What is a Mortgagee Sale?

If you fail to make the payments due under a mortgage on your home, the bank (the "mortgagee") has the right to call up the loan amount through exercising the powers contained in the mortgage contract. Usually this is done through the power to sell the property.

The mortgagee must, however, fulfil certain strict legal requirements, including serving you (the "mortgagor") with the proper notice. If these requirements aren’t met then you may be able to apply to the court for a remedy.

A Mortgagee must serve you with notice before taking action, the mortgagee must serve you with a notice under section 119 of the PROPERTY LAW ACT 2007 (PLA). This notice must adequately inform you of:
  the nature and extent of the default complained of (that is, the amount by which you are in default)
  the date by which you must remedy the default
  the rights that the mortgagee is entitled to exercise if you don’t remedy the default by the specified date

The date specified must be at least four weeks from the date on which the notice is given.

If you receive a notice from your mortgagee that does not comply with the legal requirements, you may be able to apply to the court for an injunction to prevent the sale going ahead. Further, if the mortgagee exercises the power of sale before the date specified in the notice, you may also be able to apply to the court for a remedy. For legal advice talk to your lawyer.

The mortgagee has a statutory duty to take reasonable care to obtain the best price reasonably obtainable as at the time of sale. If the mortgagee breaches this duty, you can apply to the court for a remedy.

To satisfy the duty the mortgagee must adequately market the property, which may involve advertising outside the local area, giving notice of the property’s advantages (including the potential for any development), and setting a realistic reserve price based on the property’s valuation.

There are three ways of exercising the power of sale. The mortgagee can exercise the power of sale in one of three ways:
  sale through the High Court Registrar
  sale through public auction
  a private sale
  sale through the Registrar

If the mortgagee chooses to exercise its power of sale through the High Court Registrar, it must apply to the Registrar and notify the Registrar of the name and address of the mortgagor and of any other mortgagee. The Registrar must be satisfied that the mortgagee is entitled to exercise its power of sale.

A mortgagee is entitled to buy the mortgaged property only if the sale is conducted through the Registrar.

You do have the right to redeem the property. There is a small degree of protection afforded to you, the mortgagor, through the "redemption price" – this is the price at which you may redeem the land to be sold. At any time before the Registrar’s sale you may pay the redemption price or the amount due and owing under the mortgage; the mortgagee must then release the mortgage.

This is normally done through refinancing the mortgage, but you are unlikely to be able to get another loan from a bank. This will mean instructing a mortgage broker to approach second tier lenders, which may charge higher interest rates and may also have additional loan fees depending on your equity in the property. However this is generally a short term solution so you can arrange your affairs and either refinance the property in 6 months to retain the equity or sell the property in an orderly sale.

Property Law Act 2007

If you have fallen behind in paying your mortgages and the bank can eventually sell your property.

If matters cannot be sorted out at this time and arrears continue, the bank or finance company will issue a Property Law Act notice or PLA. This gives you the home owner a specified period (of not less than 4 weeks) to pay the whole amount outstanding. If the home owner cannot do that, the bank can take steps to sell the house.

For detailed information on the Property Law Act 2007 please contact your solicitor.

If you have been issued a Property Law Act notice then we strongly advise you contact your solicitor.

Call Steve McGowan - Mortgage Broker/Adviser on 0800 ADVOCO (0800 238 626) for a free consultation.

 

Call us on 0800 ADVOCO (0800 238 626) or email us.

Some of the 107 homes Steve has saved from the auctioneers hammer!

King George Avenue, Epsom.

Williamson Avenue, Grey Lynn.

Khyber Pass, Grafton.

Ivy Place, Birkdale.

Evandale Street, Glen Innes.

Whangaparaoa Road, Whangaparaoa.

Layton Road, Manly.

Kenwick Place, Pakuranga.

Scenic Drive, Swanson.

Port Waikato Road, Tuakau.

Layton Road, Manly.

Eyre Street, Henderson.

Edinburgh Street, Pukekohe.

Ivon Road, East Tamaki.

Hillsborough Road, Mt Roskill.

Israel Avenue, Clover Park.

Dawson Road, East Tamaki.

Howell Street, Mt Roskill.

Lake Road, Devonport.

Rangatira Road, Birkdale.

Levesque Street, Birkdale.

Alidade Place, Massey.

Otaua Road, Waiuku.

Ambler Avenue, Glen Eden.

Trojan Crescent, New Lynn.