Does a mortgagee (whether it be a bank or other lender) have to get the best price when it forcibly sells a property?

With interest rates rising and with it the potential increase of people defaulting on their mortgages, this question becomes more relevant. The issue was considered by the Supreme Court of Victoria in a recent case 1.

What is the law?

The law says as follows 2:

"In exercising a power of sale in respect of property of a corporation, a controller must take all reasonable care to sell the property for:

  • if, when it is sold, it has a market value--not less than that market value; or
  • otherwise--the best price that is reasonably obtainable, having regard to the circumstances existing when the property is sold."

The test applied by the Courts is whether the lender "... has failed to do what a reasonable and prudent person would do ....".

There is also a principle that the lender may sell at the time of its choosing and does not have to wait until a time when a better price might be obtained.

What was the complaint in this matter?

In this case, the lender took possession of the property and sold it for $7 million. The property owner complains that:

(a) the sales campaign was too short;

(b) the proposed advertising strategy was inapt in that it gave undue prominence to the fact of the sale being a mortgagee sale; and

(c) the lender should have extended the campaign into 2021 in light of the quality of the offers that it had received rather than entering into the Sale Contract.

The property owner said that had the lender sold it for the best possible price it would have sold for $7.8 million.

What did the Court find?

The Court found that the lender engaged experienced agents and appropriately mentioned that it was a mortgagee sale (in accordance with the usual practice).

The Court found that the sale was appropriate.


When a lender sells a property it must take all reasonable care to obtain market value or the best price. Unfortunately this does not always accord with the property owner's perception of the best price.

An objective review of the sale price (supported by valuation evidence) is required before any action is commenced, taking into account that a lender can sell at the time of its choosing.


1Manda Capital Holdings Pty Ltd v PEC Portfolio Springvale Pty Ltd [2022] VSC 381

2 Section 420A(1) of the Corporations Act 2001

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