Being chased for a 17k loan my solicitor should have paid off - help please!

[HL123]

This is probably going to be very long and complicated, so apologies for that! I’ll try to be as clear as I can, sorry if I’ve missed anything out. And I hope I’ve put this in the right place.

 

In 2004 I purchased a house with my now-ex partner, with a mortgage from Halifax. A few months later we took out a secured loan with London Scottish to put in a new kitchen and bathroom. We decided to wait until after Christmas to get the work done, but before that happened we split up. I moved back to Scotland to be near my family (we were not married), and we agreed that he would get the new kitchen and bathroom fitted ASAP and then put the house on the market. I wrote to Halifax and London Scottish with my new address and explained that my ex had agreed to be responsible for the repayments until the house was sold (I knew this would have no legal bearing on anything, I just wanted to make them aware of the situation). This was early 2005. The house was put on the market but had very little interest. Eventually after more than two years on the market, my ex decided to buy a brand new house because the builders were offering to buy the old house as a ‘chain-free incentive’. Although they were offering nowhere near market value, I agreed to it on two conditions: 1) That I would receive a refund of the £5,000 my parents had originally given us for the deposit; and 2) that all debts against the property would be paid off in full before my ex received a penny.

 

As things had not ended amicably, everything was done through a solicitor. As the solicitor was handling the sale of our property and my ex’s new purchase simultaneously, she dealt mostly with him. But I had written to her stating my conditions for agreeing to the sale and she had written back confirming them, so I signed the documents and everything was fine. The sale went through on 24th August 2007. The solicitor didn’t send me a breakdown of the figures involved, but she did send me a letter confirming that the mortgage and loan had been settled as agreed, and enclosed my cheque for £5,000. As far as I was concerned, that was the end of the matter.

 

Fast forward three years, and in July this year I receive a letter from London Scottish out of the blue, demanding payment of £17,183. The letter said that the loan had not been repaid in full when the property was sold and the shortfall was still outstanding. Sure enough, my credit report shows that a default for £17,183 was registered against me on the 31st August 2007, exactly a week after the sale. I'd seen the default few months ago and meant to contact them about it, but I needed to find the account number first and to be honest it went out of my mind. But after their letter, I decided to phone them to sort it out, expecting them just to say it was a mistake. Unfortunately, they didn't. They said the final redemption figure for the loan had been £22,981 but my ex had told them there would be insufficient funds to repay both the mortgage and the loan from the sale proceeds, and he was experiencing financial difficulties because he’d lost his job, so he had no choice but to go ahead with the sale (none of this was true – he had a very well-paid job and had just got a £200k mortgage for his new house). They agreed to accept a partial settlement of £3,000 in order to remove their charge from the deeds so the sale could proceed, on the condition that my ex made an arrangement to repay the shortfall afterwards. Apparently he agreed to this over the phone, saying he would sell his car and make monthly repayments ‘once he was working again’. They also said the solicitor was aware of the arrangement because London Scottish confirmed it to her in writing and over the phone.

 

Following this phone call, I wrote a letter of complaint to the solicitor. I explained what London Scottish had told me and pointed out that I had expressly instructed that all loans were to be repaid, and for her to go ahead with the sale knowing I would be left with this debt was unacceptable and amounted to negligence. The firm replied stating that she no longer worked for them, but that they would investigate my complaint and get back to me. A couple of weeks later they wrote to me stating that London Scottish only ever quoted a settlement figure of £3,000 and their correspondence made no mention of an outstanding balance at any time. They had also questioned the solicitor involved and she confirmed that she was not aware of the outstanding balance, and had considered the £3,000 to be for full redemption of the account. They provided copies of the following documents to support this:

 

· A letter from the solicitor to London Scottish dated 13/08/2007 stating: “Further to our recent telephone conversation, I write to confirm that I am instructed by Mr X and Miss X regarding the sale of the above property, and the purchase by Mr X of [his new address]. As this matter is now reaching completion, please provide me with a redemption statement in relation to the registered charge on the above property”.

 

· A copy of a letter from London Scottish to my ex on 17/08/2007 (the date of his phone call) stating: “Further to our telephone conversation, I am writing to confirm the settlement figure on your account. The settlement figure we have agreed on is £3,000. This is to be paid to London Scottish on completion of the sale.”

