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Land Law (BTT), Study notes of Land Law

University of Wales, SwanseaLand Law

v New Patagonia Meat and Cold Storage Co Ltd), i.e. mortgage is security for a loan, ... Cityland & Property Holdings v Dabrah: reduce 38% interest rate.

Typology: Study notes

2021/2022

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Topic 1: Mortgage
1. Definition of mortgage
Form of security where the borrower (mortgagor) grants the lender (mortgagee)
proprietary rights over the property in exchange for the loan being made.
2. Definition of parties
a. Mortgagor
b. Mortgagee
3. Formalities for valid legal mortgage creation
Legal
i. Signed in writing s. 53 LPA 1925
ii. Deed (s52 LPA 1925 and s1 LP (MP)A 1989)
iii. Registered (s27(2) LRA 2002)
Equitable
i. Entering into an agreement which lacks the formalities necessary to
create or pass a legal mortgage but still fulfils those requirements
necessary to create or pass an equitable interest.
ii. s 2LP (MP) A 1989 + Walsh v Londsdale:
- in writing
- signed by both parties
- record all expressly agreed terms
4. Analysis of mortgage clauses: are they enforceable
Mortgage is a security for a loan, not an opportunity to take property from
someone who is willing and able to repay the money owed (Kreglinger v New
Patagonia Meat and Cold Storage Co Ltd).
i. Terms which clog or fetter the equity of redemption
- Not allow mortgage terms that prevents redemption altogether
(Toomes v Conset)
- Fairclough v Swan Brewer Co Ltd (17 ½ years) cf Knightsbridge
Estate Trust v Byrne (40 years but arm’s length commercial
bargain)
ii. Option for the lender to purchase the property (may be void)
If a mortgage includes an option for the lender to purchase the property,
that option may be void for excluding or preventing the borrower from
exercising the equitable right to redeem.
- Formalities
Equitable interest so only signed written contract s2 LP(MP)A 1989
+ protected by notice s 32 LRA 2002
- Samuel v Jarrah: option granted on the same day as the mortgage
→ void
- Reeve v Lisle: option may be valid if given in a subsequent and
independent transaction
- Warnborough v Garmite: but if part of a larger transaction can be
valid so examine the “substance“ of the transaction to ascertain its
true nature, i.e. substantially a mortgage or not.
iii. Collateral advantages which may be void
- General principle: Once a mortgage, always a mortgage (Kreglinger
v New Patagonia Meat and Cold Storage Co Ltd), i.e. mortgage is
security for a loan, not an opportunity to take property from someone
who is willing and able to replay money owed.
pf3

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Topic 1: Mortgage

1. Definition of mortgage Form of security where the borrower (mortgagor) grants the lender (mortgagee) proprietary rights over the property in exchange for the loan being made. 2. Definition of parties a. Mortgagor **b. Mortgagee

  1. Formalities for valid legal mortgage creation** Legal i. Signed in writing s. 53 LPA 19 25 ii. Deed (s52 LPA 1925 and s1 LP (MP)A 1989) iii. Registered (s27(2) LRA 2002) Equitable i. Entering into an agreement which lacks the formalities necessary to create or pass a legal mortgage but still fulfils those requirements necessary to create or pass an equitable interest. ii. s 2LP (MP) A 1989 + Walsh v Londsdale : - in writing - signed by both parties - record all expressly agreed terms 4. Analysis of mortgage clauses: are they enforceable Mortgage is a security for a loan, not an opportunity to take property from someone who is willing and able to repay the money owed (Kreglinger v New Patagonia Meat and Cold Storage Co Ltd). i. Terms which clog or fetter the equity of redemption - Not allow mortgage terms that prevents redemption altogether (Toomes v Conset) - Fairclough v Swan Brewer Co Ltd (17 ½ years) cf Knightsbridge Estate Trust v Byrne (40 years but arm’s length commercial bargain) ii. Option for the lender to purchase the property (may be void) If a mortgage includes an option for the lender to purchase the property, that option may be void for excluding or preventing the borrower from exercising the equitable right to redeem. - Formalities Equitable interest so only signed written contract s2 LP(MP)A 1989 + protected by notice s 32 LRA 2002 - Samuel v Jarrah: option granted on the same day as the mortgage → void - Reeve v Lisle: option may be valid if given in a subsequent and independent transaction - Warnborough v Garmite : but if part of a larger transaction can be valid so examine the “substance“ of the transaction to ascertain its true nature, i.e. substantially a mortgage or not. iii. Collateral advantages which may be void - General principle: Once a mortgage, always a mortgage (Kreglinger v New Patagonia Meat and Cold Storage Co Ltd) , i.e. mortgage is security for a loan, not an opportunity to take property from someone who is willing and able to replay money owed.
  • A lender is entitled to nothing more than repayment of the loaned sums plus interest.
  • Collateral advantage may be struck down as unconscionable.
  • See Noakes & Co Ltd v Rice [1902] AC 24 and Biggs v Hoddinott [1898] 2 Ch 307, (in your Casebook) collateral advantage cannot last beyond the mortgage’s duration. Any tie ends, at the latest, once loan is repaid.
  • However, as with options, if the collateral advantage is regarded as wholly independent of the mortgage transaction, the court may allow it to continue beyond the ordinary mortgage term. See Kreglinger v New Patagonia Meat & Cold Storage Co Ltd [1914] iv. Unconscionable terms re interest rate
  • Cityland & Property Holdings v Dabrah : reduce 38% interest rate to 7%
  • Multiservice Bookbinding v Marden : difference between “unfair and unconscionable” and unreasonable. Equity will not save someone from a bad/hard bargain. [Consumer Credit Cases applicable by analogy]
  • Paragon Finance v Nash: lender’s discretion to vary interest rates was subject to an implied term not to exercise that discretion for an improper purpose, arbitrarily or capriciously. Maintaining interest rates 2-4% above market not improper.
  • Falco Finance g Gough : dual interest rate, impossible for any borrower to make all payments exactly on time and the differential between the two rates had no relation to the loss that the finance company would occur as a result of a missed payment.
  • Davies v Directloans: Take into account poor credit history of borrower and subsequent risk taken by the lender.
  • **s62 Consumer Rights Act 1925
  1. Undue influence i.** Lenders must take care that none of the signatures to the mortgage has been tainted by undue influence. ii. When is the lender put on enquiry of potential undue influence:
  • CICB Mortages v Pitt : lender had no actual or constructive knowledge of the husband’s undue influence. Mortgage application said the loan was for holiday cottage.
  • Barclays Bank v O’Brien : not for the wife’s direct benefit. To protect itself, the lender should have taken steps to bring home to the wife the risk that she was running and should have advised her to take independent advice. iii. Precautionary steps to be taken before mortgage is completed :
  • Lender must show that it took reasonable steps to bring home to the claimant the risks involved in giving the guarantee.
  • Insist on taking independent advice from a solicitor, which should be in the context of a face-to-face meeting in the husband’s absence.
  • Solicitor should explain practical implications of the transaction in a meaningful way **(RBS v Etridge No. 2).
  1. Lender’s rights on default by the borrower i. Right to Possess**