MORTGAGE LAW PAPER SAMPLE
Thursday, March 19, 2009
1. Vitiating Factors 1. In Mortgage Agency Services Number Two Ltd v Chater [2003] provides that the condition of the plaintiff and the relationship between the parties is part of the test of facts to establish undue influence. In this case, a son convinced his mother to make him a co-owner of the house and take up mortgage to finance his business. The purpose noted on the loan application was for purchase. The court held that there was undue influence because the mother was not aware of the true purpose of the loan. Yorkshire Bank plc v Tinsley [2004] involves a couple who mortgaged their matrimonial home to fund the husband's business. However, the business failed and the bank is seeking foreclosure of the house. The wife contested the foreclosure on the ground that the mortgage was obtained trough undue influence since the husband told her that the mortgage only covers 5,000. The court held that there was presumption of undue influence and the bank has the burden of proof to prove that the transaction was in order. The presence of a solicitor does not prove acquiescence by the wife because the solicitor may have the role of enforcing the agreement and not to give advice. The wife was also vehement that had she known about the nature of the mortgage she would not have agreed to the risk. First National Bank v Achampong [2003] provides that when the solicitor did not report to the bank regarding the freely given consent of the wife in the mortgage of a family home the foreclosing bank is faced with the presumption of undue influence. 2. In the case of Maureen Niersmans v Bernard Pesticcio [2004], the appeal was denied and the previous judgment on the presence of a presumption of undue influence was upheld. The decision was based on the fact that the transferor was not given independent advice by the solicitor, who had a close relationship with the transferees and stands to gain 18 percent of the value of the property. The solicitor did not act professionally resulting to her implication in the issue on undue influence. Legal ethics provides that a solicitor should act professionally to prevent any thoughts of suspicion on the validity of his actions and to ensure the protection of the rights of the parties seeking advice. As the person given responsibility to advice the transferor over the management of his assets, she should not have any personal interest in the transfer. The solicitor was entrusted with the job to ensure the legal and proper management of property and having a personal relationship with the transferees and a personal interest in the property clouds her independent and objective advice. 2. Rights of the Mortgagee – the right to enter into possession Birmingham Citizens Permanent Building Society v Caunt [1962] allows a mortgagor in arrears to adjourn the possession hearing to allow for payment of arrears based on evidence of the mortgagor's ability to pay. Section 36 of Administration of Justice Act 1970 supports this decision by allowing the substitution of court proceedings with actual installment payments of arrears. Payment may come from other sources that do not necessitate the sale of the property mortgaged. Incorporated in the mortgage as a remaining term of the agreement is the period agreed upon for completion of payment. Cheltenham & Gloucester Building Society v. Norgan [1996] provides for the rules and remedy in applying the option given to the mortgagor to seek payment instead of continuing with foreclosure. In suspending the possession proceedings, the court should be satisfied that the mortgagor is able to pay the arrears within the period agreed upon for completion of payment. If the court sees the ability to pay then the installment payments will commence. However, if the court deems the mortgagor unable to pay, the latter is given the option to seek the court's permission to acquire possession of the mortgaged property to put it up for sale. The latter case of Cheltenham and Gloucester Plc v Krausz [1997] provides a qualification to the option of seeking possession in order to sell the property. The decision in this case implores the mortgagor to provide evidence that the total amount of unpaid debt will be fully satisfied with the selling price of the mortgaged property. The purpose of allowing the mortgagor to sell his property is his interest to obtain the highest possible selling price. The Financial Services and Markets Act 2000 was enacted for the purpose of regulating previously unregulated activities to allow the fair settlement of issues without referring it to the courts to the satisfaction of the demands of the parties. The Financial Services Authority was accorded with the legal power to manage the process of putting in order and giving advice on regulated contracts such as the regulated mortgage contracts. Mortgage mediation is one of the activities managed by the Financial Services Authority because of the revisions made to mortgage laws upon the enactment of the Financial Services and Markets Act. Mortgage mediation that coincides with section 36 of the Administration of Justice Act is the initial remedy in foreclosure issues before commencing a court action in case the mediation fails. The regulations of the Financial Services Authority provide clearer guidelines to the court litigation alternative remedy in section 36 of the Administration of Justice Act. Mortgage mediation provides the parties to engage in negotiations for scheduled payment of debts. In case of irreconcilable disagreements or conflicting points of view, it is only then that the parties will subscribe to court intervention. This is a court management solution created to relieve the courts of piling cases that may be settled through the negotiation of the parties. These laws provide a formal venue for out of court settlement of mortgage issues with the authority recognized by the parties because it is created and recognized by law. A mortgagor falling behind in paying the amount owed and recognizing the probability that the mortgagee will file an action for foreclosure should contact the mortgagee in order to discuss the possibility of extending the period for payment. If the mortgagee accedes to the change then the mortgagor has additional time to procure money for debt payment. However, if the mortgagee refuses to extend the period for payment and commences legal action, the mortgagor is given the option to apply for court permission to cancel the proceedings in order to make way for negotiations for the payment of the arrears through instalment subject to the presentation of evidence of the ability to pay within the additional time requested. Instalment payments ensue upon the permission of the court. The case may be forwarded to the Financial Services Authority for negotiation of the terms of payment. If the court does not allow the suspension of the possession proceedings, the mortgagor may seek permission of the court to sell the property at a price that fully covers the arrears. The mortgagor should seek the greatest possible price for the property. 