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10:59 AM, 29th January 2015, About 9 years ago 390
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Today was Judgement Day in the case of Mark Robert Alexander (me) vs the West Bromwich Mortgage Company. I was representing a group of 360 affected borrowers, who between them contributed nearly £500,000 to fund the legal action. I am extremely disappointed to report that we didn’t get the News we were so desperately hoping to receive.
#WestBromTracker – please re-Tweet if you think we should appeal – http://t.co/UgNLSXvurt
— Mark Alexander (@iAmALandlord) January 30, 2015
Could this be the end of tracker mortgages as we know them for up to 1 million people in the UK?
The Judge, Mr Justice Teare ruled that the mortgage company were within their rights to increase the premium (margin) on the rate they charge above the Bank of England base rate. He also ruled that West Bromwich Mortgage Company had the right to call in mortgages with 30 days notice. Clearly we are shocked at his decision and we anticipate outrage from the general public too.
The special conditions in my OFFER OF LOAN state (I’ve added bold capitalisation for emphasis) ….
“After 30th June 2010 your loan reverts to a variable rate which is the same as the Bank of England Base Rate with a premium of 1.99% UNTIL THE TERM END.”
NOTE the words “until the term end”, which I have always understood to mean that the premium of 1.99% over the Bank of England Base Rate would apply to the remainder of my 25 year mortgage after the initial 4 year fixed rate period was completed. The Bank of England Base rate today is 0.5% so you would be forgiven for thinking that I should be paying a rate of 2.49%. However, the West Bromwich Mortgage Company have added another 1.5%, meaning that I’m now paying them 3.99%. When they first increased the rate, the margin they added on was 1.99%. Should I be thankful they reduced it? What’s to stop them putting it up to 10% tomorrow? Well according to the Judge, Mr Justice Teare, apparently very little!
The Special Conditions, which the mortgage company are relying upon to vary the premium (margin), are generic to all of their mortgage products and come in the form of a booklet. It is very obvious that the Special Conditions booklet is generic to their entire mortgage range because in one section it says the property cannot be let, which is clearly inconsistent with a Buy To Let Mortgage.
To deal with issues of inconsistency between the OFFER OF LOAN and the Special Conditions booklet the mortgage company also has the following condition in the very same Standard Conditions booklet it has been allowed to justify the increase in the premium charged ….
“These Mortgage Conditions incorporate any terms contained in the OFFER OF LOAN. If there are any INCONSISTENCIES between the terms in the Mortgage Conditions and those contained in the OFFER OF LOAN then THE TERMS CONTAINED IN THE OFFER OF LOAN WILL PREVAIL.”
I accept that the mortgage company needs the contractual ability to vary their Standard Variable Mortgage rates in their generic Special Conditions booklet and I had every reason to believe that the clause they are now relying upon to increase my interest rate only exists because Standard Variable Rate mortgages are not pegged to another rate in the same way as a tracker. I had no reason to assume that the clause allowing them to make variations to interest rates would affect me, after all I had a Tracker Rate Mortgage with a premium over the Bank of England base rate UNTIL THE TERM END, which in my case is in the year 2031.
Would you have come to the same conclusions I did?
The reason I took the lead and encouraged other affected borrowers to fund this expensive legal battle was that the industry regulators have a proven track record of allowing banks and building societies to get away with this particular form of “daylight robbery”. In 2013 the Bank of Ireland hiked its rates for over 14,000 customers with Tracker Mortgages, many of them were home-owners, NOT Landlords. The regulators proved ineffective for affected complainants. Prior to that, in 2009, the Skipton Building Society CEO publicly confirmed that their Standard Variable Rate mortgages were capped at 3% over the Bank of England base rate and that pledge would be honoured despite market conditions. A year later that promise was broken and the regulators did nothing about that either!
The problem that all borrowers have faced when complaining to regulators has been that all mortgage lenders who have been a party to these rate hikes to date have very sneakily targeted borrowers who ‘fall between the cracks’ in terms of consumer protection regulation. WBMC targeted borrowers who own three or more properties whereas the Bank of Ireland relied on a date when mortgage selling regulations changed. The the Bank of Ireland case this provided them with an opportunity to mercilessly target homeowner mortgages too. Anybody who took out a Tracker Mortgage before the MCOB (Mortgage Conduct of Business) rules were introduced on 31st October 2004, AND anybody who owns three or more properties has good cause to be VERY worried following the judgement passed today.
There are an estimated 1 million Tracker Rate mortgages in the UK, they were very popular in the decade prior to the Credit Crunch. I have other tracker mortgages with other Buy to Let lenders and I am fearful that if they follow suit all my hard work to generate money to invest for my retirement will be undone. Many homeowners with tracker rate mortgages could also lose their homes.
