Contra proferentem mortgage conditions

Contra proferentem mortgage conditions

15:13 PM, 9th October 2013, About 10 years ago 49

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Unless you are a qualified contracts lawyer who has also studied Latin you will probably not have a clue as to how contra proferentem mortgage conditions affect you. I have spent the last two weeks getting my head around it as it was a key point in the barristers opinion for the Bank of Ireland Tracker Mortgage Class Action which has stalled due to all funds raised for that campaign having been exhausted. Therefore, for the benefit of everybody with a tracker mortgage who may be affected by a hike in their tracker mortgage margin at some point, and in particular to those affected by the decisions of West Bromwich Mortgage Company and the Bank of Ireland I offer this laymans interpretation and my thoughts on how we should progress.

Very simply, the contra proferentum law is created to enable judges to decide which conditions apply if contractual conditions are in conflict. In other words, if the contract has two or more conditions and they don’t all say the same thing one of the conditions will apply and the others will not.

The relevance of this is that West Bromwich and Bank of Ireland have conditions in their mortgage documentation and some conditions contradict others.

The law goes on to say that the judges interpretation of what the contract means will be the condition(s) which are in favour of the person to whom the contract was presented. To put it another way, if your mortgage conditions were presented by West Bromwich or Bank of Ireland the judge will rule against them because they wrote the contract and the most favourable of the conditions will be applied to you. 🙂

There are, of course, several more legal arguments our lawyers could throw at the enemy, however, in my opinion the contra preferentem argument is without any shadow of doubt our best shot

Other legal arguments will only suit some of our Class Action Group. For example, there appears to be no legal definitions of a sophisticated landlord but West Bromwich think it is anybody with more than three properties. Let’s say we win that battle and the Court decides it’s six – anybody with seven or more isn’t going be too happy are they? I will be one of them! Also, what good would that do for those affected by Bank of Ireland or by any other lender who tries this on? Remember, Bank of Ireland has a different criteria and is not using the sophisticated borrower argument. Other lenders will no doubt make up their own excuses too. What we need is a win which will affect ALL mortgage lenders.

Many people are arguing that they didn’t receive the Mortgage Conditions from their lenders. Well sorry folks, maybe you did, maybe you didn’t, but I can assure you that you signed a piece of paper before your mortgage completed to say that you did. The Mortgage Deed I signed for my West Bromwich mortgage states “By signing this Mortgage you confirm the terms of the Standard Conditions of Offer, the Special Conditions and the Mortgage Conditions”.

There are many more arguments which I could play devils advocate with which have been raised on our forums. With a bit of thought I reckon I could win most of the arguments and I’m not even a qualified solicitor. I am, however, in the same boat as you so please don’t shoot the messenger. I’m also affected by these increases and I’m doing everything I can to make sure we win this fight. In my case that’s been 18 hour working days for the last three weeks and a lot more time on the Bank of Ireland case since it reared its ugly head earlier this year.

That’s why I would like Justin and the barrister to lead with what I believe is our best shot – contra proferentem mortgage conditions.

If we ask our lawyers to look into every legal argument we have presented on our forums we will run out of money before we get to first base. What I would prefer is that we fight the one universal truth which is that our mortgage terms are contra proferentem. If we lose and we still have some money left there’s nothing to stop us appealing on other grounds as well.

For the above reasons, do you agree that we should ask our legal advisers to focus on contra proferentem mortgage conditions?

There are lots of other things we can do as a group to be a thorn in the side of these lenders in the meantime. For example, I love the PR campaigns and lobbying we are sharing ideas on. We must continue to win the hearts and minds of the media and every centre of influence we can think of. I also applaud the tactics being used to make these lenders lives a misery, for example the Subject Access Requests. Perhaps the most important thing we can do whilst we wait for the legal bods to advise us is to spread the word. We need to get every borrower we can find with a tracker mortgage to sign up. There are also plenty of other landlord groups who can help us to do this and it’s in all of our interests to put as much pressure on them as possible to get involved and spread the word amongst their members.

