Lecture 16 – Mortgages
Possession and sale two distinct processes. Mortgagees will pursue possession before sale.
One instance where a mortgagee didn’t seek either:
See Horsham Properties: did the LPA 1925 section 101 give a power to permit mortgagees to
do this, or did it require them to apply for a court order? The mortgagee appointed receivers
who sold the property at auction whilst the mortgagors were still in possession. Changed
hands several times, eventual purchasers – was Horsham. They sought to evict the
mortgagors as trespassers. H relied on mortgage deed conditions, felt it gave them the power
of sale to do this. Mortgagors argued that the depravation of possession that followed this
infringed their right to peaceful enjoyment of their property.
Briggs J, found “that the power of sale was derived wholly from the mortgage contract itself.
All that s.101 served to do was implement rather than override the private bargain between
mortgagor and mortgagee. The exercise of a statutory power of sale under s.101 following a
default by a mortgagor did not infringe the ECHR article 1 and neither was the exercise by
receivers acting under purely contractual powers un overriding the mortgagee’s equity of
redemption by contracting to sell the property. “
The depravation of possession constituted by the exercise by a mortgagee of its powers under
s.101 was justified in the public interest and required no case-by-case proportionality
exercise. It was justified in the public interest because it reflected a bargain habitually and
historically drawn between mortgagors and mortgagees, in which the ability of a mortgagee
to sell the property offered as a security without having to go to court was identified as an
essential aspect of the security necessary if substantial property based security lending was to
be available at affordable rates of interest.
The power of sale was derived wholly from the mortgage contract itself. Court said it was a
power derived from common law. Aftermath: this gave mortgagees considerable discretion,
various attempts to confine the judgment and the MOJ tried to distinguish this judgment
scenario on the basis of facts. They said this was a buy to let scenario. The Building Societies
Association (who represented mortgagees actually) tried to help also calm the worries within
the market at the time.
MOJ” “Horsham did not change the law in this area. In addition, the mortgage in
question was a buy to let mortgage, under the terms of which the borrowers were not
permitted to live in the property themselves. Further, the borrowers continued to live
in the property for a substantial period of time without making payments. This was
not a case of a mortgage taken out for the purpose of funding an owner-occupied
family home. ‘
BSA: ‘We do not agree that legislative change is needed in the context proposed. As
noted in the consultation, there are no reported instances of this practice being widely
Possession and sale two distinct processes. Mortgagees will pursue possession before sale.
One instance where a mortgagee didn’t seek either:
See Horsham Properties: did the LPA 1925 section 101 give a power to permit mortgagees to
do this, or did it require them to apply for a court order? The mortgagee appointed receivers
who sold the property at auction whilst the mortgagors were still in possession. Changed
hands several times, eventual purchasers – was Horsham. They sought to evict the
mortgagors as trespassers. H relied on mortgage deed conditions, felt it gave them the power
of sale to do this. Mortgagors argued that the depravation of possession that followed this
infringed their right to peaceful enjoyment of their property.
Briggs J, found “that the power of sale was derived wholly from the mortgage contract itself.
All that s.101 served to do was implement rather than override the private bargain between
mortgagor and mortgagee. The exercise of a statutory power of sale under s.101 following a
default by a mortgagor did not infringe the ECHR article 1 and neither was the exercise by
receivers acting under purely contractual powers un overriding the mortgagee’s equity of
redemption by contracting to sell the property. “
The depravation of possession constituted by the exercise by a mortgagee of its powers under
s.101 was justified in the public interest and required no case-by-case proportionality
exercise. It was justified in the public interest because it reflected a bargain habitually and
historically drawn between mortgagors and mortgagees, in which the ability of a mortgagee
to sell the property offered as a security without having to go to court was identified as an
essential aspect of the security necessary if substantial property based security lending was to
be available at affordable rates of interest.
The power of sale was derived wholly from the mortgage contract itself. Court said it was a
power derived from common law. Aftermath: this gave mortgagees considerable discretion,
various attempts to confine the judgment and the MOJ tried to distinguish this judgment
scenario on the basis of facts. They said this was a buy to let scenario. The Building Societies
Association (who represented mortgagees actually) tried to help also calm the worries within
the market at the time.
MOJ” “Horsham did not change the law in this area. In addition, the mortgage in
question was a buy to let mortgage, under the terms of which the borrowers were not
permitted to live in the property themselves. Further, the borrowers continued to live
in the property for a substantial period of time without making payments. This was
not a case of a mortgage taken out for the purpose of funding an owner-occupied
family home. ‘
BSA: ‘We do not agree that legislative change is needed in the context proposed. As
noted in the consultation, there are no reported instances of this practice being widely