I simply couldn’t allow this to continue unchallenged. Somebody had to stand up to the financial bullies and I am proud to have been one of them, despite this awful news.
The question now is; “Should we appeal?”
We already have £68,912.39 lodged with Barco (The Bar Council Escrow Account Service) and we have paid £350,000 into the Court on account of the other sides claimed legal expenses. The Judge is yet to rule on costs to date so we may get some of the money paid into Court back too. We don’t yet know how much an appeal will cost in terms of paying the others sides legal fees if we lose, however, our barrister is so dissapointed by the verdict that he has already offered to represent us in the Court of Appeal on a no-win-no-fee basis, despite this not being covered in his original terms of engagement.
I also worry about the potential impact on tenants. The ramifications of lenders being able to hike up Tracker Mortgage interest rates or call in unprofitable loans on a whim (even if they are not in default) could no doubt result in mass defaults of repayments and inevitable repossessions of the quality rental property which has been funded by Buy To Let mortgage lenders. The knock on effects to tenants in terms of security of tenure and the availability of quality accommodation, afforded by the very existence of Tracker Rate buy to let mortgages, could be devastating!
Please share your thoughts in the comments section towards the bottom of this page.
Mr Justice Teare’s 20 page reasoning for his ruling is available free of charge via the Courts. However, I am asking everybody reading this article to donate £50 by completing the form below and in return we will immediately redirect you to a full copy of the Judges ruling. All money received will be used in a marketing campaign to raise awareness of the potential consequences of this dreadful decision. If you want to donate more than £50, simply order two copies for £100 or three for £150 etc. We believe we have already raised enough money to fight an appeal. However, we must not dip into these funds to promote the importance of the case, hence the need for an additional fundraising campaign.
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Richard Mann
17:47 PM, 31st May 2015, About 9 years ago
Reply to the comment left by "Under let Landlord" at "31/05/2015 - 17:13":
... One can't be to frank on what is essentially an open forum.
However, allegedly the FCA are an independent body setup to monitor? observe? And take action where there is financially inappropriate behaviour, I felt relieved that justice will be done with a such a body in place. It would appear from the action taken that although WB appear to have rewritten the "contract" to suit " prevailing" conditions this would have been a great opportunity for such a body to step up and say or do something ... anything, however curiously this has not happened?
Could it be that an "independent" body and a large financial institution are closing ranks? ....I am sure that could not possibly be the case...
The NLA whom have " the ear " I'm led to believe of certain authority figures appear to be toothless and surprisingly without out comment and such a ruling ?
Once again I'm surprised to note this as the potential financial repercussions are substantial and would affect a huge amount of landlords working in the PR sector.
Particularly important I would say at this point in time with the legislative tide swinging back onto landlords that the NLA should be seen to be on the right side ie with the Landlords.
With many investor landlords now considering their position and whether or not the whole business proposition is in fact viable, should either condemnation or a word of support be the right thing to do for the NLA.
Can a large financial institution ignore the essence of the contract and the manner in which it was promoted and sold to investor landlords?
Is it an honest and open arrangement if there is a "publication" that suggests the financial institution can rewrite the contract at will?
We will soon find out.
Anthony Wilson
19:06 PM, 31st May 2015, About 9 years ago
I am not sure that the giving of leave to appeal automatically means that the judge was wrong but it is right that an appeal should be allowed on a public interest basis alone.. almost irrespective of the specific facts of this case.. also I expect many of us have terms and conditions which vary in some degree from the ones being relied on for Marks case so even losing this case on appeal does not automatically close the door to others...this is why it is important to understand the documents and the exact phraseology used at each hearing... however it is a big step to take to go from where we are now to pursuing individual solicitors and financial advisors for negligence...the fact that the West Brom adopted the policy we all believe they are bound by before changing the rules unilaterally suggests to me that negligence cases against advisors would be difficult to pursue and are likely to be expensive and time consuming to maintain.
The other alternative would of course be to co-ordinate a mass demonstration at the West Broms offices ...and other legitimate bases of peaceful protest....booking individual appointments to discuss the situation with chief executive Jonathan Westhoff (who is not a director) perhaps or one of the directors of which there appear to be three currently Thomas Michael Lynch ( DOB 24/03/1963) , Stephen John Smart (DOB 10/10/1960 ) and James Roy Babbington Wright (DOB 21/06/1966). Two shares in issue in total .. each in favour of the West Bromwich Building Society and the auditors KPMG ceased acting as auditors on or around the 28th October 2014. No explanation provided.
