Every now and then, a case comes to my attention which makes me causes me unimaginable joy. Redstone Mortgages Plc v Welch, Jackson & Jackson (Birmingham County Court, June 22, 2009, HHJ Worster) is one of those cases. It’s already attracted some media coverage and, with luck, might attract some more. It deserves to. I’ve summarised and simplified matters where possible but a full transcript is available if anyone wants it.
This was a mortgagee’s claim for possession, but with a rather unusual history. Mr & Mrs Jackson were, until October 2005, the owners of a residential property. The property was mortgaged to Cheltenham & Gloucester Building Society and Welcome Finance. The Jacksons fell into arrears in 2005 when Mr Jackson lost his job. They saw an advert in their local paper for “Repossessions Stopped” who offered to buy properties from owners in arrears, pay off the mortgages and grant tenancies to the former owners.
Mr & Mrs Jackson contacted Repossessions Stopped and were visited by Mr Dewsbury (who appears to be, with Ms Welch, the first defendant, the brains behind “Repossessions Stopped”). He offered to buy the property for £63,0000 (in circumstances where the property was actually worth £100,000 and Mr & Mrs Jackson believed it was worth £85,000) and told them that they could stay for the rest of their lives so long as they observed the conditions of tenancy. They would also be entitled to buy the property back in the future at a price 10% less than the market price and, to top it all off, their daughter could be a joint tenant and inherit the tenancy.
In due course an assured tenancy agreement was signed and the property sold to Ms Welch. The mortgages were discharged with the benefit of a further advance from Beacon Homeloans Ltd and, in turn, the Claimant acquired the right to enforce Beacon’s rights under the Mortgage. Repossessions Stopped / Ms Welch then stopped paying the mortgage.
The Claimant came to enforce its rights. It had not been a party to the representations in 2005 and the question was the extent to which the agreements made by Repossessions Stopped could bind it.
The Judge found that Repossessions Stopped / Ms Welch had granted an Assured Tenancy to Mr & Mrs Jackson; that, as against Repossessions Stopped, Mr & Mrs Jackson also had a proprietary estoppel founded on the representations made at the time of purchase, in effect, that they had an Assured Tenancy to which their daughter could succeed, with the option to buy the property back; and that they had (as against Ms Welch) a right to set aside the sale for fraud.
Repossessions Stopped / Ms Welch had, therefore, mortgaged the property subject to those rights. Accordingly, those rights took priority over the rights of Beacon (and the Claimant). In order to satisfy the proprietary estoppel, the minimum equity to do justice was that the Jacksons should be able to continue with the tenancy on the original terms (i.e. succession to the daughter or repurchasing at discount). Alternatively, they could set aside the sale to Repossessions Stopped / Ms Welch on terms relating to the financial compensation of the Claimant.
These “sale and rent back” schemes are now regulated by the FSA. But, of course, that doesn’t help those people who agreed to one of these schemes prior to 1 July 2009. For those people (or their lawyers), I suggest getting hold of this judgment, a wet towel and a stiff drink. It doesn’t set down any binding legal principles and, as discusseed in the comments below, quite a lot of the case turns on its own facts. However, it is an encouraging example of the arguments which one might want to use in cases against sale and rent back schemes in the future.
A round of applause
The Jacksons did not qualify for legal aid because their income was just above the relevant limit. Their case was dealt with by John Gallagher and Marie Burton of Shelter and Andrew Walker at Maitland Chambers all of whom acted pro bono until shortly before trial, when legal aid was finally granted. Using the new pro bono costs powers in s.194 Legal Services Act 2007, the court made a costs award of £20,000 in favour of the Access to Justice Foundation. Hearty congratulations to all concerned.
Excellent though this judgment undoubtedly is, I do wonder how much turns on two particular sets of facts. One, the deficiencies in the tenancy agreement that meant it was an assured rather than AST and two, the timescale on the sale that meant it was just possible to assert that Ms Welch had title before the mortgage and charge bit, such that a tenancy could be granted with priority over the mortgage as an interest.
I realise there are other bits in there, but the assured tenancy point seems particularly important. As, of course, was the misrepresentation by Repossessions Stopped, but that seems rather more commonplace amongst these charming organisations.
Which reminds me, it might be worth mentioning that they bought the property for 62K when the market value was actually 100K and the occupants thought it was about 85K. Nice.
Ye, having reflected on it overnight, I agree that most of this case will turn on its own facts. Some of the clever bits about what constitutes an overriding interest in this post 2002 Act world and the continued existance of the registration gap are of general application (albeit this is only a decision at county court level). My excitement is for the general justice of the result
I am a caseworker at Bristol Law Centre. I am currently assisting in a similar case. Could you email me a copy of the Judgement please?
Will – I’ve just emailed it to you.