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Cheltenham & Gloucester Plc v Krausz [1997]

Facts

  • A mortgagor defaulted on his mortgage loan payments
  • He was in negative equity – his security (property) was worth less than the amount owed, the extent to which disagreed upon

Issue

  • Could the mortgagee’s possession be delayed to allow the mortgagor to make an application for sale under s 91(2) of the Law of Property Act 1925?

Decision

  • No

Reasoning

  • At common law, a mortgagee’s right to possession myst be strictly observed
  • Section 36, which allows for postponement where it can be shown that a mortgage loan would be paid off within a reasonable period, does not apply where a mortgagor is in negative equity, so could not postpone possession to allow the mortgagor to make an application for sale
  • This may not be case where a mortgagor could show that he has personal funds to meet any shortfall caused by negative equity
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