In reaching his verdict at the High Court of Justice, High Court Appeal Centre Bristol, Mr Justice Birss said it was “impossible not to feel sympathy for the position Mrs [Paula] Fletcher has found herself in”.
However, he noted that Santander’s claim to the charge over the property was valid following the fraud enacted by her son Ashley Fletcher.
As a result of the fraud the home was mortgaged to Santander for a much larger loan of £120,995 than the £31,250 Ashley had led his mother to believe.
Ashley Fletcher has since been convicted of fraud and was jailed for 14 months in September 2015.
Santander said it appreciated the sensitive situation and wanted to find a mutually supportive result.
Lawyers have since warned that lenders may need to take further notice about the ownership history of a property in the run-up to a mortgage application for the risk of undue influence being exerted.
Paid off in one month
In November 2011 Paula Fletcher made her son a joint owner of her property in Plymouth.
On the same day she signed an “agreement statement” document drafted by Ashley explaining he wanted to raise an Enterprise Finance Loan of £125,000 with 25% required to be secured, so he needed to secure £31,250 on the property.
The document refers to having to put his name on the deeds and asserts that the loan will be paid off in full within one month.
The mortgage application in the names of both mother and son was dated 15 December 2011 with completion on 16 January 2012 when the money was paid to Ashley’s sole account.
Santander initiated proceedings when the loan was not repaid. The debt stood at about £160,000 in May 2017 and has continued to increase.
Impossible not to feel sympathy
Mrs Fletcher appealed the initial court ruling that Santander could take possession of Ashley’s share, arguing that her son did not have a beneficial interest in the property.
However, despite the arguments put forward, Justice Birss decided that the bank may still have an equitable charge over the beneficial interest of the other party.
“Listening to [the solicitor’s] submissions on Mrs Fletcher’s behalf it is impossible not to feel sympathy for the position Mrs Fletcher has found herself in but in the end in my judgment this appeal must be dismissed,” he said.
He concluded: “Overall, despite the submissions made on Mrs Fletcher’s behalf, I am not persuaded that it would be unconscionable for the bank to enforce its equitable charge over Ashley’s beneficial interest in the property.”
Sympathetic to the situation
Santander told Mortgage Solutions: “We are very sympathetic to Ms Fletcher’s situation and we are seeking to find a solution that helps both parties.
“Unfortunately, Ms Fletcher’s son (Ashley Fletcher) succeeded in being added to the deeds of the property – and secured a loan on 88 Seymour Road, Plymouth.
“Santander is owed the money Mr Fletcher obtained – and this debt is secured against the property that the deeds show as being jointly owned by Ms Paula Fletcher and Mr Ashley Fletcher,” it added.
Lenders should understand ownership history
Reviewing the case, Stevens & Bolton partner Jonathan Porteous and senior associate Matthew Padian agreed that the outcome of the case sounded “terribly unfair” as Mrs Fletcher now risked losing her home.
But they warned it was a stark reminder of the potential hazards associated with the transfer of property interests for nil consideration.
“For property lenders, the case illustrates the importance of understanding the ownership history of the property in question,” they said.
“Lenders need to be alive to the risk that property transfers made in the run-up to a proposed financing might be tainted by undue influence. Lenders will be well aware of such risks in certain transactions such as when taking personal guarantees.
“Here, such risks were less obvious but had the case been pursued differently, the outcome for the lender might have been worse,” they added.
The firm noted that had Mrs Fletcher’s counsel explored whether the property transfer was procured by mistake, the judge could have considered whether she had any right to rescind the declaration of trust that put the property into the joint names of her and her son.