A woman is less likely to lose her home because of her partner’s inability to make loan repayments after a House of Lords ruling yesterday.
It gives greater protection to a woman’s share of the family home when she stands surety for a partner’s debts.
It was given after eight women brought a test case. Law lords told lenders that they must do more to protect wives who sign over their interest in a property to protect a partner’s loan.
The women have battled for years and some of them now have the chance to reclaim their share of a repossessed property from their lender.
Judith Moore, one of the eight, said: “I am absolutely delighted. As a result of the ruling I will now go back to the county court and argue that the building society is not entitled to the charge on the mortgage.”
Mrs Moore and her husband lost their home in Pangbourne, near Reading, after their bank sought repossession when they fell behind with remortgage repayments. “It has been a long battle over seven years but we hope now we will win at trial.”
The law lords held that a bank’s charge over a property could not be enforced unless it had checked directly and privately with the wife that she was receiving independent legal advice before signing.
Richard Holt, a solicitor for one of the wives involved, said after the ruling that married women were often persuaded to sign bank charges to raise loans on the matrimonial home “at times of great emotional vulnerability”.
Giving judgment, Lord Nicholls of Birkenhead said that the bank should not proceed with the transaction until it had received an appropriate response directly from the wife.”
It should become routine practice for banks, when relying on confirmation from a wife’s lawyer, to send the solicitor details of her husband’s finances, including his debts, overdraft facility and the amount of the new loan.
If the husband refused to consent to the release of this information, the transaction would not be able to proceed, Lord Nicholls, sitting with Lords Bingham of Cornhill, Clyde, Hobhouse and Scott, ruled.
The eight women claimed that the fact that they were standing surety for their husbands’ debts meant that the banks were “put on inquiry”. They claimed that they could have acted under the “undue influence” of their husbands when they signed, and that the banks had failed to bring home to them the risks involved.
The appeal centred on whether banks have a responsibility to ensure that a partner – whether husband, wife, unmarried or homosexual – receives proper advice from an independent source.
Lord Nicholls said: “A bank is put on inquiry whenever a wife stands a surety for her husband’s debts. The bank must then take reasonable steps to bring home to the wife the risks involved.”
The law lords allowed some of the appeals, but dismissed others, depending on the individual facts of each case.
Hilary Messer, partner with Richard Wilson & Co, solicitors in Pangbourne, said: “This ruling is very welcome. It has implications for every solicitor, every small business and every lender in the country.
“It reinforces the principle that lenders must take certain steps to ensure wives are not under ”undue influence” It also sets out the reasonable obligations for solicitors when advising wives.”
Richard Holt, the solicitor for one wife, said that until now the law had considered it acceptable for the wife to receive advice from the husband’s solicitor, “who has every reason not to discourage her from entering into the transaction”.
“All we were asking for was a chance for the wife to be advised on her own in her own solicitor’s office, to be given hard advice in the absence of her husband,” he said.
Mr Holt said that perhaps in some cases the advice should be: “Let your husband go bankrupt; his half share of the house will be lost, but yours will be preserved; you can take your half share and rebuild your lives together; don’t sacrifice your share here – the deal is no good for you.”
Some lending banks said that they already insist on partners seeking independent legal advice. Others said that they would study the judgment and, if necessary, make appropriate changes to their procedures.
“The Times” 12 October 2001
