Do I have any redress re. a possibly missold equity release scheme!

Moby

I am dealing with my parents estate. I have discovered that in 2004 my father re-mortgaged the family home through an equity release scheme. He took a loan of about 45K. He and my mother then became ill in the following years and both have now passed away. They made no re-payments on the loan. The interest repayments on the loan have been about 5k a year over the last 10 years so the outstanding debt is now about 95K.

Due to illness my parents also did not look after the property. It has now been valued at about only 125K due to it's poor condition. I would really appreciate some advice:-

I'm worried that soon the interest repayments will overtake any remaining value in the property. I and my three siblings are already aware that our inheritance has all but disappeared:(
Is there any redress I have for misselling at all in relation to this equity release. My parents did sign up to it but they were being charged 6% a year, year after year and there is no record of correspondence advising my parents in the following years. Or is a complete non starter and we just have to 'suck it up' so to speak!

As the sibling taking on responsibility for administration of the estate could I be personally held responsible to pay back any outstanding loan amount on this property should it turn out to be more than any remaining equity in the house when we finally manage to sell it?

Nearlyold

What would your miss sale reason be given that the scheme seems to have worked in the way that equity release schemes are meant to work.


The estate would be responsible for the debt not you personally HOWEVER in administering the estate you have to act responsibly i.e. you have to take into account the debt (should there be one) when distributing monies from the estate - you can't for example take your "inheritance" out of any funds that might be available (bank accounts etc.) leaving insufficient to cover any debts.


You also need to look at the terms of the equity release scheme to see how any negative equity would be treated.

dunstonh

Is there any redress I have for misselling at all in relation to this equity release.

You have failed to give a single reason as to why you think it was mis-sold. So, based solely on what you have said, the answer to that is no.

My parents did sign up to it but they were being charged 6% a year, year after year and there is no record of correspondence advising my parents in the following years.

That rate is consistent with equity release. So, no issues there.

As the sibling taking on responsibility for administration of the estate could I be personally held responsible to pay back any outstanding loan amount on this property should it turn out to be more than any remaining equity in the house when we finally manage to sell it?

No. If the estate is negative, then there is no inheritance. You cannot distribute any wealth to anyone knowing that this is a possibility. If you have, then it would need to be clawed back should the estate go negative. The only liability you have as executor is if you distribute things that should not have been distributed then you can face action.

magpiecottage

Your parents' debts are their own. You cannot inherit them.

There are some exceptions. As Nearlyold says, you do need to distribute the estate responsibly and clear any debts first although you can meet reasonable expenses (including funeral expenses) out of any assets first.

Other exceptions would include any debt to which you were a party (such as a joint loan or mortgage) and if they had absolutely nothing you could find you had to pay funeral costs. Things like making the property secure and insuring it pending sale would be expenses you could meet out of any cash available, though.

However, a mortgage is a secured debt. The lender gets first call on the sale proceeds. If there is not enough to clear it they then join all the other unsecured creditors.

However, in 2004, most equity release providers were members of a scheme called SHIP - Safe Home Income Plans. It had two rules that would be very significant to your situation. The first is that the borrower must, in all cases, be given independent legal advice.

This means a misselling complaint about a SHIP scheme is easily sunk (ha ha!).

The other is that all members must proved a no negative equity guarantee. This means that on selling the property they will take back the amount owed or the amount raised by the sale - whichever is lower. If it does not produce enough then they will write off the shortfall.

If the lender was not a SHIP member it will, still almost certainly have fallen under the jurisdiction of the Financial Ombudsman Service, so you could complain. If necessary, you could then ask the Financial Ombudsman to take account of what was considered good practice at the time and suggest that good practice was in accordance with what SHIP required - including the no negative equity guarantee.

The

Moby

Thank you for the advice. I have another question in relation to this equity release mortgage. My mother died at the beginning of February. Can the mortgage company continue to charge interest on the loan after her death (until the property is sold) or does any liability stop with her death?

Insider101

Moby wrote: »

I am dealing with my parents estate. I have discovered that in 2004 my father re-mortgaged the family home through an equity release scheme. He took a loan of about 45K. He and my mother then became ill in the following years and both have now passed away. They made no re-payments on the loan. The interest repayments on the loan have been about 5k a year over the last 10 years so the outstanding debt is now about 95K.

Due to illness my parents also did not look after the property. It has now been valued at about only 125K due to it's poor condition. I would really appreciate some advice:-

I'm worried that soon the interest repayments will overtake any remaining value in the property. I and my three siblings are already aware that our inheritance has all but disappeared:(
Is there any redress I have for misselling at all in relation to this equity release. My parents did sign up to it but they were being charged 6% a year, year after year and there is no record of correspondence advising my parents in the following years. Or is a complete non starter and we just have to 'suck it up' so to speak!

As the sibling taking on responsibility for administration of the estate could I be personally held responsible to pay back any outstanding loan amount on this property should it turn out to be more than any remaining equity in the house when we finally manage to sell it?

Sorry to hear about your loss.

Equity release, like anything, CAN be missold and due to its specialist and high risk nature, specific qualifications are required to advise on it. If you consider it to have been missold then you can put in a complaint about it. However, it isn't missold just because your parents had it. It is a legitimate and fair product in the right situation. So it's up to you to consider whether you believe there was any wrongdoing. As regards the rate of interest, this would have been agreed at the outset, it is a fixed rate and charged for the lifetime of the borrowing.

In answer to the second point, a lot of lifetime mortgages have a no negative equity guarantee which will protect against situations like the one you have described. So it's always worth checking with the lender. But if it doesn't then whilst any debt over the value of the house can be enforced against the estate (i.e. they can claim against your parents other assets), if there are no other assets then they cannot claim against you or any of the other beneficiaries.

Hope that helps.

Insider101

Moby wrote: »

Thank you for the advice. I have another question in relation to this equity release mortgage. My mother died at the beginning of February. Can the mortgage company continue to charge interest on the loan after her death (until the property is sold) or does any liability stop with her death?

Unfortunately, no it doesn't. On death, the debt passes to the estate. The lender is still owed their money. So interest can be accrued until such a time as the estate repays the debt.