Mortgagee Vs. Mortgagor

Remedies for the Mortgagee, esp. power of sale

Mortgagee = Lender             Mortgagor = Borrower

Power of Sale:

Has power arisen? – LPA s.101:

1)      Mortgage must be affected by deed

2)      Money has become due                                                                        All 3 have to be met

3)      Mortgage doe not give any express contrary intention

Is this power exercisable? – LPA s.103:

1)      Mortgage in default for 3 months after notice

2)      Interest payment, of at least 2 months, in arrears                          Only 1 has to be met

3)      Any other breach of mortgage terms

NB:// LPA s.104: Sale is subject to prior mortgages, but not subsequent ones.

Upon using the power of sale, a mortgagee owes 2 duties (Cuckmere Brick v Mutual Finance)

1)      Subjective – To act in good faith

2)      Objective – To take reasonable care to obtain the true market value.

These duties arise by virtue of ‘an equity arising out of the relationship of mortgager and mortgagee (Parker-Tweedale).

Mortgagee will only be liable if ‘clearly in breach’ (Meftah v Lloyds TSB). 2 main points:

·         Timing of Sale – Mortgagee has unfettered discretion to sell when he likes (Silven),                      .                           this overrules L. Denning in Standard Chartered v Walker.

-          May in breach though if sold too quick without acceptable advertising (Predeth v Castle Phillips).

-          No duty to increase property value, e.g. apply for planning permission (Silven)

-          But, if such planning permission is already in place, must be advertised (Cuckmere)

·         Mode of Sale – Must be conducted properly, in all respects.

-          Auction does not necessarily confirm no breach (Tse Kwon Lan v Wong Chit Sen)

-          Appointment of estate agent does not escape liability, cannot delegate task of obtaining true market value (Cuckmere)

-          Again, must be properly advertised (ANZ v Bangadilly)

·         Bear in mind the ‘broad’ approach in Meftah, difficult to breach duties.

Remedy for a breach is ‘an order to account’ in equity for price that should have been received (Silven). This being the difference between the sale price and the true market value.

Sale to Associated Party – does not void sale. But, the onus of proof is now on the mortgagee to show that objective duty (market price) is complied with (Tse Kwon Lan)

Remedy – none, but sale can be voided if found liable.

Proceeds of Sale? LPA s.105:

a)      Any prior mortgagees (consenting)

b)      Expense of sale

c)       Money due to selling mortgagee

d)      Surplus – subsequent mortgagees

 – owner of land

Also, note:                                             Personal Remedy to Sue

Mortgagee can sue Mortgager if there is a failure to repay a debt.

-          Such an action will be contained as an express covenant in a standard mortgage

-          Creates a contractual relationship to pay monies owed

-          Note West Brom. Building Society v Wilkinson – claim must be brought within 12 years from date that first repayment demand was made.