3. Different types of mortgages and the power of sale 1. Welsh mortgage is the transfer of possession of a property by the mortgagor to the mortgagee for a particular consideration. The agreement incorporates the right of the mortgagor to redeem the property by paying the principal amount received during the transfer of possession. The contract also provides for the right of the mortgagee to collect income from the property to serve as interest for the money loaned to the mortgagor. 2. Sharia law forbids both payment and receipt of any kind of interest. Muslims do not subscribe to mortgage agreements involving interest. (Ahmad 1992) Murabaha and ijara are two types of Islamic mortgages that do not involve interest payments. The primary difference in these two mortgages is the amount that a real estate property buyer has to pay as condition of the mortgage. On one hand, murabaha mortgage covers an agreement that the bank pays eighty to ninety percent of the total purchase price while the buyer pays the balance. Full payment of the property gives rise to the registration of the property under the name of the buyer. The buyer pays the money forwarded by the bank within the agreed period. On the other hand, ijara mortgage does not require the buyer to pay any percentage of the price of the property because the bank makes a full payment for the property. The transaction leads to a lease agreement with the rent constituting an installment payment of the purchase price. (Khan 1986) However, Islamic mortgages do not appeal to non-Muslim banks because of the lack of interest incentives. Contemporary Islamic mortgages evolved to provide incentives to banks to forward full payment without violating Sharia law. There are two alternative actions. First, the bank buys the property and pays for it in full. It then acts as tenant collecting payment that is higher than the original purchase price to gain profit. Second, the bank makes full payment then resells the house at a higher price to gain profit. These alternatives benefit both Muslim buyers and banks because the buyers do not pay interest with the banks gaining profit for their part in advancing full payment. This involves trust, payment of higher price by the buyer and non-imposition of an exorbitant price by banks. Part III of the Law of Property Act 1925 provides for the extent of the rights of a mortgagee in selling mortgaged property. A mortgagee has the right to sell mortgaged property subject to the responsibility to obtain the highest possible market price. Obtaining a reasonable price excuses the mortgagee from any liability for losses. AIB Finance Ltd v Debtors [1998] applies the law by attaching a duty of care to obtain the highest possible price for mortgaged property to the mortgagee. 4. Rights of the mortgagor Section 38 of the Consumer Credit Act 1974 provides the best defense for Mr. Toad in the case for repossession on the ground of extortionate credit bargaining. This defense is proven through agreements for grossly exorbitant payments and unfair dealing. Ideally, a mortgage contract provides equally protects the interest of the parties so that in determining allegations of extortionate credit bargaining, the court looks at the circumstances of the mortgagor relative to the mortgagee. It is known to the mortgagee, through its agent, that Mr. Toad does not have the capacity to pay a loan secured by his house, making repossession inevitable. Foreseeing eventual repossession but continuing with the mortgage involves extortionate credit dealing by the mortgagee. Courts are open to extortionate credit deal case but the nature of the issue limits the tools available for the courts to deal with these cases and affects the propensity of people to seek court intervention. Adjudicating extortionate credit deals involves questions of fact and there is no clear benchmark for handling the issue. People are also reluctant to go to the courts because of lack of financial resources, fear of extortionists and lack of understanding of the protection provided by law. 5. This is your final piece of work Studying mortgage law resulted to a split decision on its legal significance. On one hand, the ideal and purpose enshrined in mortgage law balance the rights of the parties, provides limits and rules in the exercise of these rights, and offers remedies. The law allows people to use their property to secure loans on the premise that the elements of a valid contract are present and the transaction express fair dealings. Ideally, the law is as simple as this. On the other hand, a consideration of the actual cases shows that the application of the law is not as simple as it looks. Mortgage law is subject to the particular circumstances of the case. Seeking the protection and using the remedies provided by law is subject to the inequalities between the parties. The law may address inequalities but only if people assert the exercise of their rights. Exercising a right requires knowledge and understanding of the right, which not all people have that explains taking advice from legal experts. However, even legal experts deviate from the law as seen in their participation and potential role in undue influence, extortion and other illegal acts. Bibliography Legislations Administration of Justice Act 1970 Consumer Credit Act 1974 Financial Services and Markets Act 2000 Law of Property Act 1925 Case Law AIB Finance Ltd v Debtors [1998] 3 All ER 929 Birmingham Citizens Permanent Building Society v Caunt [1962] 1 Ch 883 Cheltenham and Gloucester Plc v Krausz [1997] 1 WLR 1558 First National Bank plc v Achampong [2003] EWCA Civ 487 Maureen Niersmans v Bernard Pesticcio [2004] WL 852508 Yorkshire Bank plc v Tinsley [2004] EWCA Civ 816; 28 EG 176 (CS) |
Posted by Vic Fabe 12:42 PM 1 comments
The Agreement provides that completion shall take place at the offices of the Vendor’s solicitors at No. 3, Pump Yard, Admiralty, Hong Kong, or as they may direct, on the 15th day of December 2007.
