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Residential Mortgages - Detailed
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Lecture 10: Residential Mortgages: Live:Right to Possession:
With the classic mortgage the right of possession arose from the legal estate
LPA 1925, s.87[1] carries over these rights into the legal charge by way of mortgage
The mortgagee’s right to possession is immediate and independent of default i.e., “the
mortgagee may go into possession before the ink is dry on the mortgage” Harmann J.
Equity will not interfere with the right but may control its exercise – Caunt [1962]
Purpose of taking possession: enforcing security vs protecting his position? –
Quennell v Maltby [1979]
Possession & Eviction:
Laura Faxo – Conceptualising Home:
o Tries to work out how do we conceptuaism the borrowers interest in their
home? Borrowers interest are much more complex
o Not well-catered for, do not get taken in the same way because they are more
complicated interest.
o We must think of more than the House itself – place of identity
Intangible features and law struggles to take them into account there
are attempts, law does try and protect these intangible features.
Eviction of a single borrower has implications on a broader level,
ripple affects
Good reasons why law should intervene to protect the borrowers
interest.
Procedural Safeguards:
Pre-action Protocol on Possession Actions based upon Mortgage Arrears – soft
instrument not statutory but introduced and requires lenders to demonstrate they have
complied with this protocol before seeking possession. The lender must demonstrate
forbearance. Cannot seek possession at first sight of trouble, try to engage with
borrower, extend the terms reduce payments, different options? Lender must show
they have discussed these options. Restraining the lender from seeking possession
MCOB 13 – Soft law instrument but has a provision that a lender must demonstrate
forbearance, cannot ignore the borrowers difficulties and seek to takeaway possession
straight away.
They have their limitation these soft law instruments – Thakker Case [mortgage
contract was still void, was enforceable] these protections are helpful but by
themselves not very powerful.
Criminal Law Act 1977, s.6 – an offence to use violence to gain possession of a
house, gives protection to person in occupation
Eviction Act 1977, s.1[3] – an offence to harass the occupier to gain possession. To
all borrowers but also to tenants as well. Channel disputes about possession and who
is entitled through the courts, net effect of these measures encouraged through the
courts.
Administration of Justice Act 1970, s.36 [as amended] – Key piece of legislation
which provides protection for the borrowers again.
Administration of Justice Act 1970:
, S.36 = gives court the power to control the lenders right to take possession of a
dwelling house; court adjudicated for parents. Here, there is previous for court to
actively supervise what the lender has done to engage with the borrower. More strict
protection, that the lender needs to take note of.
Provision applies as it gives courts the discretion to control the exercise of the right to
take possession. Once lender has applied for possession then borrower can go to the
court, please exercise your discretion under s.36 to control the lenders attempt to take
possession.
Does not apply to extra-judicial actions. This provision does not apply where house is
left derelict or in vacant possession, lender can seek to take possession without the
AJA applying. This act applies where the lender needs their right to possession
measured under this act and assessed under this provision.
The court has broad powers, adjourned proceedings. Significant jurisdiction the court
has here.
What is a dwelling?
Next step: Borrower must show that the legislation applies to their loan arrangement, in the
statute it only applies where a dwelling house.
RBS v Miller:
o Nightclub with residential space for workers upstairs:
o Property makes the resident was a subject of a mortgage was a default, Lender
wanted to take possession, applied, and this point the borrower sought to
defend and said the AJA applied. Wanted the court to help.
o Not a dwelling house, majority of property used for commercial purposes.
o CH:
AJA, s.36 applies where part of the property constitutes as a dwelling,
this property was a mixed residential and there was a mortgage.
As part of mortgage property is a dwelling then whole lot has
protection.
The relevant time for determining whether land consists of a dwelling-
house is the time when the mortgagee claims possession. – does not
make a difference if the borrower has breached the term of the
mortgage, protection still applies
Breach of a term of the mortgage [e.g., occupation by a 3rd party
without consent] does not prevent application of s.36
Paying sums due in a “reasonable period”:
This provisions gives this court power to postpone, stay, the possession order if court
considers the borrower within a reasonable period pays sums due.
If court comes to conclusion borrower is able within reasonable period to pay any
sums due = TRIGGER POINT
Whether borrower is likely to make this payment. Two situations where s.36 will
apply it is necessary to distinguish between them.
[1] Borrower who wants to sell the property themselves
o Court will only exercise s.36 to postpone repossession from the lender if there
is evidence from borrower. It is not enough for them to say ‘well I am thinking
of selling the house’ not enough, court want evidence of an advanced sell and
sale will generate enough money to pay off debt.
o Court will be prepared to exercise s.36 to allow borrower to sell their house
themselves, there is advantages to that.
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