The duty of a mortgagee in possession on a sale
The issue in the recent High Court case of Aodhcon LLP v Bridgeco Ltd was whether a bridging loan company had taken reasonable care to sell the property at the best price reasonably obtainable.
Aodhcon was a special-purpose company established to develop a property. It sought a bridging loan from Bridgeco to complete the redevelopment of the property and to enable it to repay its bank loan. Bridgeco obtained a mortgage valuation, which indicated that, as of March 2010, the value of the property with vacant possession was £1.4m or £1.25m on a 90-day sale.
Bridgeco advanced £750,000 over a six-month term, secured by way of a first legal charge over the property. Aodhcon proved unable to sell the property and voluntarily delivered up possession to Bridgeco. In March 2011, Bridgeco exchanged contracts with a third party for a sale price of £852,000…
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