MORTGAGE PROBLEM ANS PROPERTY FINAL

Jennifer took out a mortgage over her house with Bean Machine plc in July 2016. The
loan was used to fund an expansion of Jennifer’s coffee shop business. The mortgage
was for £50,000. Bean Machine plc was a supplier of coffee beans and other
equipment to coffee shops. Jennifer had been unable to acquire a mortgage from
ordinary banks and therefore was only able to borrow from Bean Machine. The
interest rate which Jennifer was required to pay was 0.25% lower than it would
otherwise have been because the mortgage contract contained two clauses:

Jennifer shall be required to acquire all of her coffee from Bean Machine.
Jennifer shall be required to pay the fixed monthly repayment amount specified in
this contract for forty years whether or not the mortgage capital is repaid.

Bean Machine is now forcing Jennifer to pay double the price for her coffee
compared to the amount she had been paying in 2016. Bean Machine claims that this
is because of movements in commodity markets in recent years. Jennifer has noticed
that the market value of coffee has not increased nearly as much as the prices Bean
Machine is charging.
Jennifer has failed to meet her mortgage repayments for two months. Bean Machine
wishes to take possession of the property as a result. Jennifer will produce
evidence that she will be able to generate sufficient profits from a new business
venture by opening an Italian restaurant in the premises. However, that restaurant
business will take one year until it is in profit. Jennifer claims that she will be
likely to be able to make repayment of the mortgage when the business is in profit.

Advise Jennifer.

This inquiry necessitates a thorough examination of mortgages as well as the

conditions stated within the mortgage agreement. We must primarily inform Jennifer
of her responsibilities as a mortgagor and assess whether or not the contract
contains any severe or discriminatory clauses. Identifying the equity principle of
redemption doctrine and the mortgagor's privilege to cancel the mortgage, that is
also his basic lawful right, or "no clog or fetter," is also required in order to
address this issue. While the lender prevents the mortgagor from making use of his
right to redeem the real estate mortgage, it is termed to as a clog on the
redemption.

At first, we are going to start by determining the word "mortgage" and its
processes so that we can advise Ed. The comprehensive description of mortgage found
in Ben McFarlane, Nicholas Hopkins, and Sarah Nield's book Land Law is the finest
available. A mortgage passes the borrower's ownership of the property over to the
lender, resulting in the lender's duty to pay back the ownership rights to the
borrower after the amount owed has been paid off as well as a requirement which
grants the borrower the "authority to reclaim.' According to section 205(1)(xvi) of
the Property Act of 1925, a mortgage is also specified in the law. A mortgage debt
is a type of protection that offers rights of ownership to real estate. In the
present instance, Jennifer has secured a loan from Bean Machine through signing a
mortgage on her home, turning it into a business deal among the parties that are
involved. Although it is clear about the information provided that Jennifer
contacted Bean Machine plc with the intent to acquire the loan upon failing to do
so from a number of banks in order to grow her business. The one that allows us to
draw the conclusion that Jennifer had a history of bad credit in addition to being
aware that her profit percentages were also inadequate, thus rendering it
imperative enough to dismiss the possibility of granting her loan, while Bean
Machine plc in contrast had fewer requirements on their suitability for offering a
loan. Additionally, despite Jennifer's weak eligibility requirements, Bean Machine
continued granted her a credit at a rate that was 0.25 percentage points less than
what was usual in the current market. The issue then arises as to whether or not
Jennifer's risk in obtaining a loan allowed Bean Machine plc an opportunity to
exploit the borrower's circumstance by including unjust and immoral conditions
within the contract.

Now that we have carefully examined all of the terms, we will let Jennifer know if
any of them were unjust so she can be guided appropriately. Jennifer must purchase
all of her coffee from Bean Machine plc, according to the first condition stated in
the current situation. The so-called "solus tie," that tends to restrict the
mortgagor's ability to trade in goods, is the word used to describe this situation.
Consequently, alongside to the protection, the lender (Bean Machine plc) gains the
benefit of the asset. Solus ties were typically only allowed for the length of the
mortgage because normally the asset would not be refunded in exactly the same
condition as when it was provided. The agreement is not binding following the
penalty has been redeemed, it was determined in the matter of Noakes v. Rice. In
this matter, Lord MacNaghten expanded on the law that prohibits an issue in the
equitable treatment that are needed to redeem a mortgage. 'Redemption is of the
fundamental character and essence of mortgage', when the funds protected by the
mortgage on property has been paid off, the land itself in conjunction with the
proprietor of land within their occupancy and utilization of it needs to be as
liberated and unrestricted for all purposes and objective as though the land were
never originally the collateral of the mortgage. likewise, in our current instance
the initial term stated does not hold any kind of concept pertaining the amount of
time period. Due to this, there is a chance that the legal system may decide that
the solus tie is merely valid for the length of the mortgage when relating it to
the previously mentioned situation. As we move forward, consider Kreglinger v. New
Patagonia Meat and Cold Storage.The HOL ruled that the time frame was not a
hindrance but rather a collateral benefit and that it was therefore not a component
of the charge but instead a prerequisite to making a loan.

