Mortgagee in Possession in UK Law

The duties of a receiver towards the mortgagor have the same origin. They are duties in equity imposed in order to ensure that a receiver, while discharging his duties to manage the property with a view to repayment of the secured debt, nonetheless in doing so takes account of the interests of the mortgagor and others interested in the mortgaged property. What a mortgagee or a receiver must do to discharge them depends upon the particular facts of the particular case.

The cases do support the proposition that a power of sale is improperly exercised if it is no part of the mortgagee's purpose to recover the debt secured by the mortgage. Where, however, a mortgagee has mixed motives (or purposes) one of which is a genuine purpose of recovering, in whole or in part, the amount secured by the mortgage, then in my judgment his exercise of the power of sale will not be invalidated on that ground.

So far as I am aware, foreclosure actions are almost unheard of today and have been so for many years. They usually appoint a receiver or exercise their powers of sale. Take the present case: the security is inadequate, but Mortgage Services is not seeking to foreclose, nor is it seeking to sell at once. It is seeking to hold on to the house, preferably without becoming accountable as a mortgagee in possession, with a view to exercising its own power of sale at some future date.

In the exercise of his rights over his security the mortgagee must act fairly towards the mortgagor. His interest in the property has priority over the interest of the mortgagor, and he is entitled to proceed on that footing. He can protect his own interest, but he is not entitled to conduct himself in a way which unfairly prejudices the mortgagor.

The Respondents had the rights of a secured creditor, that is to say the right to be repaid their loan together with interest; in support of that right they had the remedies or rights granted by the legal charge and the law, namely to sell the land or appoint a receiver. They were not bound to exercise these remedies in defence of their rights, but they could do so.

Justification for interference with the Plaintiffs' contractual right based upon an equal or superior right in the Defendant must clearly be a legal right. Such right may derive from property real or personal or from contractual rights. Alternatively, the law may grant legal remedies to the owner of property to act in defence or protection of his property; if in the exercise of these remedies he interferes with a contract between A and B of which he knows, he will be justified.

Mr Millett also submitted that the evidence of the Standard witnesses as to the valuations that they would have put on the TDA-Es, had they come to value them, was irrelevant and inadmissible. That was because, he said, in circumstances where Standard had not in fact carried out a valuation exercise, the Court should pay no regard to the opinions of the Standard witnesses.