS INHERENT

JURISDICTION to POSTPONE POSSESION


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1. POSTPONING POSSESSION- s.36 ADMINISTRATION

OF JUSTICE ACT 1970


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s.36 AJA 1970

s.36(1) AJA

Where the mortgagee under a mortgage of land which consists of

or includes a dwelling-house brings an action in which he claims

possession of the mortgaged property the court may

exercise any of the powers conferred on it by

subsection (2)below ifit appears to the court that in the

event of its exercising the power the mortgagor is likelyto be able within a reasonable period to pay any

sums due under the mortgage

s.36(2) AJA The court has power:

to adjourn possession proceedings

or stay or suspend execution of a possession order

or postpone the date of delivery of possession


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s.36 AJA 1970

CRITERIA: the mortgagor must

1. Be LIKELY

2. To PAY ANY SUMS DUEunder the mortgage

or to remedy any default

3. WITHIN A REASONABLE PERIOD


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MEANING OF CRITERIA VARIESACCORDING TO MORTGAGORS PURPOSE

IN SEEKING POSTPONEMENT

To pay arrears off To sell the property him/herself


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PURPOSE - TO PAY OFF ARREARS:THE MEANING OF

TO PAY ANY SUMS DUE

Halifax Building Society v. Clarke [1973] Ch. 307

s.8 ADMINISTRATION OF JUSTICE ACT 1973


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PURPOSE - TO PAY OFF ARREARS:THE MEANING OF

WITHIN AREASONABLE PERIOD

reasonable period can mean

the whole term of the mortgageC& G B.S. v Norgan [1996] 1WLR 343

factors for the court to consider under Norgan


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PURPOSE - TO PAY OFF ARREARS:

THE MEANING OF

LIKELY

A realistic prospect & evidence of this

First National Bank v Syed [1991] 2 All ER 250:

Town & Country B.S. v Julien [1991] 24 HLR 312

C&G B.S. v Grant [1994] Times 9thMay


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Case Law Extracts

FIRST NATIONAL BANK V SYED per LJ Dillon:I need say no more than that the prospects [of Mr.Syed

obtaining work] are entirely speculative, & there is no

basis for estimating reliably when & whether any, & if so

what, income will be received. I have to say, withevery regret for the defendants' misfortunes, that if the

test to be applied [is that in s.36 AJA 1970], I am wholly

unable to see any prospect of the defendants paying off

the arrears within any reasonable period, while also

paying current instalments


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What are the prospects of Mr. Julien actually earning sufficient

sums of money by his own efforts or through any other

commercial way to pay off this very substantial debt? What he

said in evidence was he was quite sure the recession wasending, that he had, and I am paraphrasing it slightly, a number

of professional irons in the fire which he may be able to take out

and very profitably. It all seems to me, however you look at it,

highly speculative and at the moment quite frankly is asking the

Building Society to act, or his insurers to act, as his bankers forthe next year while he re-establishes his professional practice

which has suffered so much because of the effect of the

recession. Well I do not consider that being within the words of

Section 36 , I do not consider that, however one turns it round to

be, to say, that means that Mr. Julien is likely to be able, within areasonable period, to remedy the default which has occurred


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II. THE COURTS

INHERENT JURISDICTION

TO POSTPONE

POSSESSION


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THE COURTS INHERENT POWER

TO POSTPONE POSSESSION

LIMITED FUNCTION

Birmingham B.S. v Caunt 1982 Ch 883

a short time to afford to the mortgagor a chance of

paying of the mortgage in full or otherwise satisfying

[the mortgagee] but this should not be done if there is

no reasonable prospect of this occurring

LIMITED USE = If s.36 AJA 70 unavailable


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finally

CAN A COURT POSTPONE POSSESSION IN A CASE

OFNEGATIVE EQUITY?

PURPOSE - TO PAY OFF ARREARS (s.36)?

PURPOSE - TO SELL (s.36/inherent jurisdiction)?Cheltenham and Gloucester PLC v Krausz 1997 1All ER 21