Modern Land Law, 9th Edition

Students: Chapter 10

Welcome to the Student Resources for Chapter 10 of Modern Land Law. Here you will be able to practice your exam technique with a set of essay questions; check your understanding of what land law is with our multiple-choice quiz and short-answer questions; test yourself on your knowledge of the key statutes and case law; and listen to a short lecture podcast on the latest developments within land law.

Click on the tabs below to view the resources:

Essay questions

Question 1

‘Once a mortgage, always a mortgage’. Do the rules on clogs on the equity of redemption unduly frustrate commercial interests?

Question 2

In 2006, Walter and Yasmin became joint registered proprietors of No. 9 Labyrinth Lane. In order to buy their house they took out a mortgage with ABC Bank. The bank provided £300,000 which was due to be paid back over 20 years at an interest rate to be specified by the bank. The bank acquired a registered legal charge over the property.

Two years later it became apparent that Walter and Yasmin were not able to keep up the payments on this mortgage and although they had not yet fallen into arrears on the interest payments, they worry that they may do in the near future. They have therefore contacted the bank to inform them of their difficulties. The bank is anxious to ensure that it does not lose the value of its security as the house is now worth only £250,000. The market is continuing to fall.

The bank has contacted you and would like to know what it can do in order to maximise the value out of the property. Specifically,

  • The bank’s preferred option is to go into possession of the property in order to sell the property. They have noticed that Walter and Yasmin are on secondment from their jobs for three months and so are not living in their property. They do not wish to go to court. Is the bank able to obtain possession in these circumstances?
  • Failing going into possession, the bank wishes to sell the property without possession. Is this a viable option?
  • The bank is worried that Walter and Yasmin may try to slow things down by claiming that they should be able to sell the property themselves. Is this something that Walter and Yasmin may be able to do?
  • Finally, the bank is anxious that the Human Rights Act 1998 may impact on their ability to obtain possession and or sell the property. They are losing money on this investment and wish to get what money back that they can.

Advise the bank.

Question 3

‘The range and scope of remedies available to a mortgagee is too broad. It is time that the balance was redrawn to give the mortgagor more control’. Discuss.

True/False Quiz

Answer the questions below based on the facts of this short scenario. A, the registered freehold proprietor of No. 1 Main Street granted a registered charge to ABC Bank Plc in 2006. A is now struggling to manage his finances and is three months in arrears having been served a notice by the bank. The bank wishes to sell the property after having gone into possession. A is worried that this will mean a lower price is obtained for the house leaving him unable to afford to buy again.

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    Statute Quiz

    Here you should outline the main effect, role, etc. of the provisions below. This is designed as a guide to the most important provisions, and as a means to improve your recall of the statutory provisions.

    Law of Property Act 1925, section 101

    Law of Property Act 1925, section 101 implies a power of sale into every mortgage made by deed. Book location: 10.10.2

    Administration of Justice Act 1970, section 36

    Administration of Justice Act 1970, section 36 states that an application by a mortgagee for possession of a dwelling house may be suspended, adjourned or postponed by the court, in its discretion, if it appears that the mortgagor would be likely to be able to pay within a reasonable period any sums due under the mortgage. Book location: 10.10.3.2

    Law of Property Act 1925, section 91

    Law of Property Act 1925, section 91 grants the court a wide discretion to order sale of mortgaged property. Book location: 10.10.2.3

    Law of Property Act 1925, section 103

    Law of Property Act 1925, section 103 specifies when the statutory power of sale has become exercisable. Book location: 10.10.2

    Law of Property Act 1925, section 104

    Law of Property Act 1925, section 104 states that if after the power of sale has arisen, but before it has become exercisable, the mortgagee nonetheless proceeds to exercise its power of sale, the purchaser takes the land free of the mortgage. Book location: 10.10.2.2

    Case Law Quiz

    Here you should attempt in one or two sentences to outline the main points to be taken from these cases and also three or four key words with their subject matter. This should assist in revision.

