Sch SECOND para 5
(1) Where a payment falls to be made under .the last foregoing paragraph in respect of any person's interest in a house and at the date when the house was purchased compulsorily or, as the case may be, vacated, that interest was the subject of a mortgage or other charge or an agreement to purchase by instalments, either party to the mortgage, charge or agreement may apply to the county court who, after giving to the other party to the mortgage, charge or agreement an opportunity of being heard, may, if the court thinks fit, make an order— (a) in the case of a house which has been purchased compulsorily, discharging or modifying any outstanding liabilities of the person aforesaid by virtue of any bond, covenant or other obligation with respect to the debt secured by the mortgage or charge or by virtue of the agreement, or (b) in the case of a house vacated in pursuance of a demolition order, closing order or clearance order, discharging or modifying the terms of the mortgage, charge or agreement, and in either case either unconditionally or subject to such terms and conditions, including conditions with respect to the payment of money, as the court may think just and equitable to impose. (2) In determining in any case what order, if any, to make under this paragraph, the court shall have regard to all the circumstances of the case, and in particular in the case of a mortgage or charge— (a) to whether the mortgagee or person entitled to the benefit of the charge acted reasonably in advancing the principal sum on the terms of the mortgage or charge, and (b) to the extent to which the house may have become unfit for human habitation owing to any default on the part of the mortgagor or person entitled to the interest charged in carrying out any obligation under the terms of the mortgage or charge with respect to the repair of the house, or, in the case of an agreement to purchase by instalments, to how far the amount already paid by way of principal, or, where the house has been purchased compulsorily, the aggregate of that amount and so much, if any, of the compensation in respect of the compulsory purchase as falls to be paid to the vendor, represents an adequate price for the purchase; and for the purposes of paragraph (a) of this sub-paragraph the mortgagee or person entitled to the benefit of the charge shall be deemed to have acted unreasonably if, at the time when the mortgage or charge was made, he knew or ought to have known that in all the circumstances of the case the terms of the mortgage or charge did not afford sufficient security for the principal sum advanced.