The following Property guidance note provides comprehensive and up to date legal information covering:
Sale by a mortgagee destroys the equity of redemption in the mortgaged property. The sale defeats the rights of all subsequent incumbrancers, whose remedy then is only against the proceeds of sale. The mortgagee exercising the power of sale becomes a trustee of the surplus proceeds of sale, if any, for the interested persons according to their priorities.
A statutory trust arises as soon as the proceeds of sale are received, unless:
the sale is under an express power, and
the mortgage deed merely declares that the mortgagee must apply the purchase money in a manner stated, or
the sale is under another statute which contains no special provision for the application of the purchase money
In those cases the mortgagee becomes a constructive trustee of the surplus as soon as it is shown there is a surplus.
Whether the trust is statutory, express or constructive, time does not run against the person or persons entitled to the surplus, if the selling mortgagee retains the surplus or converts it to his own use.
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