mortgages 1.ppt
TRANSCRIPT
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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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THE CREATION of a LEGALMORTGAGE
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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THE CREATION of a LEGALMORTGAGE
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