Burnley Borough Council wished to acquire a property, subject to a mortgage in favour of the Bank of Scotland, under s.15 Compulsory Purchase Act 1965. The property was in a state of disrepair and the valuation was significantly less than the mortgage. The question was what was the correct sum the Council should pay for the property.
A compensation amount of £28,000 was granted a sum higher than the valuation, but significantly less than the mortgage. The sum was decided on the basis that it was beneficial for the mortgagor by the further reducing the debt.
As the COVID-19 pandemic continues and the threat of a double dip recession becomes more likely, it is increasingly probable that negative equity will become common once more. As borrowers struggle to keep up monthly repayments and lenders find themselves increasingly under-secured, undoubtedly, lending criteria will be tightened.