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Priority of interest between mortgagee and beneficial owner

Abbey v National Building Society v Cann was an acquisition mortgage situation. The house of lords rejected the argument of scintilla temporis, so the wife's interest could never amount to an overriding interest. And I apply the rule on power to sale & possession of mortgagee here. On the other hand, if it is a post-acquisition mortgage situation, where the sole legal owner has defaulted the mortgage payment and the bank sought possession of the house, the bank will be subjected to the beneficial owner's interest because of the overriding protection given under Para 2 Schedule 3 ????? So....the bank cannot sought possession....and I could cite WIlliams & Glyn's Bank v Boland, right? And I will invoke Trusts of land and appointment of trustee act 1996 which the bank could apply for a court order under section 14...?
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jjarvis
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Original post by Somanee
Abbey v National Building Society v Cann was an acquisition mortgage situation. The house of lords rejected the argument of scintilla temporis, so the wife's interest could never amount to an overriding interest. And I apply the rule on power to sale & possession of mortgagee here. On the other hand, if it is a post-acquisition mortgage situation, where the sole legal owner has defaulted the mortgage payment and the bank sought possession of the house, the bank will be subjected to the beneficial owner's interest because of the overriding protection given under Para 2 Schedule 3 ????? So....the bank cannot sought possession....and I could cite WIlliams & Glyn's Bank v Boland, right? And I will invoke Trusts of land and appointment of trustee act 1996 which the bank could apply for a court order under section 14...?


The bank can certainly seek possession. The question is whether it will be granted. A number of questions are relevant here. First, did the wife consent to the mortgage? Secondly, was the mortgage used to pay down the acquisition mortgage? If it was, the second mortgage is subrogued to the first mortgage and takes priority. Third, was the mortgage granted by one trustee, or by more than one? Consider the distinction between Boland and Flegg on this, crucial, point. Fourth, remember the wife must be in actual occupation and a fortiori have an interest for her interest to override under sch 3 para 2 of the LRA. As for s 14, the bank can apply for an order of sale. The bank might succeed in its application, depending on the facts and how the court applies s 15. Bear in mind, however, that unless (a) the wife consented to the second mortgage or (b) the second mortgage was used to pay down the acquisition mortgage, triggering subrogation, the mortgage will only bind the *husband's* share.

All of this rests on the assumption that the wife is a beneficial owner (for which, apply the principles in Stack--though note this is a sole legal owner question, and thus the rebuttable presumption is that the wife *does not* have a beneficial interest). Her interest will also, of course, need to be quantified.
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Avatar for Jilly.0
Jilly.0
Original post by jjarvis
The bank can certainly seek possession. The question is whether it will be granted. A number of questions are relevant here. First, did the wife consent to the mortgage? Secondly, was the mortgage used to pay down the acquisition mortgage? If it was, the second mortgage is subrogued to the first mortgage and takes priority. Third, was the mortgage granted by one trustee, or by more than one? Consider the distinction between Boland and Flegg on this, crucial, point. Fourth, remember the wife must be in actual occupation and a fortiori have an interest for her interest to override under sch 3 para 2 of the LRA. As for s 14, the bank can apply for an order of sale. The bank might succeed in its application, depending on the facts and how the court applies s 15. Bear in mind, however, that unless (a) the wife consented to the second mortgage or (b) the second mortgage was used to pay down the acquisition mortgage, triggering subrogation, the mortgage will only bind the *husband's* share.

All of this rests on the assumption that the wife is a beneficial owner (for which, apply the principles in Stack--though note this is a sole legal owner question, and thus the rebuttable presumption is that the wife *does not* have a beneficial interest). Her interest will also, of course, need to be quantified.


So if the wife situation is replaced with someone being granted a legal lease of less than 7 years without the bank's notice, does that take priority?

Also, for acquisition mortgages, all overriding interests under actual occupation will not bind the Morgagee, as we determine them at time of disposition of the interest. What about other overriding interests? Or does the rejection of an interest scintilla temporis apply to all overriding interest for acquisition mortgages? If so, for 2nd mortgages, overriding interests bind at the date of registration, what about actual occupation-does it arise as an overriding interest during the date of completion still??

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