Chapter 23 Self-test questions

. John and Jane Smith bought 66 Downlords Avenue in 2009. They raised most of the finance for the purchase by mortgaging no. 66 to the Southern Bank. The mortgage is a standard instalment mortgage repayable over 25 years. John and Jane have both recently had a spell of unemployment. Both have now got jobs, but less well paid than their previous ones. The house is currently worth £180,000; the mortgage debt is now (2022) £150,000. John and Jane are about a year in arrears with the mortgage instalments, and Southern Bank is now taking proceedings for possession of no. 66.
Advise John and Jane.

Give in to the proceedings and find somewhere to rent.

Just argue in court that, in the circumstances, it would be unjust to make a possession order.

Ask for possession to be delayed under the Administration of Justice Acts, and provide the court with a new schedule of repayments which will see the mortgage cleared in 2034.

Ask for possession to be delayed under the Administration of Justice Acts, offering a catch up on instalments within two years.

. Same facts as in previous question, except that John and Jane are still unemployed and they realise that sooner or later, 66 Downlords Avenue will have to be sold.
Advise John and Jane.

Ask for possession to be delayed one year under the Administration of Justice Acts, while they endeavour to find a purchaser.

Ask for possession to be delayed five years under the Administration of Justice Acts, while they endeavour to find a purchaser.

Just tell the court that in the circumstances, it would be unjust to make a possession order. The bank should wait to see if John and Jane can get jobs.

Give in, and let the mortgagee have the hassle of selling the property.

. Alergion and Penelope Bloggs-Smythe mortgaged 'Greenhouses' to the XYZ Loan Corporation Limited. The loan has a fixed interest rate. Greenhouses is currently worth £500,000. XYZ have just taken possession, but it is not yet clear what they intend to do with the property. In what circumstances should the Bloggs-Smythes definitely apply to the court under section 91 of Law of Property Act 1925 for a court-ordered sale?

Where there is 'negative-equity' in the property.

Where there is positive equity, and it becomes clear that XYZ aim to sell within 12 months.

Where there is positive equity, XYZ decide to delay sale and let the house to a tenant at a rent which does not cover the interest payable.

Where there is positive equity. XYZ decide to delay sale and let the house at a rent which more than covers the interest payable.

. John mortgaged his house to Keith. John has defaulted on his repayments, and Keith has just obtained a court possession order. The market in the area is currently depressed, so Keith is not keen to sell immediately.
What should Keith do?

Leave the property empty.

Live in the property himself.

Grant a gratuitous licence to an employee to look after the property on Keith's behalf.

Lease the house out to a tenant at a full market rent.

. Assuming that the statutory power of sale arises, in which of the following circumstances is the power of sale NOT exercisable?

The mortgagee gave notice requiring repayment of the capital debt two months ago, but the debt has not been repaid.

When the interest on the debt is three months in arrears.

When the mortgagor breaks a condition of the mortgage requiring him to keep the mortgaged property insured.

When the mortgagor breaks a condition of the mortgage requiring him to live in the mortgaged property.

. Lennox mortgages his house to John. The mortgage is by deed and the legal redemption date has elapsed. John exercises his power of sale when there is just one month arrears of interest. John sells to Malcolm, who is undoubtedly a purchaser in good faith.
Advise Lennox.

The sale is void.

The sale is voidable, so Lennox should sue both John and Malcolm for an order setting the sale aside.

The sale is valid and, despite the irregularity, Lennox has no claim against either John or Malcolm.

The sale is valid; but Lennox can sue John for damages.

. In which of the following circumstances does the mortgagor have a claim for damages against the mortgagee?

The mortgagee sells at a time when prices in the relevant area are depressed by a recession.

The mortgagee sells at a very-well advertised auction, which is nevertheless poorly attended.

The mortgagee sells by private negotiation. The advertised particulars on which negotiations were based did not mention some of the special merits of the property.

The mortgagee sells by private negotiation, when the mortgagor would have preferred a sale by auction.

. Which of the following sales by a mortgagee would (in principle) be open to challenge by the mortgagor?

Sale by the mortgagee to a company in which the mortgagee has a large shareholding.

Sale by auction, where the successful bidder is a national of a country outside the European Union.

Sale to a property speculator, at a time when prices in the locality are depressed by a motorway proposal.

Sale by private negotiation to a firm which specialises in buying private 'repossessed properties'.

. XYZ Properties Ltd mortgages an office block to Larissa. Larissa validly appoints a receiver under s.109 of LPA 1925. Felicity, the receiver, mismanages the property, and a loss is suffered totalling £30,000.
Who has to bear this loss?

Only Felicity, as her mismanagement caused it.

Larissa, as she appointed the incompetent receiver.

XYZ Properties Ltd; no liability on Felicity.

XYZ Properties Ltd, who can in turn claim the money off Felicity

. What is the effect of a court making an absolute foreclosure with respect to Blackacre, a parcel of mortgaged land which is (currently) unregistered title?

The mortgagee becomes (irrevocably) owner of Blackacre.

The mortgagee becomes owner of Blackacre, but subject to the possibility of the foreclosure being reopened.

The mortgagor holds the land on bare trust for the mortgagee, who therefore – for practical purposes – is owner of the land.

The order does not affect ownership of Blackacre; it merely authorises the mortgagee to sell the land.

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