Two directors resigned or retired in 2014 namely Paul David Field and Andrew Peter Conroy. Mr Lynch has been a director since 08.08.2002 and therefore would appear to be the key decision maker. The two other directors were both appointed in 2014.
The connected companies appear to be West Bromwich Homes Limited (of which Mr Westhoff is a director with Neil Noakes and Peter Southcott (profit to 31.03.2014 £5,643,000 (gross margin 67%)), WBBS (SRS) limited(pension company ) (of which Mr Westhoff and Mark Gibbard appear to be directors) and Sandwell Finance Holdings Limited of whom the shareholder is Wilmington Trust S P Services (London ) Limited (assets £25,000.00 and liabilities £24,999.00) It appears to hold 505 directorships as well as being the shareholder of this company.The directors are Mr Lynch, John Traynor and Mark Filer. Mr Lynch's personal address in Bromsgrove is listed under this company in case anyone wishes to write to him directly.
According to the published accounts for West Bromwich Mortgage Company Limited (co number 02773114) for 31st March 2014 the net profits before tax where £1,909,000.00 and after tax £3,897,000.00. Presumably a tax refund?. No doubt the 31st March 2015 accounts will make interesting reading..
Given the profits from WBMCL and West Bromwich Homes Limited the building society appears to be in good shape.
Headline from June 6th 2014;-
The new 70,000 sq ft five-storey building next to the BT regional business centre off the A41 island in West Bromwich is due for completion in spring 2015 and will accommodate up to 700 staff.
Nick Trueman, a spokesman for the West Brom said: "Our new head office will represent a modern, efficient and environmentally friendly base from which the business can expand with our people fully equipped to support and serve our membership."
Lets hope they can serve their customers a little better than they have up to now.
Tony Wilson
All BankersAreBarstewards Smith
19:09 PM, 31st May 2015, About 9 years ago
I wonder who is on the board of the company that got the building contract for the new HQ ?
Richard Mann
19:47 PM, 31st May 2015, About 9 years ago
Reply to the comment left by "Anthony Wilson" at "31/05/2015 - 19:06":
Super piece of work an excellent post. Thank you.
Anthony Wilson
20:48 PM, 31st May 2015, About 9 years ago
Reply to the comment left by "All BankersAreBarstewards Smith" at "31/05/2015 - 19:09":
In view of the fact that the judgement refers to the justification for a change in rate being able to be made due to the presence of the far reaching words";-
" to make sure our business is carried out prudently efficiently and competitively" and the lender has to exercise its power " honestly and in good faith and not arbitrarily or capriciously "
I wonder whether having to fund the development of a new headquarters falls within this definition of being an honest and good faith basis for carrying out its business . Also it would be interesting to know what salary increases have been voted to directors in the year before and since the rate hike compared to the % increase from 2008 onwards.
At para 32 of the judgement the judge made it clear that he was only considering issues of construction of the parties agreement rather than of fairness and this leaves open the possibility of a completely new case being won on an estoppel basis in any event.
Finally at paragraph 40 the judge appears to contradict himself when he states that "however a term of 25 years is a long time .. and it is unrealistic to suppose that during that period the lender has no right to terminate the mortgage.." but this seems to be a matter of the judge submitting his subjective view on the wording of "Term " in contradiction of what he says at paragraph 32.
The best example I have is of when Kaupthing Singer and Friedlander (KSF) (a Bank ) went into receivership... I am not aware of any circumstances in which the receivers sought to terminate the mortgage term of any borrower early who was not in default..... despite their desire to seek early repayment. But perhaps I am wrong... I need to review those terms in relation to my own mortgage with KSF to see if a similar provision existed. it would be interesting to explore whether the Northern Rock mortgages for example had a similar provision and whether their receivers sought to enforce them. The one I had was taken over by Virgin money and no one asked me to repay it on a months notice.
What is so clear to us all is that the lender is in every new lending case blase about the small print when signing one up to a loan.. and there is no negotiating power.. so the only alternative is to boycott the product... this is why the government created the lending code.. because issues of fairness should outweigh strict contractual arguments..when one partys bargaining position is so completely inferior to the other's.
In this case.. estoppel may be the logical route open to us all...
Wikopedia defines it;-
In law, estoppel is a set of doctrines in which a court prevents a litigant from taking an action the litigant normally would have the right to take, in order to prevent an inequitable result. Estoppel occurs when a party "reasonably relies on the promise of another party, and because of the reliance is injured or damaged".[1] For example, estoppel precludes "a person from denying, or asserting anything to the contrary of, that which has, in contemplation of law, been established as the truth, either by the acts of judicial or legislative officers, or by his own deed, acts, or representations, either express or implied".[2]
The Lending Code
The Lending Code covers subscribers dealings with:
•Consumers
•Micro-enterprises (enterprises that employ fewer than 10 persons and have a turnover or annual balance sheet that does not exceed €2 million
•Charities with an income of less than £1 million
The Code covers:
•Current account overdrafts
•Loans
•Credit cards
•Lending to micro-enterprises and charities
The Code does not apply to non-business borrowing secured on land or to sales finance ( a buy to let business for three properties or more therefore appears to qualify as we are not consumers.)
