Application by mortgagor for order for sale – Whether order appropriate in severe negative equity situation – Application refused
In or about 1997 the defendant mortgagees obtained a suspended order for possession of the plaintiff’s house in Morval, Cornwall, at which time the amount owing on the mortgage debt exceeded £220,000. It was common ground that, but for a problem relating to access and a further problem of a planning nature, the price obtainable on sale would be in the region of £85,000. Applying under section 91 of the Law of Property Act 1925, the plaintiff sought an order authorising a sale at £45,000 to an adjoining owner who, unlike other prospective buyers, had no cause to be concerned with the access problem. The application was resisted by the defendants on the ground, inter alia , that in due course they would be able to remove both problems and obtain the full market price.
Held The application was refused.
Although the plaintiff sought to rely on Palk v Mortgage Services Funding plc [1993] Ch 330, it was clear both from that case and from Cheltenham & Gloucester plc v Krausz [1997] 1 All ER 21 that an order at the instance of a mortgagor would not, save in exceptional circumstances, be made where the proceeds would fall substantially short of the amount outstanding under the mortgage debt. Unlike the mortgagees in Palk, the defendants had obtained an order for possession and did not intend to postpone sale indefinitely, their reasons for postponement being based upon factors specific to the mortgaged property.
Steven Ball (instructed by Sproulls, of Bodmin) appeared for the plaintiff: Jonathan H Marks (instructed by Eversheds, of Cardiff) appeared for the defendants.
