Business Law Seminar 2

PLEASE ANSWER THE FOLLOWING QUESTIONS IN bullet points:

1. Jack, a corporate executive, is friendly with one of his executive employees Liz. Liz had been living in a tiny rented flat, and was keen to purchase a large flat for herself. However, Liz only had a 5% deposit and was ineligible to take out a mortgage on the flat from a bank. Jack, after consulting his corporate affairs colleagues, offered to provide the finance for Liz to purchase the flat. Jack and Liz entered into a charge by way of legal mortgage that provided, amongst other terms, the following: (i) Provision for an interest rate set at 3% above Lloyds TSB’s standard credit card rate; and (ii) That the capital of the loan could not be repaid during the first five years of the mortgage. Liz very rapidly found the monthly repayments too high and fell behind in her repayment plan to Jack. In a short period of time she became three months in arrears on her interest repayments. Rather unfortunately for Liz, all the banks by that time had begun to keenly market 95% mortgages at very reasonable interest rates which Liz would have been able to pay. Recently, Jack has asserted to Liz that his mortgagee’s power of sale has arisen and become exercisable, and that he intended to seek a court order to enable him to repossess the property. By accident, Liz has discovered that Jack, once he had obtained possession of the flat, intends to immediately sell the flat to another of his employees, Kenneth, at a knock down price. Jack has also threatened Liz that if there is any money left owing after the sale to Kenneth that she will have to make up the difference. Advise Liz as to any protection she may claim from the terms of the mortgage, and from Jack’s plans to repossess the property, and from Jack’s plan to sell the flat to Kenneth. 2. Critically assess the relative strengths of the rights of the Mortgagor and the rights of the Mortgagee, and evaluate which party possess the strongest rights

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