Chapter 7 Quiz:
Choose one answer unless otherwise indicated.
1 Which of the following will not give rise to an equitable mortgage?
a) A written assignment of a beneficial interest in land on condition that it be reassigned on repayment of the loan.
b) An attempt by a beneficial owner to create a mortgage over the legal title by
forgery.
c) Depositing the title deeds to unregistered land with the lender.
d) An uncompleted contract to create a legal mortgage.
[Answer guide]
See Land Law, Section 7.3.2.
Answer: c
2 True or false: equity will only intervene to assist a borrower if she has granted an
equitable mortgage or charge over her land.
a) True.
b) False.
[Answer guide]
Equity, particularly the equity of redemption, applies to both legal and
equitable mortgages and charges: see Land Law, Section 7.4.1.
Answer: b
3 True or false: even as amended, the Consumer Credit Act 1927, does not allow the
court the power to intervene in favour of a borrower who has granted a first legal
charge over a residential property at an excessively high rate of interest?
a) True.
b) False.
[Answer guide]
See Land Law, Section 7.4.2.
Answer: a
4 Which of the following best summarizes what is expected of lenders after the
House of Lord’s decision in Royal Bank of Scotland plc v Etridge (No. 2) [2002] 2 AC
773?
a) To take reasonable steps to ensure that the surety enters into the transaction
with her eyes open to the basic elements of the transaction.
b) To take reasonable steps to ensure that the surety does not enter into a
transaction that will be to her disadvantage.
c) To tell the surety that she must consult a solicitor of her choice.
d) To obtain written confirmation from a qualified solicitor that the mortgage
documents were signed in his presence.
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[Answer guide]
See Land Law, Section 7.4.4. .
Answer: a
5 What is the significance of Cheltenham & Gloucester Building Society v Norgan
[1996] 1 WLR 343?
a) The Court of Appeal stated clearly for the first time exactly when the
mortgagee’s right of possession arises.
b) The Court of Appeal set out guidelines for how the courts should exercise
their statutory discretion to grant relief to a mortgagee in a repossession
action.
c) The Court of Appeal held that the duration of the ‘reasonable period’ for the
purposes of section 36 of Administration of Justice Act 1970 was not limited
to any particular period of time.
d) The Court of Appeal held that by exercising its discretion under section 91 of
the LPA 1925, it could effectively postpone a possession order in cases
where the total debt now exceeded the value of the mortgaged land.
[Answer guide]
This case is considered in Land Law at Section 7.5.1.
Answer: c
6 Which two of the following are not requirements for the statutory power of sale to
arise?
a)
b)
c)
d)
The mortgage must be legal.
The mortgage must be made by deed.
The mortgage deed must contain no provision excluding the statutory power.
The borrower must be in breach of at least one of his obligations under the
terms of the mortgage.
e) The contractual date of redemption must have passed.
[Answer guide]
See Land Law, Section 7.5.2(a). Take care not to confuse when the power
of sale arises (LPA 1925, s 101) with when it becomes exercisable (s 103).
Answer a and d
7 True or false: a mortgagee must obtain a court order before selling the land
pursuant to the powers conferred by sections101 and 103 of the LPA 1925?
a) True.
b) False.
[Answer guide]
See Land Law, sections 7.5.2(a).
Answer: b
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8 What duty does the lender owe to the borrower when selling the land?
a) Not to sell the land for less than the mortgage debt.
b) To sell the property as soon as possible.
c) To take reasonable care to get the best price reasonably obtainable ‘on the
day’.
d) To take reasonable care to get the best price obtainable.
e) The lender owes the borrower no duty.
[Answer guide]
The duty of care is considered in Land Law, Section 7.5.2(b).
Answer: d
9 Which two of the following have been successfully used by borrowers to mitigate
the possible impact of the mortgagee’s power of sale?
a)
b)
c)
d)
Section 91 LPA 1925.
Section 105 LPA 1925.
Article 8 of the European Convention on Human Rights.
An application to postpone a possession order, to allow the borrower to sell
the land.
e) Foreclosure.
[Answer guide]
See Land Law, Sections 7.4.3, 7.5.1, 7.5.2 and 7.5.4.
Answer: a and d
10 True or false: if the mortgagee wishes to sue on the borrower’s personal
covenant, it must begin proceedings within twelve years of the legal date of
redemption specified in the mortgage deed?
a) True.
b) False.
[Answer guide]
See Land Law, Section 7.5.5. Note that the limitation rules when recovering
the capital are different from those which apply in the case of unpaid
interest.
Answer: b
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