power of sale

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1 The right of a mortgagee to sell mortgaged property if the mortgagor has not repaid his loan by the contractual date of redemption. This power arises when the contractual date (stated in the mortgage document and usually very early in the period of the mortgage) has passed, but may only be exercised if interest due under the mortgage is two months in arrears, if there has been a breach of certain terms in the mortgage by the mortgagor, or if notice has been served on the mortgagor to repay the loan and the loan (or part of it) has not been repaid within three months of the notice. If the mortgagee sells the property under the power of sale, he owes a duty to the mortgagor to act with reasonable care (Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949) and hold on trust any money surplus to that needed to pay his expenses and mortgage debt for the mortgagor's benefit. Certain types of mortgagee (such as building societies and local authorities) have a statutory duty to take care to obtain the best price that can reasonably be obtained through the exercise of the power of sale.

2 The right of a tenant for life under the Settled Land Act 1925 to sell the settled land for the best price in money that can be obtained. Such a sale overreaches the interests of the subsequent beneficiaries.

Subjects: Law.

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