Santander refusing to discharge mortgage

Lamma

My mother has an interesting situation with Santander. It involves two loans.

The first loan is the mortgage on the marital home, which currently amounts to around £17K.

The second involves a "home improvement loan" subsequently obtained from Santander by my father many years ago (currently amounting to about £65,000). It was not used for home improvement, however, but as capital for my father's business (as stated specifically on the application form). My mother's signature was forged on the loan application document. In addition, it transpires this loan was unsecured, so no charge was ever entered against my parents' house. My father died several years ago. Finally, and to cut a long story short, my mother has not subsequently ratified this loan.

My mother wants to pay the balance due on the mortgage, whose term has now expired. Santander will of course take her money but has stated that "the first mortgage cannot be legally discharged unless the second account is paid back". I dont see how this can be correct given that no security was obtained for this loan.

Can anyone shed any light on this? Assuming the bank is wrong, what are my mother's options? I am assuming she could bring a redemption suit against the bank to force them to formally discharge the security, but is there any other way to approach this?

kingstreet

Yes. It's called an "all monies charge."

Lamma

I am familiar with the concept, but there is no "all monies charge" clause in the mortgage. AFAIK, these clauses usually apply where there is also a current account held by mortgagor(s) with the mortgagee bank. Anyway, it seems unlikely they could operate to bind a co-mortgagor in the case of a later loan where the co-mortgagor was unaware of the existence of the loan and whose signature was forged?

TrickyDicky101

Have you sight of the original mortgage documentation (and were there any subsequent agreements eg new fixed rates since initial inception) as I would expect the 'all monies charge' to be evidenced in one of them?

Like you say, interesting situation - please keep us informed as the situation progresses.

Lamma

There is certainly nothing in the original mortgage agreement (which originated in the 1970s). As a matter of interest, is it normal for banks to include this type of clause in a standard home mortgage?

I'll have to check to see if there were any other subsequent agreements, though I dont know of any. Anyway, I would have expected that by now the bank would have disclosed the existence of the clause if there were one. So far, Santander's complaints department have tried to claim the second loan is enforceable against my mother by virtue of the fact that correspondence relating to it was addressed jointly to both my parents at the matrimonial home, where they lived. I dont think that gets them very far, for various reasons, but thats straying into another area...

cns06

If they are digging in on their position I would suggest you are going to need a solicitor.

DandelionPatrol

Leave aside 'all monies' for the moment, because, although possibly true, this is not the relevant insight. Indeed it could lead you right up the garden path over removing the charge on the property. While the charge should rightfully be removed because the mortgage is repaid, another charge might equally rightfully be placed on the property to cover whatever part of the £65,000 is recoverable. So don't bother until you have addressed the rest of what is in this post

The relevant truth is that Father's estate owes Santander £65,000. So where is that £65,000? Whatever cash Father left to Mother or to anyone else up to £65,000 is rightfully Santander's. And if the house was owned 'tenants in common', half the value was part of Father's estate. But if the house was owned 'joint tenants', then it was outside the estate, and if Father left less than £65,000 he would have died insolvent. [joint bank accounts also sit outside the estate, AIUI].

Sorry for the bad news, that up to £65,000 may be due to Santander. Some relief may be possible if the executors advertised in the London Gazette, but I believe this only protects executors and administrators - it still leaves beneficiaries open to claims. It is obviously going to be awful to unscramble. However, I believe it will be less expensive to start with the correct analysis of the situation and deal with it accordingly than to start with a battle over lifting a charge, because that will still leave exactly the same claim from Santander to be addressed.

What is required now is to go back to the disposal of his estate and recover all of the money up to £65,000 to pay off Santander. If this sum is covered, job done. If the estate was not worth £65,000, then the argument of the fraudulent signature comes into play and I believe Santander should stand the loss. It would also be relevant to consider whether the business still exists and if it does, the terms of disposal to the current owner

If the whole value of the estate [up to £65,000] is no longer available, then Santander might have grounds to place a charge on the property [eg if Mother does not have all the money she inherited from Father], which is why I suggest that trying to lift the charge off the property is not the right place to start. Once the whole value of the estate [up to £65,000] has been returned to Santander - or at least the whole of any monies which went to Mother, I believe that Santander should lift their charge, but this will require establishing the fraudulent nature of the loan if there is any shortfall.

