It may sound overcautious to say so, but it is always worth taking legal advice before entering into any significant arrangement, even when it is with a trusted member of the family.
Failing to do so has proved to be an expensive lesson for a woman who has now lost her home as a result of an agreement she entered into with her son.
The facts were straightforward. The woman’s son needed money and persuaded his mother to let him take out a mortgage on her home. In order to accomplish this, she had to make her son a joint owner of the house. She believed the sum borrowed would be £32,000, but instead he borrowed £120,000 using the house as security.
When the required repayments were not made, the bank sought to repossess the house for sale. The son was convicted of fraud.
The woman argued that as she had been defrauded, her liability to the bank should be limited to the sum she would have owed had the original mortgage been for £32,000. However, the way the original form had been filled in to add her son’s name to the property title meant that his share of the property was one half. Accordingly, even if the mother’s liability were limited to £31,250 as she argued, the bank could still pursue her son for the balance and force the sale of the property to achieve that end.
Initially, the woman argued that the form used to add her son to the title was not clear and would not convey to a layman that the property would be held in equal shares. She had believed that he would have no legal interest in the property at all.
The High Court dismissed her claim. The bank had not been a party to the conveyance transferring a half share in the property to her son. Its loan was advanced later and it had no reason to believe that the transfer had been the result of undue influence or fraud.