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Mother loses her home as a victim to Son's fraud

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Santander UK plc v Fletcher & Anor [2018] EWHC 2778 (Ch)


Mrs Fletcher (the appellant) has lost her home after becoming a victim to fraud by her own Son, Mr Fletcher. Mr Fletcher was convicted of fraud after Mrs Fletcher’s home was mortgaged to Santander (the respondent) for a much larger loan than he had led his Mother to believe. She believed it was for a loan of £32,000 when in fact it was £120,000. The debt stood at £160,000 and continued to rise. Santander brought a mortgage possession claim.

The judge allowed for the mortgage to be set aside based on undue influence and held that provided Mrs Fletcher paid Santander the sum she had thought the mortgage had been for (£32,000), Santander will not be able to enforce the whole mortgage against her.

However, Mrs Fletcher was still at risk of losing her home as a few months prior to her signing the mortgage application, she made her son joint owner of her home. This was done in the ‘declaration of trust’ section in the TR1 form which transfers the property from Mrs Fletcher’s sole name to her and her Son’s joint name. As a result, both Mr and Mrs Fletcher had a 50% beneficial title. Santander accepted that the mortgage was not enforceable to Mrs Fletcher’s interest but argued that the Bank had an equitable charge over Mr Fletcher’s 50% beneficial interest in the house since it was owned jointly.

The judge held that the declaration of trust in the TR1 was conclusive. This meant that the property would have to be sold and 50% of Mr Fletcher’s proceeds from the sale would be paid to Santander to clear the debt. The appellant appealed.

Practical Implications

The arguments in favour of Mrs Fletcher were that the execution of the TR1 by Mrs Fletcher was procured by fraud. It was argued that Mrs Fletcher never intended her Son to have a beneficial interest and when the loan was paid off, the property would revert into her sole name. As a result, the execution of the TR1 was made by mistake.

It was argued that authorities such as Pankhania v Chandegra [2012] highlighted that the Judge was not compelled to treat the written document as conclusive due to evidence of fraud and mistake.

What did the court decide?

It was held that even if Mrs Fletcher’s intentions were not for her son to have a beneficial interest, this would only justify an action founded on mistake and would only make the declaration of trust voidable, not void.

Santander clearly relied on the TR1 when entering into the mortgage in their joint names and lending the money. The mortgage deed was signed 6 months after the TR1 was signed. At the time the mortgage deed was signed, Mr Fletcher had a beneficial interest as they were joint owners of the property and therefore the court decided that it would be acceptable for the Santander to enforce their equitable charge over Mr Fletcher’s 50% beneficial interest in the property. It was unfortunate that as a result of Mr Fletcher’s fraud, Mrs Fletcher had to lose her home.

When purchasing a property jointly or transferring a property into joint names, there is a lot that needs to be considered carefully. How is the property going to be held? What is the difference between joint tenants and tenants in common? How will the sale proceeds be split if we sell the property in the future? It is important to understand how your property is to be held as this will affect the amount each joint owner receives once the property is sold or if one of the joint owners dies.

Our Emery Johnson Astills Conveyancing team in Leicester and Loughborough are happy to assist and provide guidance on joint ownership.