Article
Mortgagees' power of sale and the duty to sell at market value
Legal Issues in Business
(2009)
Abstract
In times of an economic downturn and financial hardship, many homeowners face the risk of
having their homes repossessed and sold. When mortgagors are unable to pay their mortgage
loan and they default on their payments, the mortgagee, such as a bank, building society or
other financial institution that provides mortgage loans, has a right to exercise a power of sale,
providing certain requirements are met. In such circumstances the mortgagee generally acts in
his or her own interest and does not represent the interests of the mortgagor. However, over
many decades the courts have held that the mortgagee does have a duty to act in good faith
when exercising a power of sale. A question that does, however, arise is whether or not a
mortgagee has a duty to sell the mortgaged property at market value and at a favourable time
to get the best possible price. The aim of this article is to consider the mortgagee’s duty to the
mortgagor when exercising a power of sale with specific reference to the duty to act in good
faith, selling at market value and the timing of the sale. The article concludes with some
guidelines that particularly pertain to financial institutions and property valuers.
Disciplines
Publication Date
2009
Citation Information
Squelch, J. (2009). Mortgagees' power of sale and the duty to sell at market value. Legal Issues in Business, 11, 49-56