Property owners in mortgage arrears and facing repossession should be wary of entering into agreements for a fast sale.
The warning follows a recent case in which a property consultant took advantage of a couple who were losing their home. He scoured the court listings looking for targets who were to be evicted, cold-called them, turned up at their property and subsequently pressured them.
The expert property litigation team at mfg Solicitors represent clients involved in property disputes including mortgage repossession claims.
What’s the background?
In Quick Property Sale Ltd v Solaja & Anor EWHC 1257 (Ch), Mr and Mrs Solaja owned a Surrey property but fell into arrears. It was repossessed by their mortgage company, Santander, on 19 October 2022.
On 25 October, the couple entered into a written agreement with property investment company Quick Property Sale Ltd (QPS) to sell their property for £436,000. It had been arranged at speed by self-employed consultant Paul Essien, who ran a business contacting homeowners facing eviction with a view to finding them a purchaser.
QPS was among a list of prospective buyers contacted by Mr Essien. It proposed in writing an immediate exchange of contracts “by releasing the funds required to redeem” the Santander mortgage in full. Mr Solaja accepted the offer within an hour and the couple signed an agency agreement with Mr Essien’s company. It also emerged in court that Mr Essien had a direct financial interest in a property sale (2% of the purchase price).
Mr Essien and QPS also wanted to conceal from Santander the fact that QPS was a prospective buyer of the property.
Contracts were exchanged on 25 October with completion to take place by 23 January 2023. However, Santander refused to comply with the solicitor’s requests for redemption figures until it had seen proof of funds or signed written letter from the third party confirming the funds were a gift or loan to the Solajas.
The bank believed the redemption funds were being provided as a loan, and the Solajas would be returning to the property to live following redemption of the mortgage. That was not the case. There was no formal loan agreement, and so neither the bank (nor Mr and Mrs Solaja) were willing to go ahead.
QPS brought proceedings to enforce the agreement by way of specific performance. It also sought compensation for the alleged breach.
Mr and Mrs Solaja argued that their agreement to the sale was the result of a QPS agent misrepresenting various issues and exerting undue influence on them – which the bank knew about. They also said they had rescinded the agreement.
What was the outcome?
QPS’s claim failed. A contract for the sale of land must be in writing and contain all agreed terms (s2 Law of Property (Miscellaneous Provisions) Act 1989). The agreement with the Solajas was that the deposit paid by QPS could and should be used to redeem the mortgage before completion.
For that to happen, QPS would have to loan the deposit funds so that the beneficial interest in them passed to the Solajas – but that was never QPS's intention.
The agreement did not include the critical term that deposit funds could be used to redeem the mortgage. In fact, it stated that the deposit was to be held by the Solajas' solicitors as stakeholder (ie it could not be passed on before completion).
The agreement for sale was therefore impossible to perform; and the Solajas were entitled to treat themselves as discharged from it.
On the misrepresentation issue, the Solajas had not proved Mr Essien had acted as QPS’s agent so that argument failed.
However, the judge found that the Solajas’ agreement had been obtained through undue influence. A relationship of influence had arisen between Mr Essien and Mr and Mrs Solaja who were in a very vulnerable position. He used that to create a relationship of trust and confidence to procure their agreement to the sale.
QPS also had constructive notice of undue influence as its director had worked regularly with Mr Essien. The Solajas were not bound by the sale agreement.
What does this mean?
If you’re involved in a property dispute it is vital to consider taking early legal advice before taking any further steps, particularly if you are in a vulnerable position. For specialist advice on property disputes, get in touch with Harjie Bindra at harjie.bindra@mfgsolicitors.com or call 01527 831691.