Mortgage isn't over until it's all paid off: Sue Fieldman on a shock for borrowers who thought last payment was made

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The Independent Online
A COUPLE from Somerset have been pursued by Barclays Bank for an extra pounds 2,700 to pay off their mortgage, even though their solicitor checked with the bank that the original redemption figure it stated was correct.

Their plight highlights the vulnerable position of all borrowers who think they have paid off their mortgage - only to find the lender has got the figures wrong and is looking to them for the shortfall.

Nicholas Langridge and Sarah Cumberbatch live in Batcombe, a small village in Somerset. They recently moved house, and the transaction progressed quickly.

The couple had a mortgage with Barclays Direct Mortgage Service, a division of the bank. On 22 March, their solicitor wrote to Barclays asking for the redemption figure to pay off the mortgage.

On 25 March, the day of exchange, the solicitor had not received a reply. A colleague telephoned the lender and got the figures. Barclays said the amount to redeem one of the accounts was pounds 43,675.87.

Meanwhile, Mr Langridge was in his solicitor's office next door. He said: 'When I was shown the figures, they did seem a bit low. My solicitor said that we should check them again.

'He rang Barclays when I was sitting with him. The bank confirmed exactly the same figures as they had given to his colleague.'

The couple exchanged, and the transaction was completed the next day.

Geoffrey Pratt, the couple's solicitor, said: 'We completed the sale and purchase, but late on the day of completion, Barclays told us we were pounds 2,700 short on the telegraphic transfer of monies sent to them to redeem the mortgage.

'Barclays claim they faxed us the correct figures, but we did not receive them. I have written to Barclays complaining about the situation.'

The redemption figure should have been pounds 46,375.87 and not pounds 43,675.87 - two figures had been transposed.

Mr Langridge said: 'The money they want has been reallocated. The way I see it is that we completed and redeemed the mortgage. They accepted that amount.' After we spoke to Barclays, the lender had a change of heart.

A spokesman said: 'The figures were checked with us and Mr Langridge claims he did not receive the statement which was sent out. In the circumstances, we are prepared to write off the pounds 2,700.'

The couple and their solicitor are delighted. But Barclays' benevolence is not a go-ahead for other borrowers to assume that lenders will not pursue them for a shortfall.

If, for example, the redemption statement is wrong because you cancelled a direct debit payment too early, the lender can justifiably look to you for the debt.

If you are the innocent party to a lender's mistake, it will undoubtedly try to pursue you for the money, but the legal situation is far less clear.

John Samson, property partner with the solicitors Nabarro Nathanson, said: 'Every lender knows that a request for redemption figures will be taken as a statement of how much is required.

'If it was a major and obvious mistake, the borrower cannot reasonably rely on the figure. But if the mistake is less obvious then although the lender may have the right to demand payment, the borrower can claim that the lender gave an implicit promise to redeem on the basis of that figure.

'The scenario has not been fully tested in the courts, but it is likely that a lender who unwittingly gave an incorrect figure, in the knowledge that it is being relied upon, will be unable to correct the situation at a later date.'

Another problem with an incorrect mortgage redemption figure is that it can prove troublesome for the seller's solicitor. The lender may try to withhold the document that releases the mortgage until the extra money is paid.

The Council of Mortgage Lenders says the lender 'should discharge the mortgage'. However, although it might agree to release the property, the borrower could still be made liable for the balance as a personal debt.

(Photograph omitted)