Enforcement

Mortgagor's obligations

In addition to an obligation to repay principal and interest, the mortgage will invariably:

  1. oblige the mortgagor to repair and insure the property, and

  2. contain restrictions on the mortgagor’s ability to let it

Mortgagee's rights

A mortgagee's remedies include sale and the appointment of a receiver. Taking possession and foreclosure will rarely be encountered in practice.

The mortgagee’s power of sale arises under Law of Property Act 1925, s 101 (LPA 1925) and is regulated by LPA 1925, s 103. This allows a mortgagee to instigate possession proceedings once:

  1. two current monthly instalments have fallen due and remain unpaid, or

  2. in the case of a repayable on demand mortgage, a notice requiring payment of the mortgage money has been served and payment has not been made three months after service

To provide a level of protection to defaulting homeowners, section 36 of the Administration of Justice Act 1970 provides that where the mortgagee is suing for possession and the mortgagor is likely to be able within a reasonable period of time

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Insolvency, declarations of trust, loan agreements, artificial asset protection, sham transactions, transactions defrauding creditors, interspousal asset transfers, change of position defence and wife’s entitlement to share of husband’s assets (Sayers v Dixon)

Restructuring & Insolvency analysis: The court held that six declarations of trust (DoTs) executed by the transferor (Mr Dixon) in favour of his wife (Mrs Dixon) constituted transactions defrauding his creditors within the meaning of section 423 of the Insolvency Act 1986 (IA 1986) and that two of them, purporting to transfer all his future assets and income to Mrs Dixon, along with an accompanying loan agreement, were shams which were void and ineffective. It set aside the DoTs and ordered Mrs Dixon to restore the value of three transferred properties (which had been converted into £551,589 cash) to Mr Dixon’s trustees in bankruptcy (trustees) together with interest of £101,726. It also ordered an account to be taken of the funds that had been transferred to Mrs Dixon or on her behalf by Mr Dixon over the seven years between the date of the DoTs and his bankruptcy. The court dismissed Mrs Dixon’s defence of change of position to the trustees’ claim for restoration, finding that even if such a defence were generally available (which is unclear), she had not acted in good faith and could not rely on it. It also dismissed her defence that, having been married to Mr Dixon for many years, she was entitled to half his assets and/or an entitlement to a share of them by virtue of a right to be maintained. Written by Jonathan Lopian, barrister at New Square Chambers, who acted for the successful claimants.

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