Moreover, according to Lord Parker, the option was not related to the property;
rather, it was a business contract made by businesspeople at a "arms-length"
distance. if the conditions still hold up on their own at this time remains subject
for argument. First and foremost, Jennifer receives coffee at the going rate for
the market, of which can be explained by having noticed that Bean Machine
subsequently brought up the prices while arguing that the market had done the same
thing. Jennifer later understands that the prices were not increased as much as
Bean Machine declares that they have been. This makes it possible to determine that
Jennifer may have done some research into the costs and rate prior to committing to
a deal with such term, which is why she may have accepted such a term if the price
was reasonable. In addition to the second step this provision only allows Jennifer
to purchase coffee from one vendor, that left her with no choice but to stock
coffee that Bean Machine is currently claiming to have purchased at an increased
price. Jennifer can counter the fact that she is in a unique situation at the
present moment, Hence, she is free to go against the conditions established at the
moment of the contract execution by Bean Machine. A particular instance that
immediately arises is Biggs v. Hoddinott, where the court determined that the
collateral advantage was put into the contract with no unlawful dealings or
inappropriate stressful circumstances. Furthermore, as stated by Lord Parker in
Kreglinger, an additional benefit would be considered neglecting if it was unjust
and unacceptable, an injustice obstructing the justification of redemption,
conflicting with or objectionable to the authority to redeem, or was any of the
rest of these things. Biggs and Noakes state that the judge has the authority to
limit the use of collateral benefit to the term of the mortgage. Jennifer, however,
may additionally argue before the court that the aforementioned provision violates
his right to freedom of trade by forcing him to only purchase coffee from Bean
Machine. One notable case that highlights the fact that English courts will strike
down any clause that conflicts with the rights of anyone in trade is Nordenfelt V.
Maxim Nordenfelt Guns. This case highlights the point that such clauses are
contrary to public policy and are therefore invalidated. To sum up, if the courts
can understand that a company that specialises in coffee supplies along with the
other resources needed to a coffee house has an immense incentive to provide loan
finances to these proprietors of bars and that they also do so at a comparable
reduced rate that it differs from usual practice, only then it possibly can be an
effective claim in the context of commercial actualities.

In the current situation, the second term also addresses the right of refusal. This
is a shining illustration of equity of redemption. Redeemability is the fundamental
tenet of a debt. In the matter of Casborne v. Scarfe (1738), Lord Hardwicke
asserted that the equitable power to redeem became recognised as more than just a
personal right but additionally as a proprietary right that could be leased or
mortgaged and represented the borrower's equitable "ownership" of the land. Upon
full payment of all obligations, the mortgagor must immediately redeem the
possessions. In the Samuel V. Jarrah Timber scenario Lord Lindley emphasised that
any clause in the mortgage prohibiting the mortgagor from regaining possession of
the property by settling off any unpaid debts is void and is inconsistent with the
theory of mortgage. Nevertheless, it was determined in the case of Reeve v. Lisle
that if the option given to a mortgagor to buy mortgaged property was contained in
a distinct agreement from the mortgage, the equity at the time of redemption would
not be harmed. Equity won't permit a clause of this kind to be valid because it is
giving definite power, like Reeve, it is stated in two different contracts, bearing
consciousness of an actual situation. Although the right of first choice, also
referred to as the "right of pre emption," is not available in a scenario in which
the mortgagee continues to be the party with power and attempts to pressure the
mortgagor into surrendering his property. As a result, it doesn't impede the
fairness of redemption. In Warnborough v. Garmite, the court further explained that
the property can only be bought whenever the mortgage is not a "clog" and that it
is crucial for the court to understand the real nature of the negotiations being
made within both the parties. to reveal to the court the real nature of the
agreement being reached between the parties. As a result, Jennifer cannot be
compelled to sell by the mortgagee, making the mortgage irredeemable. Therefore,
once the debt has been paid off, this clause will no longer be enforceable and will
only be legitimate during an active mortgage. If not, the term would be
inconvenient or interfere with the fairness of redemption.Sammuel V. Timber from
Jarrah.In the end, the second period functions as a means of delaying the right to
redemption. According to Ben McFarlane, Nicholas Hopkins, and Sarah Nield's book
Land Law, delaying the right to redeem is not necessarily a bad thing for the
fairness of redemption. Common law typically establishes an opportunity of
redemption within six months of the date a mortgage is given. Equity, however,
enables it to go on for a much extended time. if the mortgagor's ability to repay
the loan is constrained. This makes it appear as if the fundamental tenet of
mortgages is being restricted. Thus, the judge will not take into account such a
clause. In light of Samuel V. Jarrah Timber, the period mentioned will be deemed
null and void if Jennifer manages to repay her debt during the allotted mortgage
time, as previously stated. In Fairclough v. Swan Brewery, it was determined that
the borrower's right to redeem was arbitrary because he could not pay back the loan
until six weeks before the mortgage leasehold period expired. In light of this,
Jennifer is more probably to succeed in the current instance instead of Bean
Machine, and the mortgage may be redeemed early in the event that the debt is fully
paid. However, the courts recognised that it was crucial to take into account
freedom of contract because a mortgage is fundamentally a contract, and because the
present situation is of a commercial nature, we cannot override the concept of
freedom of contract. This was the case in Jones v. Morgan and Warnborough v.
Garmite. As a result of the parties' use of advisers to provide legal advice
despite accomplishing the deed, the courts found the clause to be rational when
taking the case of Knightsbridge v. Byrne into account. On the contrary, Jennifer
can counter that because of her precarious situation when it came to loan requests,
she had no choice but to turn to Bean Machine, rendering the mortgage in a dominant
position.

