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Financial products which offer to release capital tied up in people’s homes can be extremely complex and such arrangements should only ever be entered into after receiving specialist advice. In one case which strikingly makes this point, two elderly ladies ended up with a mountain of debt and under threat of eviction after signing a deal which they hoped would enable them to stay in their home at an affordable rent.
The women had lived in the house, valued at £300,000, for almost 15 years. Their joint income was, however, modest and, in order to make ends meet, they had borrowed various sums, using the house as security. Eventually, they entered into a ‘sale and leaseback’ arrangement, which involved transferring their home to a third party.
They received less than £10,000 in cash under the deal but their debts were paid and it enabled them to stay in their home under an ‘assured shorthold tenancy’. However, once that tenancy expired, a rent dispute developed and they were given notice to quit. They stopped paying the rent and were said to have remained in occupation of the property for almost four years as trespassers.
The case ended up at the First-tier Tribunal (FTT), where the lender sought possession of the house so that it could be sold.
The women argued that their signatures on various documents had been forged or that they had been tricked into entering into a deal which they did not understand. They said that they believed they were taking out another loan and had no inkling that they were selling their home.
In rejecting those arguments, however, the FTT noted that it was no part of its role to relieve the women from the consequences of an imprudent deal. They had come nowhere near proving either forgery or trickery and had found themselves in a hole from which there was no escape. The mortgage on the property stood at more than £200,000 and the FTT’s ruling paved the way for possession proceedings.