Court Order for Sale

General

A court order for sale will not generally be required. Usually, it will be possible to exercise the power of sale “out of court” with tenants in place or with vacant possession secured by surrender, peaceful possession or by court order.

There are some circumstances in which a court order for sale is necessary or desirable. A loan agreement which requires that security is to be provided, is an equitable mortgage. This is because it is an agreement by the borrower to grant the security. If for whatever reason, the security has not been completed and registered in the Land Registry, the lender’s right to have this done is an equitable mortgage. This can be protected in the Land Registry by a restriction or notice.

The mortgagor himself may apply to court for an order of sale. A court will not order a sale, if the proceeds will not cover the debt, other than in highly exceptional circumstances. If the mortgagee can demonstrate some tangible benefit, of which he will be denied if a sale is ordered, the court will rarely exercise its discretion against its  wishes. This would occur if the proceeds would not discharge the mortgage debt, leaving an unsecured shortfall.

The court has power to direct sale of a mortgaged property in any claim for foreclosure and redemption on the request of the mortgagee or on the application of any person interested in the mortgage money, including later mortgagees.

There is generally no absolute right to require a sale. The court has an element of discretion to grant or withhold a sale.

Conduct of Sale

Where an order for sale is ordered, the conduct of the sale will usually be given to the mortgagor, if the proceeds of sale are likely to be sufficient to discharge the debt.  A sale may be made out of court, but the reserve price must be fixed by the court. The purchase price must be paid into court.

The court has power to order a sale in any proceedings relating to land. The court may  order that any party delivers up to the purchaser or any other person,  possession of the land and or receipt of rents or profits relating to it.

Where land subject to a mortgage is sold, any party may apply to the court for a direction in relation to the disposition of the sale proceeds. The directions a court may give on such an application include a direction for the payment into court of a sum of money that the court considers sufficient to meet the value of the mortgage and further costs, expenses and interest that may become due on or in respect of the mortgage.

Court Directions

Where a payment into court has been made in accordance with a direction, the court may declare the land to be freed from the mortgage and may make any order it considers appropriate relating to the money in court and the income thereof.

Where the court has made an order for sale it may give any other directions it considers appropriate for giving effect to the order. In particular the court may give directions –

• appointing a party or other person to conduct the sale;
• for obtaining evidence of the value of the land;
• as to the manner of sale;
• settling the particulars and conditions of the sale;
• fixing a minimum or reserve price;
• as to the fees and expenses to be allowed to an auctioneer or estate agent;
• for the purchase money to be paid into court, to trustees; or  to any other person;
• for the result of a sale to be certified;

Where the court has made an order for sale and a party to the court proceedings  wishes to bid for the land, he should apply to the court for permission to do so before the sale takes place. If the court gives permission to all the parties to bid, it may appoint an independent person to conduct the sale. ‘Bid’ includes submitting a tender or other offer to buy.

If the court has directed the purchase money to be paid into court; or the court has directed that the result of the sale be certified, the result of the sale must be certified by the person having conduct of the sale.

The certificate must give details of

• the amount of the purchase price;
• the amount of the fees and expenses payable to any auctioneer or estate agent;
• the amount of any other expenses of the sale;
• the net amount received in respect of the sale;
• and must be verified by a statement of truth.

The certificate must be filed in the court where the proceedings are being dealt with.

Where the court has ordered the sale of land, the auctioneer’s and estate agent’s charges may include commission; fees for valuation of the land; charges for advertising the land; and other expenses and disbursements. If the total amount of the auctioneer’s and estate agent’s charges does not exceed 2.5% of the sale price; and does not exceed the rate of commission that that agent would normally charge on a sole agency basis, the charges may be met by deduction of the amount of the charges from the proceeds of sale without the need for any further court order.