Mortgage - Power of Sale

When a mortgagee has taken security over a property, under the Real Property Act, and the mortgagor defaults in paying the principal or interest it may become necessary to realise the security by selling the land. Alternatively, if you are a mortgagor and you have not defaulted under the loan (which is secured over your property) you may wish to restrain a mortgagee from selling your property. In some rare cases a mortgagor may want to seek an order from the court allowing him/her to sell the property instead of permitting the mortgagee to exercise its power of sale.

Court proceedings of this kind ordinarily take place in the Supreme Court of New South Wales and are often commenced by summons (or statement of claim) seeking the appropriate relief. Evidence is often given by way of affidavit. It is not unusual for matters of this kind to involve both interlocutory and final relief.

Under the Real Property Act the power of sale is set out in section 58, and in most cases will require that an appropriate notice be served under section 57 (2) (b) of the same legislation.

Potential Scenarios - Involving a Mortgagee's Power of Sale Under A Mortgage

  • Mortgagee Rights - You are a mortgagee (e.g. bank) and your mortgagor (property owner) has failed to pay the principal, interest or other monies secured by the mortgage so that you now need to send an appropriate notice and sell the property;
  • Mortgagor Rights - You are a mortgagor and the mortgagee (a.k.a. bank/lender) issued a defective notice to you requiring payment under threat of selling the property and you want to stop the power of sale;
  • Rights of Mortgagor - your bank refused to accept payment of the outstanding mortgage monies and has since commenced proceedings to sell your property;
  • Mortgagor Rights - you want to contest the validity of a mortgage on the basis that there was misleading or deceptive conduct, the terms are extraordinary harsh or there is something else that affects the validity of the mortgage;
  • Rights of Mortgagor - your bank/lender sold your property, following the issue of a default notice, and during the course of selling the property it breached its obligations of "good faith" to you causing the property to be sold at an undervalue and now you wish to claim damages;
  • Also if you as mortgagor need to approach the court for urgent relief to restrain a power of sale by way of an injunction stopping the bank from selling the property (i.e. stop the power of sale) and you are prepared to pay the outstanding mortgage monies into court.

Important Quotes in Disputes Involving the Power of Sale

In Westpac Banking Corporation Ltd v Kingsland, Cole J (as he then was) held that a mortgagee in possession is not obliged to (1) sell at all or at any particular time (see 704G-706D), (2) to lease or permit occupation of premises at any particular time (see 707B-C), (3) or to exercise its power of sale in circumstances where its exercise would extinguish the liability of its debtors and guarantors (707F-709F), even if the debtor or the guarantor believed that he was suffering damage by failure of the mortgagee to exercise the power to sell it (705B-C). In relation to the first and last propositions, his Honour relied on China & South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536. - Commonwealth Bank of Australia v Thompson [2013] NSWSC 149

Let Us Help You

  • Approach the Court for an order for possession if you are the mortgagee (assuming you have such rights);
  • Run or contest proceedings regarding a bank or lender's power of sale (as appropriate);
  • Apply for urgent relief to restrain a sale of property (if you have the rights to do so).

Contact our property dispute lawyers for more information.

Talk to a Dispute Lawyer today!

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