Section 185 — Property Law Act 2007: Application of proceeds of sale of mortgaged property

185 Application of proceeds of sale of mortgaged property (1) The proceeds arising from the sale by a mortgagee of mortgaged property must be applied— (a) first, to the payment of all amounts (if any) referred to in subsection (2), together with interest on those amounts at the agreed rate (if any) at which interest is payable on the principal amount secured by the mortgage: (b) secondly, to the payment of amounts secured by any other mortgage, encumbrance, or security interest over the property to the extent that it has priority over the mortgagee’s mortgage: (c) thirdly, to the repayment of all amounts (if any) paid or advanced by the mortgagee for the purpose referred to in paragraph (b), together with interest on those amounts at the agreed rate (if any) at which interest is payable on the principal amount secured by the mortgage: (d) fourthly, to the payment of amounts secured by the mortgage (to the extent that those amounts have not been paid under paragraphs (a) to (c)): (e) fifthly, to the payment of amounts secured by any subsequent mortgage, subsequent encumbrance, or subsequent security interest over the property if— (i) the subsequent mortgage, subsequent encumbrance, or subsequent security interest is registered; or (ii) the subsequent mortgage, subsequent encumbrance, or subsequent security interest is unregistered, but the mortgagee has actual notice of it: (f) sixthly, to the payment of any surplus to the current mortgagor. (2) The amounts are amounts reasonably paid or advanced at any time by the mortgagee— (a) for the protection, insurance, maintenance, preservation, or repair of the mortgaged property; or (b) for the payment of rates or other outgoings; or (c) to meet the expenses of the mortgagee in entering into possession, or in doing anything that a mortgagee in possession is required or entitled to do; or (d) with a view to the realisation of the security (including any additional amount referred to in section 120(2) or 129(2) ). (3) For the purposes of— (a) subsection (1)(b), if there is more than 1 mortgage, encumbrance, or security interest referred to in that paragraph, payment must be made under that paragraph of amounts secured by each in the order of its priority: (b) subsection (1)(e), if there is more than 1 mortgage, encumbrance, or security interest referred to in that paragraph, payment must be made under that paragraph of amounts secured by each in the order of its priority. (4) Despite subsection (1), subsection (1)(b) does not apply in relation to another mortgage, encumbrance, or security interest over the property that has priority over the mortgagee’s mortgage if— (a) the person who purchases the property from the mortgagee agrees to accept the transfer or assignment of the property subject to the prior mortgage, encumbrance, or security interest; and (b) the arrangement referred to in paragraph (a) is consented to in writing by the mortgagee under the prior mortgage, the holder of the prior encumbrance, or the secured party under the prior security interest. (5) Subsection (1) is subject to section 153 . (6) This section and section 153 — (a) apply to proceeds arising from a sale by a mortgagee of mortgaged property that are applied on or after 1 January 2008; but (b) do not apply if section 104PPA of the Property Law Act 1952 continues to apply under section 154 . Compare: 1952 No 52 s 104