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Effect of sale on possession

Sale by receiver

Effect of sale – overreaching rights of borrower – right to possession without court order – human rights

Horsham Properties Group Ltd v Clark
[2008] EWHC 2327 (Ch)

Summary

The exercise by mortgagees of the power of sale under s101 of the Law of Property Act 1925 (i.e. without any court order) does not, breach Article 1 of the First Protocol to the European Convention on Human Rights. The effect of this is that once the receiver has sold the property and discharged the mortgage, there is nothing incompatible with the Human Rights Act 1998 in ordering possession on a claim of trespass against the original borrowers.

Facts

B and C mortgaged their property to a lender, L. B and C fell into arrears and L appointed LPA receivers pursuant to a contractual power in the mortgage deed (as well as s101(1)(iii) LPA 1925). The receivers contracted to sell the property to Company X following a sale by auction. The purchase price was sufficient to pay off the mortgage debt. Upon completion Company X transferred the property to Company Y (Horsham Properties Group Ltd) and they were registered as proprietors. They subsequently issued proceedings for possession against B and C claiming that they were trespassing on the property, and asserting that their rights as borrowers had been overreached by the receivers’ sale to Company X.

The arguments

It was common ground that the effect of a contract for sale entered into by a mortgagee, or a receiver appointed by a mortgagee, is such as to destroy the mortgagor’s equity of r ... THIS IS AN EXTRACT OF THE FULL TEXT. TO GET THE FULL TEXT, SEE BELOW

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