Mortgage Seminar PDF

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Mortgage Seminar...

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Mortgage Seminar ‘Mortgages’ in George M. & Layard., Thompson’s Modern Land Law or equivalent. Please also use the relevant statute and case law from the lecture. Seminar Questions

1. Woodbury Cottage is jointly owned by Mr and Mrs Grimes. In April 2017, Mr Grimes, who had previously worked as an accountant in the city became enthusiastic about taxidermy. He decided that quitting his stressful job in the city and setting up a taxidermy service for those who had sadly lost their pets would make the perfect business venture, but he needed capital to back the scheme. After all, he would require a workshop and all the materials necessary for his new business Pet Stuff(ed). He spoke to Mrs Grimes who was a little less enthusiastic about the idea. After months of pressure from Mr Grimes, Mrs Grimes agreed that they would make an appointment with an advisor at the Bank of Shady Dealings to discuss remortgaging Woodbury Cottage. At their appointment, their advisor Mr Governor quickly drew up a contract to be signed by Mr and Mrs Grimes offering a loan of £200,000 for 20 years secured on Woodbury cottage. After his solicitor had given the papers a quick once over Mr Grimes readily signed the contract, and having grown tired of her husband’s relentless mithering Mrs Grimes reluctantly signed the contract. Mrs Grimes tells you her husband’s business venture has failed terribly (you of course feign disbelief). As a result, they have been unable to keep up with the payments owed for some time. Indeed, they now owe the bank more than the property is worth. The Bank of Shady Dealings is seeking possession of the Woodbury Cottage. Advise Mrs Grimes.

Answer: Context: - Under the case law of Santley v Wilde [1899] a mortgage is defined as ‘a conveyance of land as security for the payment of a debt’. In this case, Mr and Mrs Grimes had remortgaged their property in order to raise funds towards Mr Grimes new business adventure. Mortgage: - From the facts it is mentioned that the property is jointly owned by Mr and Mrs Grimes with the assumption that the property is registered. In order to register a valid mortgage, the mortgage must be created by the freeholder/leaseholder which both Mr and Mrs Grimes are. The property being a registered property, a mortgage must be registered as a charge by way of a legal mortgage (s.27(2)(f) LRA 2002) using

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a deed (s.52 LPA 1925) that complies with s.1 of the Law of Property (miscellaneous Provision) 1989. However, no further detail is given to the contracts or registers signed/created, which leads to the assumption that both parties (Including the bank) correctly signed the deed and registered the land charge. Under S.1(2)c of the Law of Property Act 1925 the re-mortgage of the property has now placed a legal land charge over the Grimes Woodbury Cottage, giving the bank an legal interest which is now entered in the proprietorship register. Such registration of the mortgage gives the mortgagee the same protection, powers and remedies as a long-term leasehold as stated in s.87 of the LPA 1925. Granting the bank a significant amount of power over the Grimes property. Presently it is stated that Mr Grimes initial business adventure has failed. Resulting in debt and eventually defaulting in his mortgage repayment and the bank now seeks to repossess the property.

Repossession: o Repossession is one of the remedies provided to Mortgagee in an event where the mortgagor is unable to keep up with the mortgage payments. o Repossession, involves repossessing the property in question, selling it and using the proceeds to recover the debt.  Under Four-Maids Ltd v Dudley Marshall Properties [1957] – “the mortgagee may go into possession before the ink is dry on the mortgage unless there is something in the contract, express or by implication, whereby he has contracted himself out of that right.” o However, repossession is limited by s.101 and s.103 of the LPA 1925. Which prohibits the mortgagees power of sale unless:  The mortgagor has been served with notice to pay and has the subsequently defaulted on payment for three months; or  An interest payment under the mortgage is in two month’s arrears; or  There has been breach of a covenant contained in the mortgage deed, such as a covenant against letting out the property. o It is clear from the facts that Mr Grimes has failed to keep up with mortgage payments “for some time” and thus as a result has given the bank the right to exercise the power of sale in order to recover the debt. o If the property is currently not occupied by Mr and Mrs Grimes, under Ropaigealach v Barclays Bank [2000], the bank has the right to possess their property peacefully without any court order. However, if the property is in fact occupied by the couple, in order to avoid violence of repossessing the property which is an offence under s.6(1) of the Criminal Law Act 1977 a court order will be issued.

Mr and Mrs Grimes Right -

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If a court order is applied for, the court has the power to adjourn the case, stay or suspend their judgement, or postpone possession as highlighted in s.36 Administration of Justice Act 1970 (as amended by AJA 1973) As mentioned above, the right is only available if the bank has taken legal action to repossess the property due to the property being occupied. If such route is taken, Mr and Mrs Grimes will face the prospect of legal repossession but also a chance of a defence or extra time. Under Cheltenham & Gloucester Building Society v Norgan [1996] a reasonable period could be taken if some factors are considered such as: o The financial status of the mortgagor. o How temporary the difficulties are. o The reason why the mortgagor hasn’t paid Under Target Homes Loands Ltd v Clothier & Clothier (1992) the court provided an extension to the mortgagor in order to give them time to sale their property and pay off their debt. Courts however, will not issue any extension to mortgagors ability to repay if it is a mere speculation as highlighted in Bristol and West plc v Dace [1998] . From the facts provided, it seems unlikely either Mr or Mrs Grimes have any way of repaying the debt even if they were given extra time and so the courts will allow the bank to repossess the property and recover the debt themselves, if not other defences under equity are raised.

Undue Influence In this situation a defence of undue influence may be raised if certain factors a present i.e. a reluctant wife, an elderly parent etc. -

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From the facts, it is clear that Mrs Grimes was almost forced into entering the mortgage after being uncertain with her husband’s business proposition. Being in a marriage and having a relationship of mutual trust and confidence Mrs Grimes eventually but reluctantly gave in. Which meets the first criteria of presumed undue influence under the RBS v Etridge (No. 2) [2002]. The second criteria to proof that Mrs Grimes did indeed enter the mortgage under undue influence must highlight that the transaction is one that is disadvantageous to the complainant. Again, looking at the facts, Mrs Grimes was never on board with Mr Grimes business idea and refused his proposition a number of times before giving in. Once the two categories of presume undue influence is satisfied, Mr Grimes then needs to explain the transaction.

Possible position of the lender? - Having satisfied the two categories of presumed undue influence, the bank will now be in a position to highlight that they took every possible precaution to make sure both parties understood what they were getting into. The transaction being of a

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reluctant wife supporting her husband’s business adventures, the bank should have taken extra precaution. Such precaution includes giving the potential complainant (the wife), one to one independent legal advice and have confirmation to be written that advice has been given, and such advise was sufficient and correct: Bank of Baroda v Rayerel [1995].

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However, it is stated that a solicitor for the entirety of the transaction was only present to simply give a quick ‘once-over’ to the contract that was quickly drawn up by the banks advisors, by which Mrs Grimes signed to stop Mr Grimes from pestering her. Explicitly highlighting that no precaution was given to ensure that Mrs Grimes was aware of the mortgage or agreement she was getting into.

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As such the mortgage is set aside for the lender.

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2. To what extent does the law seek to protect mortgagors over mortgagees?...