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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Joe Bloggs

21:34 PM, 10th October 2013
About 7 years ago

the CD rule is only of assistance if the contract is ambiguous and im not sure it is. the contract is however grossly unfair. IMO the best shot is the unfair contracts term act. however surely your legal advice should be saying which is the best cause of action??????

Helen Landlord

8:19 AM, 11th October 2013
About 7 years ago

My thoughts are that we should ask the Barrister to consider the best cause of action for the class action considering all possibilities, rather than just asking him/her just to look at CD. It would be great if this was a way forward, but i wouldn't want to close off other routes.

Gary Nock

8:28 AM, 11th October 2013
About 7 years ago

It is interesting that when I broke down the BOI reasons for increasing the differential, in other words their rationale, they would not do it. They said it was "commercially sensitive". To justify the increase they will need at some point to do this. and I dont think they can.

Seething Landlord

18:48 PM, 11th October 2013
About 7 years ago

Reply to "Joe Bloggs" and "Helen Landlord": I understand that Mark has asked Justin to instruct the barrister to advise on the best arguments and course of action to adopt in order to achieve a result that will benefit all of those affected rather than running up costs by getting involved in issues that could distract from the main purpose, such as how many mortgages/properties a person has, whether they can prove that they did not receive the booklet and so on.

Seething Landlord

19:05 PM, 11th October 2013
About 7 years ago

Reply to the comment left by "Joe Bloggs" at "10/10/2013 - 21:34":

I think you'll find that the Unfair Contract Terms Act only deals with unfair exemption clauses so will not help.

You are correct on the CP rule - it will only come into play if there is doubt as to the correct interpretation of the contract, in which case the ambiguity or uncertain term will be construed in the way least favourable to the drafter.

Gary Nock

20:04 PM, 11th October 2013
About 7 years ago

Don't think so.Check out FOS case number 50 in which a landlord was charged an early repayment charge which was not in the mortgage offer but was in the mortgage conditions. Case found against the bank as an unfair term.

Helen Landlord

20:08 PM, 11th October 2013
About 7 years ago

Reply to the comment left by "Seething Landlord" at "11/10/2013 - 18:48":

Do you agree that we should ask our legal advisers to focus on contra proferentem mortgage conditions?

Just responding to the above question


21:01 PM, 11th October 2013
About 7 years ago

If CP is that straight forward then why hasn't FOS overruled it in the BoI case? Which surly would of happened by now.

Seething Landlord

0:16 AM, 12th October 2013
About 7 years ago

Reply to the comment left by "Gary Nock" at "11/10/2013 - 20:04":

Thanks, I've checked out this case which was decided by the FOS on the basis that "There is a legal rule that a term which is particularly unusual or onerous – and would not be generally known to the customer – is only binding on the customer if the firm has brought it fairly and reasonably to their attention before the contract is made" and "The firm’s right to demand an early repayment charge was an onerous term. So Mr W could only be bound by it if the firm had brought it fairly and reasonably to his attention before he entered into the contract." I assume that's why lenders now emphasise any early repayment conditions.
It was not a case under UCTA but is useful in that it shows that the FOS would look at a complaint connected with a commercial mortgage.

Seething Landlord

0:34 AM, 12th October 2013
About 7 years ago

Reply to the comment left by "Helen Landlord" at "11/10/2013 - 20:08":

No, I agree with your thoughts that the barrister should consider all possibilities BUT focus on the main objective of establishing that WBBS are not entitled to change the premium (which seems to be their description of the differential) on any of the affected mortgages.

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