Rights Of The Mortgagor

Front 1

What is a Mortgage?

Back 1

A loan of cash which is secured by the mortgagee being given rights over the property offered as security by the mortgagor.

Front 2

Kreglinger v New Patagonia Meat

Back 2

Facts:
A seperate collateral agreement containing right of refusal to purchase sheepskins at market value was enforceable as it was deemed to be a seperate transaction.

Held:
Collateral advantage may be acceptable provided it is not:
- unconscionable.
- In the nature of a penalty
- Inconsistent with the right to redeem.

-In 'arm's length' commercial mortgages between equal parties under certain circumstances, collateral agreement can continue after redemption.

Front 3

Biggs v Hoddinott

Back 3

Held: Collateral advantage was fine as it was not unconscionable or contrary to competition law. They are valid whilst the mortgage continues.

Front 4

Noakes v Rice

Back 4

Facts: a brewery mortgagee imposed condition that landlord mortgagor must buy all his beers from mortgagee even after mortgage had been redeemed.

Held: Clog on mortgagor's equity of redemption. Mortgagor bound by clause even after mortgage had been redeemed.

Front 5

Toomes v Conset

Back 5

Facts:A term imposed that stated, should an event occur, the land becomes the mortgagee's absolutely.

Held: The mortgagee cannot include a term that prevents the mortgagor from redeeming mortgage.

Front 6

Samuel v Jarrah Timber

Back 6

Facts: Rule on option to purchase applied to arms length commercial transaction.

Held: Not possible to give a valid option to purchase the estate on same day as mortgage transaction.

Front 7

Reeve v Lisle

Back 7

Held: Option to purchase upheld as it was independant of the original bargain.

Front 8

Knightsbridge Estates v Byrne

Back 8

Facts: Company mortgaged freehold property to an insurance company on terms that mortgage would be repaid over 40 years.

Held: As agreement was commercial and made by businessmen, the bargain was not oppressive or irredeemable. Domestic mortgage would be different.

Front 9

Fairclough v Swan Brewery

Back 9

Facts: Leashold term of 20 years mortgaged. Redemption postponed until 6 weeks before the end of the lease.

Held: Court upheld mortgagor's right to redeem. Estate would have been valueless. In case of leases, postponement likely to be more objectionable, even between businessmen.

Front 10

Cityland v Dabrah

Back 10

Facts: Agreement imposed an extremely high premium that took interest rate from 19% to 38% once imposed. This can be seen as a 'penalty clause' that renders the mortgage irredeemable.

Held: Court rewrote the term to 7%, holding that the agreement was 'unfair' and 'unconscionable'

Front 11

Multiservice Bookbinding v Marden

Back 11

Facts: Interest rate was linked with the exchange rate between the swiss franc and the pound. Made 36k loan 132k on redemption.

Held: Courts did not interfere as the parties were both businessmen who had sought advice. Both stood to profit from the deal. No pressure applied, no evidence of sharp practice. Court will not renegotiate a bad bargain.

Front 12

Falco Finance v Gough

Back 12

Facts: Dual interest credit rate extended throughout the mortgage term.

Held: Clause was unconscionable and found to be 'an extortionate credit bargain' under CCA 1974.

Front 13

Davies v DirectLoans

Back 13

Facts: Imposed a 21% interest rate assessed in relation to risk

Held: Risk taken may justify the high interest rate, especially if the party is new to the business/has a poor credit history.

Front 14

Brighton & Hove CC v Audus

Back 14

Held: Up to the courts to decide if the transaction's overall character is different from a mortgage.

Front 15

Kingsnorth Trust v Bell

Back 15

Facts: Husband falsely assured wife of short term loan with little risk.

Held: Undue Influence. Second mortgage set aside as lender hadn't advised that the borrower take 3rd party advice.

Front 16

Barclays Bank v O'Brian

Back 16

Facts: Wife signed in reliance on husbands false representation that loan was limited to 60k.

Held: Undue Influence. Wife entitled to have 154k set aside as bank was put on notice as it was for joint benefit.

Front 17

CIBC Mortgages v Pitt

Back 17

Facts: Husband took loan for a holiday cottage and used money to repay his debts.

Held: Bank not put on notice where the money is jointly advanced for an apparently joint benefit. In this case it looked like a normal advance for couple's benefit.

Front 18

RBS v Etridge (No.2)

Back 18

Held: Lender put on enquiry where: wife guarantees husband's debts, someone in non-commercial relationship guarantees debts of another. Bank must take reasonable steps once put on notice to explain mortgage and advise her to take independant legal advise without spouse.