B) The majority of the requirements for this section have to do with Bean Machine's
rights of selling and possession. It is essential to be informed that the mortgagee
retains the right to reclaim any and all amounts due under the loan granted
according to the terms of the right attached with the mortgage. Additionally, the
rights of the mortgagor are guaranteed by means of being safeguarded in such
situations. Normally, the mortgage document specifies the mortgagor's right to
sell, but in cases where it does not, where the agreement is in writing and not
verbal, it can be handled in line with Section 101 of the Law of Property Act of
1925. Therefore, Bean Machine retains the authority to sell the property in the
current situation and in pursuance of the section mentioned earlier. On the other
hand, in order to exercise this right under Section 101, you must follow the
instructions in Section 103 of the LPA, and you can only do so if all of the
following possibilities are true: (i) default, followed by a three-month notice to
repay; (ii) interest that has gone unpaid for two months; and (iii) a breach of any
condition. With the previously stated details, Bean Machine may sell the property
or exercise its right to take control as long as they have delivered a notice of
such repayments. Since these details are absent from the scenario being discussed,
it can be assumed that Bean Machine has provided a notice of the loan's repayment,
which would allow it to give away the property in accordance with the preceding
details. Clukemere Brick Co. Ltd v. Mutual Finance is the case to be considered. It
should be noted that the mortgagee is not in violation of any duty owed to the
mortgagor is simply one of the factors that could potentially be considered into
this regard, that is also fair and reasonable for directing a sale as unfairness
and injustice would otherwise follow. In the same manner, in the instance of Palk
V. Mortgage Services, the court indicated the requirement presented to the court
under Section 91(2) LPA is not a necessity.

As a result of Section 95(4) of the LPA, the mortgagee is using a more realistic
strategy in this case, which is their common law right of possession. The mortgagee
may exercise its right to possession as soon as both parties sign an official
agreement, as per the Four Maid v. Dudley case scenario, as long as particularly
forbidden by the document itself. In accordance with Ropaigealach v. Barclays Bank,
the mortgagee is subject to obligations when executing his right of possession,
including the one which is that it must not entail a violation of the criminal law
stated according to the Section 6 of the Criminal Act 1977. In the context of White
v. City of London Brewery, the court further determined that the mortgagee would be
responsible to the mortgagor for any profits or losses relating to the mortgaged
property after obtaining ownership. Thus, considering the facts and circumstances,
Bean Machine has to seek secure ownership of the mortgaged property and, if they
decide to sell it, they must do so at auction in order to establish an appropriate
market value. On the other hand, Jennifer can ask the court to halt the possession
procedures or else submit an application for a declaration of sale under Section 91
of the LPA to sell it by herself. In Palk v. Mortgage Services, the court
determined that, in accordance with Section 91 of the LPA, it has the authority to
stop or postpone a mortgagee's possession procedures if it meets the requirements
that the mortgagor is requesting such a move to complete a sale. In light of the
case at hand, Jennifer must convince the judge that she has the right to sell the
property on on her own in order to fully fulfill her debt to Bean Machine.
Nevertheless, the judge in Krasuz was not given such judicial discretion according
to Section 91 until the mortgaged asset was a place of residence and falls under
the purview of Section 36 Administration of Justice Act 1970. No judge has the
authority to postpone the possession case in any other way. As a result, it is
apparent enough that Jennifer took out the loan for business purposes, even though
the home that is subject to the mortgage is a residential house. With the case at
hand, it is possible that she will be able to maintain ownership of her home,
making it unlikely that Bean Machine will be likely to seize control of the bar in
order to pay off Jennifer's debt. Additionally, Jennifer can demonstrate that her
newly formed company is likely to succeed and that she will be capable to repay the
loan within a year of when her profits begin to flow in light of the simple fact
that the loan has been granted for forty years, so a one-year reprieve will not be
too lenient in comparison to the actuality that Jennifer, who is extremely reliant
on the mortgaged property and could be experiencing severe depression after losing
her only place of safety, may not be able to present such a convincing argument.

In summary, it is up to the court's control to determine whether to grant Jennifer

the right to keep the property for an additional year while she repays the loan or
whether to give Bean Machine ownership of the property instead because they may
suffer an enormous loss if they don't get their money back because the rate of
interest was already extremely minimal.