Contra proferentum mortgage conditions as I see it

I owned a substantial number of buy to let properties at the time of my mortgage application and still do. The chances of me proving that I was not a sophisticated landlord are very slim but I do have an argument to suggest that property investment was not my line of business at the time I took the mortgage. All of my properties were professionally managed in order to allow me to focus on my career as a commercial finance broker. I did not consider myself to be a professional investor at the time I took out this mortgage, the purpose of investing into a property portfolio was to provide for my retirement. I don’t want Justin or the barrister to push that angle though, I think it’s a waste of money as everybody’s situation will be very different.

Neither my mortgage broker nor my solicitor were aware of the rights of West Bromwich Mortgage Company to increase the premium they charge on my tracker mortgage rate. I did read the Mortgage Conditions brochure at the time  and at the time I sincerely believed that section 5 of the Mortgage Conditions was not applicable. Note that I am also a qualified mortgage adviser and IFA. I believed that section 5 of the mortgage conditions booklet was only relevant to mortgages written on the building society’s standard variable rates, which do not track the Bank of England base rate. This was supported by the marketing materials being used by the West Bromwich to promote their tracker mortgages. Also, there was no mention of such a vital clause in either their KFI document or their offer letter. Clearly my solicitor was mislead too. I suspect everybody who was affected by the Bank of Ireland rate hike would also say the same thing.Contra proferentem mortgage conditions

So having established that I read the booklet and I signed to agree to all of their terms, including those in their Mortgage Condition booklet, what makes me believe West Bromwich are still in the wrong?

  1. Their website said, and to this day still continues to say “Tracker mortgages give you the certainty of knowing that the rate you pay will move in line with Bank Base Rates.”
  2. My offer letters states “After 30th June 2010 your loan reverts to a variable rate which is the same as the Bank of England Base Rate, currently 5%, with a premium of 1.99%, until the term end”

Logic tells me the above are in conflict with Section 5 of the Mortgage Conditions booklet which I signed and received. On the basis that West Bromwich produced the booklet, their website, and the Mortgage Deed I believe there is a clear case of conflicting conditions and ambiguity, hence the conditions they are relying upon are contra proferentem. On that basis, a judge MUST rule against West Bromwich as they are the originators of the documentation. It’s not like we are asking for the mortgages to be written off, all we want is the terms and conditions we believed we had signed up for.

We MUST win a Court Case before even more lenders follow suit.

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Annette Stone

15:29 PM, 9th October 2013, About 10 years ago

Mark. This is an utterly brilliant explanation - well done. I was about to blog that I thought that everyone was going wonderfully but that we should now have two distinct threads - a simple legal argument on which we should concentrate and which would not only keep the case simple but be something which everyone with a mortgage could relate to and a separate campaign of public awareness so brilliantly started by the piece in the Daily Mail which should keep the matter in the forefront of the public mind.

May I draw everyone's attention to the letter in THE TIMES today suggesting that landlords have a very easy time when interest rates are low and that perhaps their income should be taxed more highly as part of the Government's policy to provide more housing!!! I know, I know - but they have printed it and it needs rebutting by as many of us as have the strength.

Can I just offer my sincere congratulations to all those who are working so hard on this. I am a little bit removed as I do not have a mortgage with West Brom but I have been trying to interest journalists etc and during the course of my working day as a managing agent I am trying to raise awareness amongst my buy to let landlords and getting them to spread the word as far and wide as possible about what can happen.


15:33 PM, 9th October 2013, About 10 years ago

I completely agree with you. Bravo Mark. We should not allow the fighting fund to be frittered away on red herrings. WB will know by now that there a half a dozen hammers to hit them with. We should just use the largest one.

Andy Bell

15:37 PM, 9th October 2013, About 10 years ago

Does "Contra proferentum" only apply when there is a doubt about which condition should be applied?

