Contra proferentem mortgage conditions

by Mark Alexander

15:13 PM, 9th October 2013
About 7 years ago

Contra proferentem mortgage conditions

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Contra proferentem mortgage conditions

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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Comments

Ed Atkinson

13:57 PM, 10th October 2013
About 7 years ago

Reply to the comment left by "Mark Alexander" at "10/10/2013 - 12:59":

Mark

I can do some of the phoning.

I think you must be in a tearing hurry to catch the plane! The suggested email text needs a bit of work.

Title should end: ".. when the base rate moves?"

First paragraph, the "contra proferentem " reference is not intelligible to people who have never come across that term. I'd omit it. eg just "contracts which are in conflict with promotional materials and offer letters". The concept can be used later, after the sentence on the class action group forming. It could read "The class action team are confident that the law is on their side, in particular due to established precedent that ambiguous or conflicting contracts must be interpreted in a way which benefits the customer (termed "contra proferentem ")."

The tone with rhetorical questions would not be that of a third party landlord association.

Sorry to put the spanner in the works on this, but I do want to get it right.

In our phoning I think it will help to refer the landlord association to a trusted independent article for them to look up, such as on the Telegraph website. I haven't looked recently, which is the best one folks?

Mark Alexander

14:07 PM, 10th October 2013
About 7 years ago

Reply to the comment left by "Ed Atkinson" at "10/10/2013 - 13:57":

Hi Ed

I'm happy for you to amend as you see fit.

Please post the final version here as a template for others to use.

Would you be happy to do the rest of the list? i.e.

Landlords Association of Northern Ireland
North Staffordshire Landlords Association
Sheffield and District Landlords Association
North West Landlords Association
Humber Landlords Association
York Residential Landlords Association
Barnsley Residential Landlords Association
Gateshead Private Landlords Association
Darlington District Private Landlords Association
Portsmouth and District Private Landlords Association
East Midlands Property Owners
Guild of Residential Landlords
North West Property Owners Association
.

Mick Roberts

14:34 PM, 10th October 2013
About 7 years ago

Reply to the comment left by "Mark Alexander" at "10/10/2013 - 12:59":

I've emailed EMPO in Nottingham for u (for us), the two main people there are great people, quite human with common sense, talk to me about once a month, did want me on their committee as HB Landlord, but I've not got ruddy time, but I still help with their awkward HB queries.

Ed Atkinson

17:16 PM, 10th October 2013
About 7 years ago

Below is my edited text of the suggested email from a Landlords Association to members. I see now that this is hot on the original forum:

http://www.property118.com/west-brom-building-society-to-increase-btl-tracker-margins-by-2/43657/comment-page-49/#comments

Tomorrow I will seek out some associations that no one else has phoned and list them there.

Dear Member

Was it your understanding that interest rates on lifetime tracker mortgages or reversion tracker rates can only vary when the base rate moves?

There are now plenty of angry borrowers out there, 6,700 in clients of the West Bromwich Building Society and a further 12,200 clients of Bank of Ireland are already affected. These lenders have decided to increase their profit margin by increasing the interest rates regardless of the fact that the Bank of England base rate has not changed. They are relying on ambiguous small print in their contracts, which is in conflict with their promotional materials and offer letters.

It appears a strong possibility that other lenders may follow suit and many now feel that this unethical practice should be stopped before other lenders make their decisions.

We are writing to you to let you know that a Class Action group has formed via the Property118 online forum to fight back. The Class Action team are confident that the law is on their side, in particular due to established legal precedent that ambiguous or self-contradicting contracts must be interpreted in a way that benefits the customer (termed "contra proferentem").

The Class Action is receiving support from many But-to-Let landlords in addition to affected customers of the West Bromwich Building Society and the Bank of Ireland.

For more information please visit http://property118.com

Mark Alexander

17:37 PM, 10th October 2013
About 7 years ago

Ed, your version is far better than mine, well done and thank you.

Helen Landlord

17:55 PM, 10th October 2013
About 7 years ago

One thing that could happen with this action is the WBBS make an offer to all the parties in the class action to revert their mortgages back to 'as was'. Is this possible? We would then still have the potential for tracker margins being increased across the board as the precedent is not set in court? Just wondering how we would deal with this kind of offer being put on the table?

Ed Atkinson

19:53 PM, 10th October 2013
About 7 years ago

Reply to the comment left by "Mark Alexander" at "10/10/2013 - 17:37":

Thanks Mark

Try to switch off and enjoy your break in France, you really deserve it. Then return full of new crusading vigor next week!

Cheers

Ed

Kevin Jeffery

20:17 PM, 10th October 2013
About 7 years ago

Hi everyone, I've just had a response from WB ref complaint a paragraph of which makes interesting reading - "Also, under the terms and conditions, demand for full repayment of the loan can be made by giving one month's notice (Section 14 - 'When the Loan has to be paid back to us'). We felt this was more distruptive to the customers affected and therefore felt that an increased rate would be preferable".
This leads me to feel like I'm being threatened but more importantly could this be their fall back position even in the event that we win?

20:41 PM, 10th October 2013
About 7 years ago

Reply to the comment left by "Kevin Jeffery" at "10/10/2013 - 20:17":

See my brothers comments about this on page 22 of the West Brom thread. Direct link here http://www.property118.com/west-brom-building-society-to-increase-btl-tracker-margins-by-2/43657/comment-page-22/#comment-29421

Kevin Jeffery

20:49 PM, 10th October 2013
About 7 years ago

Hi Adam

Found it thanks....

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