A lender is authorised under the law to recover the money owed to him by the mortgager. However, there are several procedures before this could be done. The following article discusses this in brief and also explains the procedures required to be performed by the property solicitors to ensure that the buyer gets a good title.
Existence of the power of sale.
A lender has the power to sell the legal estate of the borrower in lieu of the money owed to him by the mortgager. Such a sale is subject to previous incumbrances and the money from the sale is to be paid to every lender. When the land in question is a registered land, only the proprietor of a registered charge has the power of sale.
A buyer who buys the land from a lender who sells the land in exercise of his power can buy the land free from the receipt and all subsequent mortgages over which the lender who exercises the power of sale has priority, even though the mortgage deed does not bear a receipt.
Power of sale arises when the mortgage becomes due
The lender’s power to sell arises on the date that the mortgage becomes due, which is usually set at a date earlier than the mortgage term. The power can be exercised only as provided in the mortgage deed or under the provisions provided under section 103 of the LPA 1925 where one of the below mentioned events have occurred:
a) The principal amount on the mortgage is outstanding and is not paid for more than three months.
b) An interest is due in the mortgage and is in arrears for two months, and
c) A breach of terms in the mortgage has occurred
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