 

· An email from London Scottish to the solicitor on 20/08/2007, stating: “Following our earlier telephone conversation I can confirm that we will remove our charge on the above property upon receipt of £3,000.”

 

· A letter from the solicitor to London Scottish on 24/08/2007 stating: “Following completion of the above sale, we confirm that the £3,000 balance due to redeem the above account has been telegraphically transferred to you. We enclose form DS1 for signing and sealing.”

 

· A letter from London Scottish to the solicitor on 08/10/2007 stating: “We enclose the following vacated documents for the above mentioned account: 1) Form DS1. 2) Title deeds. Please note that any block buildings insurance is automatically cancelled upon redemption and any refund is taken into consideration in the final redemption figure.” (Obviously standard wording, as there was no block insurance).

 

Note how none of the correspondence from London Scottish or the solicitor states ‘full and final’, which even I know is crucial, and how they never supplied a copy of the redemption statement itself.

 

· A breakdown of the sales figures which showed that the sale price was £129,157. From this, they paid the Halifax redemption (£60,565), London Scottish redemption (£3,000) and my £5,000. This left a balance of £60,592. From this, they paid my ex’s deposit to the builders for his new property (£48,254), his stamp duty, and the legal fees. This left a final balance of £9,240 which was paid to my ex in cash.

 

I wrote to London Scottish enclosing the solicitor’s letter and copies of all the documents they had sent to me. The basic points of my letter were:

 

1) The solicitor has confirmed that the £3,000 was paid as full redemption of the account, and that no outstanding balance was ever mentioned by London Scottish. The enclosed documents support this.

 

2) How was the £22,981 redemption figure reached? The original loan was only for £11,000 and payments were made for three years before the property was sold, therefore a £3,000 settlement figure seems reasonable. A redemption figure of more than double the original loan amount does not. Please provide a breakdown.

 

3) You stated that the redemption figure was £22,981 and the solicitor paid £3,000, but registered a default for £17,183. Simple maths shows that this does not add up. What happened to the other £2,798 in the week between the property being sold and the default being registered?

 

3) Why did I never receive any correspondence from you regarding the shortfall at the time of the sale, or in the three years that have passed since? And why did I not receive a default notice, required by law, before you added the default to my credit record?

 

Finally after eight weeks of waiting, London Scottish wrote to me a few days ago with their ‘final response’ letter. They’ve answered my points as follows:

 

1) “The £3,000 settlement was not agreed as a full and final settlement of the account. We have a copy of the redemption statement sent to your solicitor on 21/08/2007 and this clearly states that the amount we required to settle the account was £22,981. We also have a record of the telephone conversation with your solicitor on the same date, during which we confirmed that the £3,000 settlement was not for full and final settlement; but that we had agreed with Mr X that we would remove our charge from the title deeds upon payment of £3,000 but that this would not clear the total amount outstanding and there would be a remaining balance payable in excess of £17,000. This information had already been confirmed to Mr X during his telephone call to our office on 17/08/2007. Mr X agreed that he would make arrangements to pay the shortfall after the sale of the property by selling his car and making monthly repayments once he found new employment, however he never contacted us to arrange this and the balance is still outstanding.”

 

I always found it a bit suspicious that the solicitors didn’t send me a copy of the redemption statement - maybe this is why! Unfortunately London Scottish didn’t send me a copy either, so I only have their word for what it said. But if the solicitor knew that a balance would be outstanding, this would mean she proceeded with the sale against my instructions. Not only that, but she paid over £9k of cash to my ex which could have been used towards the shortfall (not to mention the thousands of pounds in stamp duty and fees paid out of the sale proceeds), and then lied about it in writing when I made my complaint. I also do not understand why London Scottish would accept my ex’s vague verbal promises about future repayments, when they could have insisted that he transfer the debt to his new property as security. The solicitor’s first letter had stated that he was purchasing another property, so they were aware of this – they even had the address. And I don’t understand why they would write to him to confirm they had agreed a settlement figure of £3,000, but neglect to mention that this was only a partial settlement. It seems like a crucial bit of information to omit.

