Can a defaulting mortgagor be granted a sale order for a commercial property against the wishes of the mortgagee?

Background

The High Court recently considered the question whether a defaulting mortgagor (the Borrower) should be granted an order to conduct the sale of a commercial property contrary to the wishes of the mortgagee (the Lender). The subsequent judgment is of relevance to both borrowers and lenders.

The case: Fairmont Property Developers UK v Venus Bridging Ltd and others [2025]

The mortgaged property which the Borrower (Fairmont Property Developers UK) defaulted on was a commercial property. Once the Borrower defaulted, the Lender (Venus Bridging Ltd) appointed receivers to sell and market the property. The receivers marketed the property, however, the Borrower was subsequently granted an interim injunction which stopped the Lender and receiver from selling and marketing the property, as the Borrower claimed the Lender and receiver were selling the property at an undervalue, which would likely leave a shortfall.

The Borrower applied to continue to restrain the Lender and the receivers from selling the property, while the Borrower also sought an order under Section 91 of the Law of Property Act 1925. This would allow the Borrower or anyone entitled to redeem the mortgage to market and deal with the sale of the property for a 180-day period to achieve a higher sale price.

High Court Judgment

The Borrower’s application was rejected by the judge citing the following reasons:

• Unless there are exceptional circumstances, the court will not intervene in a sale of a mortgaged commercial property when the Lender is entitled to exercise its rights to sell once the Borrower has defaulted.
• The test of the court’s power relating to Section 91 of the Law of Property Act 1925 (Palk v Mortgage Services Funding plc [1992]) requires identifiable, not just trivial, unfairness to the Borrower. The fact the sale was likely to leave a shortfall was not sufficient because it was determined that, on the balance of probabilities, the proposed sale of the property by the receivers was not likely to be at an undervalue.
• If the application was granted, the Lender, for the period of the order, would be unable to sell the property when there was a good chance of a sale occurring, whilst there would be a risk of no sale from the Borrower’s attempt to sell the property.

Conclusion

Lenders should take comfort from this judgment, as the courts will generally not intervene and uphold a Lender’s right to enforce its security and sell a property. However, the judgment does show there is still scope under Section 91 of the Law of Property Act 1925, where the court may exercise its power to allow the Borrower to sell the property. Lenders should take note of these circumstances to ensure that they have the right to dispose of the secured property.

Our Real Estate Finance team acts for both borrowers and lenders and aims to ensure all transactions are swift, expertly facilitated and remain on track to a satisfactory conclusion. If you have any questions about any issues raised above, or need advice in relation to a finance document, please get in touch to find out how we can help.