    Palk v. Mortgage Services Funding Plc [1933] Ch 330

    Possession, section 91. A court may suspend a mortgagee's possession application or order if it concurrently orders sale of the property at the request of the mortgagor under section 91 of the LPA 1925. Book location: 10.10.3.3

    Cheltenham & Gloucester v. Norgan [1996] 1 WLR 343

    Possession, section 36 AJA 1970. The starting point for the 'reasonable period' for repayment for the purposes of section 36 is the whole of the remaining mortgage term. Book location: 10.10.3.2

    Ropaigealach v. Barclays Bank Plc [2000] QB 263

    Possession, section 36 AJA 1970. If a lender does take possession of a property without a court order, the court then has no power to suspend the possession under section 36 of the AJA 1970. Book location: 101.10.3.2

    Jones v. Morgan (2001) 82 P & CR DG20

    Clog on the equity of redemption. Any provision whereby the mortgagor is said to forfeit his property on the expiry of the legal right to redeem is void, and any undue postponement or limitation on the mortgagor's right to redeem thereafter will not be enforceable. Book location: 10.9.3.1

    Bishop v. Blake [2006] EWHC 831 (Ch)

    Power of sale. A mortgagee, when exercising his power of sale, must chose a method of achieving a sale that is likely to achieve the best price reasonably obtainable. Book location: 10.10.2.2

    Podcasts

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    Podcast Script

    This podcast discusses the statutory powers of a mortgagee.

    In the previous podcast in this series we discussed the different types of licence: bare licence, contractual licence, and the licence coupled with an interest. In this podcast we are looking at mortgages and in particular we will be focusing on Sections 101-104 Law of Property Act 1925 which outline the statutory powers of the mortgagee.

    Mortgages, the normal method used to finance home-purchases, are a very important social aspect of land law. The balance of the rules and powers of the mortgagee determines the cost of mortgages on one hand but also the risk undertaken by the mortgagor. When considering these powers you should bear this balance in mind.

    In registered land, legal mortgages can only be created by means of a registered legal charge by deed. When a mortgage is made this way, a raft of legal powers are conferred on the mortgagee, normally the bank. The mortgagee has other powers too, specifically foreclosure and the power to go into possession, but Section 101 confers on the mortgagee the power (1) to sell the property; and (2) to appoint a receiver.

    We are going to look at when these powers arise, when they become exercisable, and what the effect of these powers will be.

    Section 101

    Section 101 tells you when the power of sale arises. The power of sale arises when the mortgage money becomes due, i.e. after the legal date for redemption.

    The effect of this is that as soon as payment is due, the mortgagee can sell and a purchaser will be protected even if the power was not exercisable, something we will be discussing later. This protection ensures that the purchasers will not have their title questioned. It can be found in Section 104 Law of Property Act 1925. The only time that this protection will not apply is if the purchaser was aware of the impropriety of the exercise of the power of sale.

    This means that Sections 101 & 104 together are a very important power for the mortgagee as they give him the opportunity to recover his investment, or at the very least, to minimise his losses in cases of negative equity, where the property is worth less than the money lent on the mortgage. The power to appoint a receiver to manage the property is also a valuable one.

    Section 103

    Section 103 explains when the power of sale becomes exercisable. Although as soon as the legal date for redemption has passed the power of sale arises, it does not become exercisable unless one of the conditions in Section 103 has been met. If a power of sale is used before it becomes exercisable, as Section 104 makes clear, the mortgagor who suffers loss as a result will find his remedy in damages.

    What are these crucial conditions in Section 103?

    1. A notice requiring payment of the mortgage money has been served on the mortgagor and the mortgagor has defaulted for 3 months after such a notice.
    2. Interest under the mortgage is 2 months or more in arrears.
    3. There has been a breach of the mortgage deed other than the requirement to pay money. This could include for example a requirement to keep the property insured, or in good repair.

    If one of these conditions is fulfilled then the power of sale becomes exercisable.

    From here, it is then up to the mortgagee to ensure that when they do sell the property that they obtain a reasonable price given the current market conditions by taking the appropriate steps when selling the property. For example, the property must be advertised properly or sold at public auction.

    In the next podcast we will be looking at Schedule 6 of the Land Registration Act 2002 and adverse possession. Today's key concepts- Sections 101-104 Law of Property Act 1925.