I've only just read the bullet point on page 14 of the booklet which states that the Offer of Loan prevails over the mortgage conditions if there are any inconsistencies.

Andy Bell

15:53 PM, 9th October 2013, About 10 years ago

Reply to the comment left by "Andy Bell" at "09/10/2013 - 15:37":

I should also have said:

Excellent, thank you Mark, Yes concentrate on hitting them with the biggest hammer first, especially if that is what Justin recommends for our limited budget.

I suppose their bullet point just adds weight to the hammer.

Ed Atkinson

16:11 PM, 9th October 2013, About 10 years ago

Yes, 100% agree with the article. I say this as someone with no WB or BoI motgages, just many Trackers from other lenders.

I couldn't resist a browse on wikipedia on this. In addition to their main article this one is good.

Summing up why a garage can't unfairly impose a contract with ambiguous wording, the judge said "I do not think that defendants should be allowed to shelter behind language which might lull the customer into a false sense of security…" Also a relevant criterion is where it would surprise an ordinary person if it applied ...

And this was the UK Court of Appeal

Terry Donohue

16:52 PM, 9th October 2013, About 10 years ago

Hi Mark,

You have raised an interesting point and simplifying the argument certainly brings clarity for a court to judge on.
As we have already signed up for BOI class action, are we already included now that the situation has escalated?

Mark Alexander - Founder of Property118

20:07 PM, 9th October 2013, About 10 years ago

Reply to the comment left by "Terry Donohue" at "09/10/2013 - 16:52":

Good question Terry

We will hopefully be in a position to re-start the Bank of Ireland fundraising soon. Our marketing campaign to mortgage brokers will kick in next week and hopefully raise awareness and new expressions of interest. We have almost raised enough money to send a letter to every mortgage broker in the Country known to Experian.

When we do re-start the Bank of Ireland Class Action Fund Raising I suspect the funding and the plan of action will be based on the new West Bromwich model, i.e. £240 per affected property, less any fees already paid to keep things fair.

Depending on whether the majority agree with the recommendations I have made in the above article I will consult further with Justin and ask him to base his instructions to the barrister on the following lines.

The only legal issues the group want to to look into for the time being are listed below. The reason for this is the group want to focus their limited funds on presenting the best single legal action for the benefit of the entire group as opposed to frittering their limited funds away on investigating and fighting multiple legal issues, many of which may not be applicable to the entire group.

Questions from the group are:-

1) Is the West Bromwich documentation contra proferentum in the barristers opinion?
2) Is there a better legal argument which will be applicable to ALL affected borrowers of Bank of Ireland and West Bromwich?
3) Ideally the group wishes to obtain an injunction against West Bromwich to prevent them from implementing the increase, then to tackle the Bank of Ireland and the FCA again based on that injunction.

Tony McVey

20:24 PM, 9th October 2013, About 10 years ago

As a lawyer who also studied latin (as well as a landlord), I am familiar with the contra
proferentem rule and wish you luck with your
campaign. The rule might also apply against landlords as regards tenancy agreements, especially commercial ones. See also Unfair Contract Terms legislation.

Fed Up Landlord

20:34 PM, 9th October 2013, About 10 years ago

I am in agreement. The contra proferentem rule seems to be the best fit for both the BOI and WBBS cases. We should focus on that.

However, unless I have missed something - either in this forum or my mail delivery, the FOS has not yet ruled on the BOI matters either individually or collectively. Do we know when they are likely to do this as it will impact upon what we do next?

Mark Alexander - Founder of Property118

20:39 PM, 9th October 2013, About 10 years ago

Reply to the comment left by "Gary Nock" at "09/10/2013 - 20:34":

Hi Gary

I wish I could answer that question, sadly we are dealing with an Ombudsman. My last experience was the Insurance Ombudsman for a car insurance claim. It took 19 months to get a decision on an claim worth £4,500!

If it makes you feel any better, I won 🙂

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