Palk v Mortgage Services Funding Plc [1993]

Facts

  • A £300,000 mortgage loan was taken out by the claimants, secured against their jointly owned house
  • The first claimant’s (husband’s) business became insolvent, and payments on the mortgage loan ceased
  • The property was only worth £283,000, whilst mortgage redemption would cost £358,587, to increase at £43,000 per year, and with a likely property rental income of £14,000 per year

Issue

  • Could the mortgagors (husband and wife) have a sale of the property ordered?

Decision

  • Yes

Reasoning

  • Under section 91(2) of the Law of Property Act, a court’s jurisdiction to order sale is very wide, but limited to exceptional circumstances
  • As it would be unjust and inequitable not to order a sale, a sale was ordered
  • Whenever a mortgagee acts under its rights under a mortgage, it must do so fairly. This will include taking reasonable care of a property when in possession – this is a factor to consider under the jurisdiction granted by s 91(2)
RELATED CASE  Street v Mountford [1985]

Posted in Land Law Revision Notes.

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