Past Paper

Name: Abdul Rafeh Sajid

Subject: Property law ( Mortgages Essay )
Question:
'' The laws traditional methods of protecting mortgages , especially …...........................
May obtain possession and sale’

To what Extent do you agree with these views?

Answer:
This question requires a detail analysis on the Mortgages. In this question we are going to
compare the rights possessed by the mortgagee with the rights of the mortgagor and see that if
is being successfully aims to balance them and to see that if law is leaning in protecting
mortgagors more or not especially when it comes to legislative and equitable rights , which
have greater relevance to home owner mortgages. In the case of Santley v Wilde the Mortgage
is defined as '' a conveyance of land as a security for the payment of a dept or discharge some
other obligation.'' First we shall discuss the rights of the mortgagors. There are plenty of rights
of the mortgagor some of them are is the right to redeem the property which is defined as the
mortgagor obligation to redeem the mortgage after paying off the loan but in redeeming in law
contractual rights would include which is used to determine like when they can redeem , the
mortgagor should go to the contractual clauses so generally if the mortgagor paid all dept then
mortgagee cannot prevent him from redeeming his property back. There is also another right
for the mortgagor that if any of the clause written in the mortgage agreement which clogs with
the mortgagor right of redemption it will be void and clause would be unconscionable. In the
case of Toomes v Consent there was a condition that on the defaults on repayment that land
will become the absolute property of the mortgagee. This equitable principle would prevent the
mortgagee to sell or having an option to buy as part of the mortgage, as if exercised, the
mortgagor right to redeem would disappear. Also if there is any provision that is written in the
agreement which the postpones the right to redeem it will also be unconscionable. in the case
of Fair clough v Swan Brewery where the lease in this case was for a period of 20 years and the
date of redemption was six weeks before the lease termination date. After barely three years
the Mortgagor attempted to redeem. The court held that it was a legitimate early redemption
since if the mortgagor had redeem the lease with six weeks to go. But in the case of
Knightsbridge v Byrne it was held that 40 year postponement redemption was legal because it
was a commercial transaction between business people and as the commercial identities they
should thow what they are doing. These are some of the rights which are for the mortgagors
that they should have the freedom to perform but we have to see what is the threshold of this
freedom. The quotation in the question also requisite us to discuss about the rights of the
mortgagees such as the right to possession in common law and in equity. There are several
remedies available to the mortgagee in the event that the mortgagor defaults because the
mortgage acts as security for the loan. The most straightforward remedy would be to sue for
the loan's repayment under the terms of the contract. It is unlikely that you will be able to
collect the debt from the mortgagor because it is clear that they do not have the resources to
make their mortgage payments. If the borrower fails to make mortgage payments or violates
any of the mortgage terms, the lender has the right to sell the property. In Palk 1993, Sir Donald
Nicholls V-C stated that a mortgagee owes some duties to the mortgagor and cannot simply sit
back and do nothing. But if he does take action, common law and equity both have limits'. In
the case of Four Maids Ltd v v Dudley Marshell it was held that Under common law, a
mortgagee may take possession before the ink on the mortgage is dry, unless there is
something in the contract, express or implied, that contracts him out of that right. However
taking possession of the mortgaged property comes with certain duties as per the case
Quennell v Maltby 1979, the mortgagee was required to seek possession in a bona fide
manner—to act in good faith. Lord Denning explained, ‘a mortgagee will be restrained from
getting possession except where it is sought bona fide’. However there are certain limitations to
the possession right as in section 36 of AJA 1970. This provision prevents the mortgagee from
exercising his right to possession. in Cheltenham v Norgan 2006, the reasonable period’ was
seen to be the duration of the mortgage. However if the mortgagors can prove that they will be
able to make up the mortgage payments with in a reasonable time they court will favor the
mortgagor and delay the possession. First, the property needs to be a dwelling house for
section 36 to be applicable. Second, the lender needs to pursue possession. The Court of
Appeal ruled in Ropaigealach that possession could not be obtained because the mortgagee
hadn't sought for it. Additionally, they were exempt from criminal liability under Section 6 of
the Criminal Law Act of 1977 if they had peacefully occupied the property when the occupiers
weren't there. Upon many remedies the power of sale is the one which the Mortgagee can use
if the mortgagor defaulted. Section 101(1)(i) of the Law of Property Act 1925 grants the
mortgagor the power to sell the land, even if it is not explicitly given in the deed. The power
arises when the mortgage money is due, which is usually the contractual date of redemption.
However, there are three further conditions imposed by S103 of the Law of Property Act 1925
(1) The mortgagee must serve a notice that payment is required on the mortgagor and this
default continues for three months; or (2) The interest payable is two months in arrears; or (3)
A covenant of the mortgage deed has been breached. These safeguards were put in place to
protect the interests of mortgagors by ensuring that mortgagees do not abuse their power of
sale and that the property is sold for the best price possible. However, whether or not these
safeguards make recourse to sale too easy and disadvantage mortgagors is a matter of
interpretation and legal analysis, and would depend on the specific circumstances of each case.
Target v. Clothier, a 1994 case, demonstrated that courts are more likely to postpone
possession if they think the mortgagor can sell the property for more money themselves.
According to Section 91(2) of the Law of Property Act of 1925, the mortgagor has the option of
asking for an order for sale rather than a foreclosure. In the case of Barrett v Halifax Building
Society (1996) courts willingness to allow the mortgagor to sell the property, as it is almost
inevitable that they will be able to get a better price for the property. However the courts also
tries to protect the rights of the mortgagors by imposing the duty on the mortgagees that they
should obtain a reasonable good price for the property and take the reasonable care of the
mortgagor property as per the case of s Downsview Nominees Ltd v First City Corporation Ltd
(No. 1) [1993]. The Silven case established the mortgagee's equitable obligation to acquire the
property's "fair" or "true" market value on the day of the sale. If the property had been sold
properly, the mortgagor might have been able to recover any of the balance, so the transaction
shouldn't be rushed through with a low sale price to just cover the debt. In the case of Palk v
Mortgage Services Funding plc [1993] The fact that the mortgagee is not in violation of any duty
it owes to the mortgagor is merely one of the circumstances that may be taken into account,
according to the Court of Appeal, which upheld the claimants' appeal and held that the
discretion granted to the court by Section 91(2) LPA is not subject to any preconditions.
Furthermore, ordering a sale was fair and just because doing otherwise would result in
unfairness and injustice. Finally, it was determined that ordering a sale under these conditions
did not violate the court's established procedure. So in my conclusion there is no statutory
provision that benefited the mortgagor more. Parliament made the legislations so that they
could balance the rights of both parties and so far as up to now good job had been done.