A mortgagee’s duty to obtain the best price reasonably obtainable at the date of sale requires it to fairly and properly expose the property to the market.
The High Court has considered this issue in Burns v Fred Bridge and Property Funding Ltd [2024] EWHC 2620 (Ch).
The case concerned Blue Slate Farm, Salmesbury, Preston, originally owned by the claimant, Sheila Burns. By a contract in May 2017, Burns agreed to sell the property to Fred Bridge for development purposes for £450,000.
On the completion date of the sale the purchase price was not paid and the parties entered into an overage deed whereby Bridge would pay Burns the sale price in instalments on completion of each of the three houses to be built on the property and a balancing payment no later than 31 July 2018.
Contemporaneously, Bridge executed a second legal mortgage over the property in favour of Burns and a deed of priority giving priority to the first mortgagee over the Burns mortgage. Bridge refinanced with Property Funding Ltd, the second defendant, in 2018 and again in 2019, executing a legal charge and deed of priority in their favour.
The loan facility was not repaid. PFL took possession of the three houses in January 2021 and completed them, selling them later that year, as mortgagee in possession, for a combined total of £1,345,000. Burns claimed that at the time the houses had a market value of £1,545,000 and PFL had failed to obtain the best price reasonably obtainable.
A mortgagee in possession has an equitable duty to obtain the best price reasonably obtainable at the date of sale. Breach of the duty requires the mortgagee to account for the difference between the price obtained and that which would have been obtained had the mortgagee acted in accordance with its duty Silven Properties Ltd v Royal Bank of Scotland plc [2004] 1 WLR 997.
Burns’ claim failed. The difference between the market value Burns contended for and the gross sale price was 12.9% and Burns’ expert conceded that there was a 10% margin of error in respect of his valuation. The selling agents were competent and reputable. PFL had liaised with them both before and after taking possession and the court was satisfied that the agents had acted with reasonable care in marketing the houses. There was no real evidence apart from speculation that placing additional signs on a main road or advertising in a local newspaper when already advertised on Rightmove would have led to significant additional interest in the houses.
Louise Clark is a property law consultant and mediator
