A unilateral notice (UN) is available to protect an equitable chargee's ranking and should not impede the sale of properties as purchasers will take the property free of the charge.

This was confirmed in Valais Ltd v Clydesdale Bank plc t/a Yorkshire Bank. The claimant was the proprietor of a registered charge over four properties and was also mortgagee in possession. The defendant had entered a UN against the properties to protect the equitable mortgages it held over the properties. The claimant wished to sell the properties at auction but sought to remove the UN first, following advice that it would put purchasers off the properties.

The court held that the nature of, and reason for, the unilateral notices would be clear to the potential buyers in this instance. Unlike a caution under the regime prior to October 2003, the UN did not caution against all dealings but conferred priority on a valid interest. The UN here protected the defendant's status as equitable chargee ranking in priority after the claimant. The defendant's interest was overreached by the sale. It was entitled to payment only from any surplus after the claimant had been paid in full. The purchasers would take the property free of the charge and so should not be put off purchasing.

Things to consider

There would appear to have been a misconception here as to the protection that this particular UN afforded. For equitable mortgagees, it is essential to obtain and retain protection (whether by way of noice or restriction) to ensure that the ranking of priority is maintained.