Homeowners to sue HBOS and Barclays

A recent change in the law has opened the door for thousands of homeowners to sue HBOS and Barclays over “unfair” Shared Appreciation Mortgages.  The case could cost the Banks hundreds of millions of pounds.

These mortgages were sold in large quantities throughout the UK in 1997 and 1998, and the loans were made on a zero interest basis or on a fixed interest basis.   By far the overwhelming majority of the loans were made on a zero interest basis.

In the zero interest cases, when the homeowner comes to sell today, the Banks typically receive up to 75% of the appreciation in value of the property over the last 10 years, as well as repayment of the original loan in full, in exchange for having lent only up to 25% of the value of the home 10 years ago.

In the fixed interest cases, when the homeowner comes to sell today, the banks typically receive up to 75% of the appreciation in value of the property over the last 10 years, as well as interest on the original loan over the last 10 years and repayment of the original loan in full, in exchange for having lent up to 75% of the value of the home 10 years ago.

The result is that some 10 years later thousands of homeowners are currently trapped in properties which when sold will not realise sufficient value for them to purchase a suitable replacement home.

The problem is so severe that Barclays has introduced a “Shared Appreciation Mortgage Hardship Scheme” but this neither provides compensation nor changes the terms of the original mortgage. HBOS has not even introduced a hardship scheme.

Following years of campaigning by SAFE (Struggle Against Financial Exploitation), hundreds of homeowners are therefore now taking advantage of recent changes in the Consumer Credit Act 1974 to sue HBOS and Barclays in a Group Action.

Elaine Williams, a Director of SAFE, said “We are delighted that Leading Counsel has advised that there are strong grounds for contending that the relationship between the Bank and the holder of the SAM was “unfair” to the holder of the SAM for the purposes of these new provisions.”

The Group Action is being conducted by Hilary Messer of RWP Solicitors.  Hilary, Head of Litigation at RWP, said: “The previous provisions in the Consumer Credit Act 1974 applied in relation to “extortionate credit bargains”.  They were seldom invoked and rarely successfully because the Courts applied the provisions in a restrictive manner.  The new provisions which have been substituted and now have retrospective effect operate on the basis of a lower and more flexible threshold.  If the Court determines that the relationship between the creditor and the debtor is “unfair” to the debtor, it has wide powers to vary the terms of the loan agreement.   Leading Counsel has advised that certain of the terms of the loan agreements were in themselves “unfair” and that the terms of the Brochures issued by the Banks were “misleading” in a number of respects.”

Hilary confirmed that the relief sought from the Court will include a reduction in the percentage of the appreciation payable to the Bank, or alternatively the introduction of a cap or limitation on the amount payable to the Bank as the Bank’s share of the appreciation.

Known to her clients as “The Rottweiler”, Hilary is not afraid to take on large institutions in pursuit of redress for her clients. In October 2001 she won a landmark judgement in the House of Lords, which affected every small business, surety wife, institutional lender and solicitor in the UK. (UCB Home Loans v Moore – conjoined appeals with Royal Bank of Scotland v Etridge (No2)).

Hilary also won a case against Eagle Star in the High Court following an 8 day trial; the insurance giant appealed but the Court of Appeal unanimously found in her client’s favour (Kausar v Eagle Star).

More recently, Hilary has acted for victims of the Paddington rail crash.

Holders of SAM mortgages who wish to benefit from the Group Action need to register at samgroupaction.com before the end of October 2008.

In view of the lapse of time since SAM mortgages were sold, there is a potential limitation problem which will soon become critical in certain cases, and early registration is urgently required.  Holders of SAM mortgages who do not make a claim in legal proceedings commenced within the correct time limit will not be able to challenge the amount payable to the Bank as the Bank’s share of the appreciation. 

Contacts:

Hilary Messer, RWP Solicitors:     01189 984 2266       This e-mail address is being protected from spam bots, you need JavaScript enabled to view it   www.rwp-solicitors.co.uk

Elaine Williams, SAFE:    020 8630 9990   This e-mail address is being protected from spam bots, you need JavaScript enabled to view it   www.safe-online.org

Tim Maltin, Tim Maltin Public Relations:     020 7887 1357         This e-mail address is being protected from spam bots, you need JavaScript enabled to view it    www.maltinpr.com