Monday, November 24, 2008
Assuming that Rachel tendered a Banker's Draft for the balance of the purchase price at 6.00 pm on the 15th of December, would Janice be entitled to forfeit the deposits on the ground that the balance of the purchase price was paid too late? Janice would not be entitled to forfeit the deposits on the ground that the balance of the purchase price was paid too late. The payment made by Rachel using a Banker's Draft was made on the date agreed upon the parties, which is on the 15th of December. There was no time specified by the parties so that it appears that the exact time of payment is not deemed as important in determining compliance with payment. In applying equity, it should be considered whether the time of payment was reasonable. In the given case, the agreed place of payment was at the office of the Solicitors of the Vendors. As such, the reasonable time of payment is within office hours. This means that if 6.00 pm constitutes past the reasonable or common office hours for Solicitors, then Janice could forfeit payment because payment was delayed. However, it should also be considered that if the time of payment was of due importance to the vendor, this could have been included as a term of the provisional agreement. Since there was no term in the provisional agreement giving Janice the right to forfeit payment upon non-payment within a particular time, then Janice cannot forfeit deposits because the purchase price was not paid on time. Valid reasons for the forfeiture of the deposits, when the provisional agreement does not specify an exact time limit for payment, include bouncing cheques or the unreasonable time of payment such as payment at midnight of December 15th when Solicitors offices are expected to be closed. Moreover, a Bank Draft can be considered as equivalent to cash so that payment within a reasonable time, provided that 6.00 is can be considered a reasonable time with the agreed day would constitute effective payment by Rachel so that Janice cannot forfeit the deposit on account of late payment. (b) Would your answer to (a) differ if Rachel had tendered a personal cheque? Yes, the answer would be different if Rachel had tendered a personal cheque. Cheques in general are considered as conditional modes of payment that constitute effective payment only when honoured. However, there is a difference between a Bank Draft and Personal Cheque, with the former providing lesser risk because the cheque is drawn against the bank's account instead of the personal account of the buyer. As such, except in exceptional cases of the bankruptcy or closure of the bank against whom the Bank Draft was drawn, the parties receiving payment through a Bank Draft has a greater chance of being paid. In the case of personal cheques, there is greater risk because the payer's account with the bank may not be sufficient to pay the amount contained in the cheque. A Bank Draft is commonly considered as akin to cash while a personal cheque is not. In terms of the time of payment, a personal cheque is subject to the acceptance or acquiescence of the vendor so that if the vendor accepts the cheque as payment, then payment is deemed to have been made within the day subject to clearing. Since payment by cheques constitutes common practice, the receipt of the cheque by the vendor within the specified time or reasonable time within the given day of payment constitutes compliance with the time of payment but subject to clearing. The time of payment depends either on the time of receipt of the cheque or the clearing of the cheque so that in the given case, payment can be considered as validly made during the appointed day but claims or remedies in relation to payment such as the forfeiture of deposit depends upon the clearing of the cheque. This is in addition to the lack of a clear and explicit term in the provisional contract that would support the importance of time in payment. (c) For the purpose of this question only, assume that the Agreement provided for completion to take place on the 15th day of December at or before 5.00 pm. Rachel tendered a Banker's Draft for the balance of the purchase price at 6.00 pm. Janice has terminated the Agreement and forfeited the payments made by Rachel. The order is rising and Rachel wishes to complete the transaction. Is Rachel entitled to an order of specific performance? Rachel is not entitled to an order of specific performance for a number of reasons. One, the parties has not signed the formal purchase contract, which means that the parties are governed by the provisional contract, which provides their respective responsibilities for executing the agreement intended to pursue the signing of the contract. As such, without a formal contract, Rachel does not have the right to make claims for the completion of the sale by seeking an order of specific performance from the courts. Another reason is that Rachel was not able to make payment on or before 5.00 pm of December 15th. Although Rachel was able to offer a Bank Draft on that day, this was made at 6.00 pm so that Janice has the right to forfeit the deposits and not proceed with the signing of the formal contract. In this instance, time was considered important since it was specifically contained in the provisional agreement. As such, Rachel should have complied with the time limit to prevent the forfeiture of the deposit and ensure the signing of the formal contract of sale. |
Posted by Vic Fabe 12:54 PM 0 comments
Should Rachel’s solicitors raise a requisition on title?
Rachel's solicitors should raise a requisition on title because of the need for further documents to prove title as in Tao Qin v Ho Wai Leung (2005) HCA 1336. First, as mentioned earlier, the intermediate root of title offered by the vendor is not validly acceptable. As such, there is need to demand additional documents to provide a stronger evidence of ownership. Second, the non-compliance with the terms of the government lease for |
Posted by Vic Fabe 12:53 PM 0 comments