A further thought. Recovery of the £65,000 should be dealt with by Father's executor, lifting of the charge should be dealt with by Mother. If Mother is also the executor, she must be very clear about which capacity she is writing in and she must be very careful to avoid muddying the waters by writing any letter in both capacities.

As suggested above, consider professional help, particularly in relation to Father's estate.

Lamma

Thanks for that insightful reply. I do accept the point that in principle my father continued to owe £65,000 to the bank. I also accept that the bank could normally enforce an equitable charge that could attach his beneficial interest in the house in satisfaction of the loan (and beyond that to other assets in his estate).

This is problematic for the bank, however, because my father was made bankrupt in 2002. His business (also insolvent) was wound up and his remaining assets then vested in the trustee in bankruptcy. My mother subsequently bought out my father's interest in the house from the trustee. If the bank was indeed an unsecured creditor, it should have proven in the bankruptcy, so the complications relating to his estate after his death are thankfully removed.

You are right, though, to point out the complexities of this area of the law. There are also a number of other routes mortgagees in this situation might take to recover their money, including subrogation, estoppel, and monies had and received. We are lucky to have a lawyer in the family but this remains a specialist field and dealing with all the various possibilities is like playing wack a mole...

DandelionPatrol

Lamma wrote: »

I do accept the point that in principle my father continued to owe £65,000 to the bank. I also accept that the bank could normally enforce an equitable charge that could attach his beneficial interest in the house in satisfaction of the loan (and beyond that to other assets in his estate).

This is problematic for the bank, however, because my father was made bankrupt in 2002. His business (also insolvent) was wound up and his remaining assets then vested in the trustee in bankruptcy. My mother subsequently bought out my father's interest in the house from the trustee. If the bank was indeed an unsecured creditor, it should have proven in the bankruptcy, so the complications relating to his estate after his death are thankfully removed.

You are right, though, to point out the complexities of this area of the law. There are also a number of other routes mortgagees in this situation might take to recover their money, including subrogation, estoppel, and monies had and received. We are lucky to have a lawyer in the family but this remains a specialist field and dealing with all the various possibilities is like playing wack a mole...

OK, the bankruptcy puts a very different slant on this, which probably clears up most of the issues.

From Santander's point of view, they have an unsecured loan agreement for £65,000 enforceable against just your Mother now. If the loan was unsecured, it is no longer enforceable against your mother because of Limitations. Santander might argue that it is secured by virtue of an 'all monies' clause. But I would say that there is no real point arguing over 'all monies' or arguing over 'secured' vs 'unsecured'. What goes to the crux of the matter is that the loan was obtained by fraud.

[IANAL in any way shape or form] I think that the best way for ward with this is to deal with the issues as directly as you can. Start proceedings in correspondence to have the charge lifted on the grounds that the loan was obtained by fraud and that Mother was never a party to it [but line up other arguments such as the loan being unsecured and being included in the bankruptcy and statute barred in any case].

If it gets to court, seek a declaratory judgement that Mother was never party to the loan. Hopefully, this would be granted, subject to good evidence. Once this is achieved, Santander would have no real case left and ought to just lift the charge unless they are using a call centre supervisor to manage their side.

silvercar

I have heard of similar. We were in a house chain where the lady owner of the house was selling and the sale delayed because her late husband had secured business loans against the property without her knowledge.

We pulled out of the house purchase, but I do know that the house was sold 2 years later, so it took time to resolve, but I don't know the result was the loans being paid off. Not much help, other than to say there may be precedents in law.

Cheeky_Monkey

Can Mother prove that her signature was forged?

Surely Santander or a Court wouldn't just take her word for it?