Mortgage default interest could be unenforceable

17th May 2021

Chris Maynard successfully applied for an interim injunction to restrain enforcement by a mortgagee against a portfolio of buy-to-let properties the day before a group of them were due to be sold at auction.

He persuaded Falk J there were serious issues to be tried whether the borrower had been in material breach of covenant at all and whether the default rate of interest applied because of the breach, which was 4 times the initial contractual rate, was unenforceable as a penalty at common law. If that was correct, there was also an issue whether the lender had appointed receivers for an improper purpose.

The borrower was a company but the mortgaged properties had been owned by its two shareholders, who were husband and wife. The breach relied upon was that they continued to reside at one of the properties but there was some evidence that an employee of the lender had known it was their home and that the husband was shielding there from COVID-19 (from which he later died). In the circumstances it had been improbable that they would move.

There was a further issue to be tried whether the first claimant, a very recently widowed housewife who did not speak English and who had limited education and no financial experience, had given security for the corporate borrower because of the undue influence of her husband. The evidence cast doubt on whether she had been given appropriate independent advice.

Houssein v London Credit Ltd [2021] 5 WLUK 128 (12 May 2021)


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