The Luton Bank Case Essay Example | Topics and Well Written Essays - 1000 words

The Luton Bank Case - Essay Example In 1996 the bank appointed receivers in relation to the properties which were then sold over an 18 month period. The mortgagors complained that the properties had been sold at an undervalue and claimed that: 1) in some cases a far better price would have been obtained had the receivers or mortgagees first obtained planning permission for development. Planning permission had previously been sought but the receivers decided not to wait for it to be granted before selling; 2) in other cases a better price would have been obtained had possible leases of the vacant properties been completed before sale. (see MacKenzie and Phillips, 2008, pg 477). In deciding the case the Court of Appeal considered the duties owed by mortgagees in these circumstances. Several duties were highlighted, which will now be considered in turn. Firstly, a mortgagee in possession must take reasonable care of the premises (Downsview Nominees Ltd v First City Corporation Ltd (No.1) [1993] AC 295). Secondly, it must be remembered that a mortgagee is not a trustee of his powers. This means that the mortgagee may sell whenever he chooses and does not have to have regard to whether a different time may be more beneficial to the mortgagor (Raja v Austin Gray (a firm) [2002] EWCA Civ 1965). In this case, therefore, the bank does not need to wait until the property market has recovered before they can sell the property (Gray and Gray, 2007, pg 534. The mortgagee is also under no duty to improve the position of the property before selling, but may instead sell it ‘as is’.