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mortgages
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Lecture notes of 17 pages for the course Law at LE
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lOMoARcPSD|805298Lecture notes, lecture semester 2 - Mortgages
Land Law (University of Leicester)
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Mortgages
Average house price (2015) = £299,000
Average salary = £26,500
Lindley LJ defined a mortgage in Santley v Wilde – a conveyance of land… as a
security for the payment of a debt or the discharge of some other obligation for
which it is given. This is the idea of a mortgage: and the security is redeemable on
the payment or discharge of such debt or obligation
right to redeem = the right to repay the loan on redemption; the proprietary
interest given to the mortgagee is no longer valid, it is extinguished.
Martin and Lisa are married. They are joint tenants in law and equity of a house
with a market value of £350,000. Martin approaches Cheapaschips Bank plc for the
purposes of obtaining a loan of £200,000 to be secured by a charge on the house.
He tells Cheapaschips that the purpose behind the loan is in order to purchase stock
for his business. In fact he uses the money to pay off some of his business debts.
Cheapaschips’ solicitors wrote to Lisa, enclosing a copy of the charge document
marked “for her attention” but without advising her to take independent legal
advice. Nevertheless, Lisa asks David, the solicitor in Martin’s company, to take a
quick look at the charge document. Via telephone, David tells Lisa that the charge
document really has more to do with the business than anything else and that she
has nothing to worry about personally. David then writes to Cheapaschips, on
notepaper headed with the name of Martin’s business, informing them that Lisa
understands the document. Martin and Lisa then execute the charge. The charge
provides that should repayments fall into arrears for more than three months the
entire debt should immediately become due.
One year later, the repayments are in arrears by four months. Cheapaschips seek to
take possession of the house with a view to selling it with vacant possession. Advise
Cheapaschips.
martin is lying about the purpose to which he would apply the money?
bring out big distinction between a loan and a mortgage. a mortgage is a
loan made against a security.
if martin and lisa cant pay it off the bank gets the house so the purpose for
which martin wants the money doesn’t matter to them cos they don’t care if
he cant pay the bank gets the house
joint tenant – relevant because their interests are not separate, wholly
entitled to the whole
the law will be trying to protect lisa
undue influence in mortgages – that’s what this exam q is about
difficulty in mortgages is that we have multiple players in the game here
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we could be arguing that the husband is unduly influencing lisa
the law of undue influence says we need a relationship of trust and
confidence for undue influence to occur. does the law presume that in a
relationship of husband and wife? for the purposes of mortgages law there is
no presumed trust or confidence between husband and wife. so lisa will only
be able to argue that the mortgage should be set aside entirely if she can
prove there was a relationship of trust and confidence between her and
martin
burden of proof is on lisa to try and prove this
complicating factor in mortgages that you don’t have in contracts is bank is
not unduly influencing lisa so unfair to say if lisa is unduly influenced we
could say the mortgage should be set aside but the bank then loses out
through no fault of their own. so next issue should be the bank is unlikely to
have directly influenced someone but we are saying banks should be
responsible lendors they cant just lend money and not care. so saying
potentially the bank should be under some kind of obligation to ensure lisa
knows what she is doing. that’s exactly what the law does. question in the
question is does the mortgagee bank have notice of the undue influence
acting over lisa by martin? if it does, then the transaction is void. if it
doesn’t, its not void.
bank could be put on notice about someones potential undue influence. bank
has to be sure that lisa is going to take independent legal advice. the bank
has to very specifically tell her and ensure that she does take legal advice.
has to be independent. lisas lawyer shouldn’t be the same as martins lawyer
cos the courts don’t trust the lawyers so legal advice cannot be the same for
the husband and the wife.
another issue is why should the bank have to take the fault of the undue
influence between the husband and wife and the answer is the bank should
be a responsible lendor and to avoid being fixed with notice of that undue
influence you have to take all the necessary steps to avoid the undue
influence
lawyer – he is also part of the equation cos hes the one that will give the
advice about whether or not she should sign the mortgage document. if you
were lisa you might want to know what happens if payment doesn’t occur
and hes advising her of all the rights and obligations under the contract
we’re protecting the bank the most out of everyone
also what has to happen is the solicitor has to report to the bank that they
don’t think lisa is being controlled etc or that she is and on that basis she is
or isn’t capable or willing to sign the deed
difference of whether or not the bank can or cannot avoid being fixed with
notice is huge cos if they can avoid being fixed with notice then its as you
were they can take the house and the only thing lisa can do is sue martin for
breach of trust or breach of contract and if they are not gonna avoid being
fixed with notice, not only can they not claim the house the mortgage
becomes void so all or nothing result either the mortgage is completely valid
and lisa gets nothing or she keeps the house and the mortgage is gone
loan – Mortgage is a special type of loan . fairly recent phenomenon that a
mortgage has been used to finance the purchase of real property
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