Section1 of the Lending Code at paragraph 15 quite clearly states “subscribers will act fairly and reasonably in all their dealings with customers by, as a minimum, meeting all the commitments and standards in this code. The key commitments are shown below. In particular attention is drawn to the key commitments within Section 15:
“Subscribers will make sure that advertising and promotional literature is fair clear and not misleading and that customers are given clear information about products and services. "
It is apparent that West Bromwich Mortgage Company Limited is not a subscriber to the Lending Code.
Perhaps this is for a reason..,. they want maximum flexibility to wriggle out of issues of fairness by not having to comply with them.. which brings me back to my original point.. why is it assumed that West Bromwich Mortgage Company Limited will act "honestly and in good faith and not arbitrarily capriciously or unreasonably " when they have conspicuously failed to sign up to the Lending Code according to my google search today.
Tony Wilson
Mark Alexander - Founder of Property118
21:17 PM, 31st May 2015, About 9 years ago
Reply to the comment left by "Anthony Wilson" at "31/05/2015 - 20:48":
They are not members of IMLA or the CML either!
.
Anthony Wilson
21:19 PM, 31st May 2015, About 9 years ago
In the event that the appeal is not ultimately successful I believe there is potentially another strategy to all buy to let borrowers and it is as follows;-
We agree for a barrister to provide a general form of particulars of claim to be prepared on a simple estoppel basis... each person calculates their loss on each mortgage to a maximum of £10,000.00 in each case.. this being the small claim limit where it can be argued that one is not exposed to liability for the other sides costs if one loses... the court fee for a claim issued on line is now £410.00. This is recoverable if successful.
Separate claims are issued by each buy to let borrower up and down the country on this basis to this limit.. each person represents themselves at the hearing.. if one wins then .. when the difference in the mortgage liability increases by another £10,000.00 one could issue another claim.
In my view this would be a completely justified course of conduct bearing in mind the outrageous sum that the West Bromwich have claimed in costs to date...it also utilises a massive amount of their resources to defend so many separate claims and and would result hopefully in all of us achieving our objective of bringing the West Brom to book on an estoppel basis without any exposure to their crazy costs liability.(subject to counsels advice.).
Richard Mann
21:31 PM, 31st May 2015, About 9 years ago
Does the fact that they have not signed up the lending code infer a reticence to play by the rules?
However, I'm not sure that would make a lot of difference to the FCA whom presumably have a detailed and specific set of terms to what is considered not just best practice but law.
Are there any FCA recommendations or gudelines for financial institutions to follow in order to be deemed legitimate and able to trade?
Another excellent post btw by Anthony Wilson!
Presumably building of a brand new headquarters would suggest a view to staying in the market for the foreseeable future.
Mark Alexander - Founder of Property118
10:31 AM, 1st June 2015, About 9 years ago
Reply to the comment left by "Anthony Wilson" at "31/05/2015 - 21:19":
Hi Anthony
Using the Small Claims Courts for claims under £10,000 was previously considered by both a barrister and a QC who looked at the BoI case and also by Mark Smith in respect of the West Brom case.
They all concurred that West Brom would apply to have the cases heard in the High Court on the basis of saving the Courts time and also on the basis that all claims are similar and therefore exceed the Small Claims Court limited when aggregated.
.
Black Panther
10:56 AM, 1st June 2015, About 9 years ago
Reply to the comment left by "Anthony Wilson" at "31/05/2015 - 21:19":
I have a plan which would be based on Anthony's estoppel suggestion (subject to counsel). If his suggestion is viable, my plan would maximise publicity, get the message across to the thousand's of people affected and cause a very large headache for the Banksters involved.
Clearly it would not be appropriate to divulge details on this open forum - but if the estoppel route is pursued and deemed apprpriate, I could communicate with MArk et al to take a look at the plan and decide the best course of action.
BTW, I'm not in the media industry, so if anyone is, and wants to share ideas, that would be useful for everyone.
This limits individual's financial burden and liability to a much lower level than dragging it through the higher courts.
NB. "Equitable estoppel: sometimes known as estoppel in pais, protects one party from being harmed by another party's voluntary conduct. Voluntary conduct may be an action, silence, Acquiescence, or concealment of material facts."