 

2) “The original loan amount was £11,000. Up until the date the property was sold, £9,415 of payments were contractually due. However, during this period we only received payments totalling £3,861. In addition to the £5,540 of arrears that were outstanding, arrears management fees and daily interest charges were added in line with the terms and conditions of your credit agreement, resulting in a final redemption figure of £22,981.”

 

They didn’t provide me with a proper breakdown, but by my reckoning they added over £15,800 in fees and interest in three years – more than the original loan amount. This seems unbelievably excessive to me. This is also the first I’d heard about the account being in arrears. When I looked back over the documents sent to me by the solicitor, I realised the email sent to her on the 20/07/2007 came from the ‘Pre-Litigation Recoveries Department’ at London Scottish, so she was obviously aware he’d stopped paying and didn’t tell me.

 

3) They didn’t answer this part of my letter at all.

 

4) “We note from our records that although you wrote to us with your new address in 2005, the address was not changed on our system and consequently all correspondence continued to be sent to your old address. The Notice of Default was, as a result, sent to you at the wrong address. As this was not served correctly to you at your last known address, we will ensure that the default is removed from the Credit Reference Agency records. The records will also be amended to show that the account was partially settled on 31/08/2007. This does not mean that the debt does not exist and remain payable; as we believe that both you and Mr X were aware that a £17,183 balance remained payable following the sale of the property, and you remain jointly and severally liable for this amount. Any arrangement you made privately with Mr X regarding the payment of the account after the sale does not relieve you from your responsibility to repay the debt.”

 

Fair enough – I signed the agreement; I know that legally I’m jointly liable for the debt. But considering it was a joint agreement, shouldn’t they have got my permission to change the terms? By accepting the partial settlement and removing their charge from the title deeds, didn’t the loan change from secured to unsecured? The amount owed had also changed, as the original loan agreement we signed was only for £11k, not £17k. And all this was done without a new agreement being signed by me (or by him, it would seem, otherwise I’m sure they would have mentioned it in their letter). And I’m not sure what they mean by ‘any arrangement you made privately with Mr X regarding the payment of the account after the sale’ – they made the agreement with him (selling his car, monthly repayments etc), not me. They kept me completely out of the loop the whole time. If they had updated my address, I would have received notice when he fell into arrears and could have sorted it out. Because they didn’t let me know, the arrears continued and led to over £15k of charges, which makes up the bulk of the balance they’re now chasing. And also find it quite hilarious that they accuse me of being aware of the balance. They’ve admitted that none of their letters ever reached me; they know the solicitor is denying all knowledge of any outstanding balance and therefore couldn’t have told me; and they know I was no longer in contact with my ex. So obviously I’m clairvoyant – who knew?!

 

The upshot is, I don’t know where to go from here. The solicitor’s firm has stated in writing that the £3,000 was paid as full settlement of the account and that London Scottish never made them (or her) aware of any outstanding balance. The paperwork they have sent seems to support this but some parts are a bit suspicious, as is the lack of redemption statement. On the other hand, London Scottish have stated that the solicitor was made aware of the outstanding balance in writing and by telephone, but haven’t actually provided me with proof of this. So someone is telling porkies, I just don’t know who at this stage! If it is the solicitor, I guess I’ll need to make a complaint for negligence and try to make a claim for the £17k through the firm’s liability insurers so the debt can be repaid? It’ll be a lot of hassle but I’m certainly not being left in 17k of debt when my ex walked away with a £48k deposit and £9k of cash from the sale because of their negligence. I thought the whole point of a secured loan is that it gets repaid before anyone else gets a penny, and I trusted the solicitor to ensure this was done.

 

With regards to the default – now that it has been removed from my file, can London Scottish put it back on as technically the amount is still outstanding (i.e. reissue it to my correct address under the present date)? Or will it be taken off for good? It was the only black mark on my credit file so hopefully it’s gone for good. But it still looks like I’ve got over 17k of debt when I shouldn’t have, so I’d like the whole account removed if possible. Where do I stand with regards to London Scottish changing the terms of the loan (i.e. from secured to unsecured) after a verbal arrangement with my ex, without having a new agreement signed or even writing to me to confirm it? They mention the ‘credit agreement you signed’ several times in their letter, yet surely that agreement ended on the day the property was sold, as it was for an 11k secured loan, not a 17k unsecured one? Their letter makes it very clear that all their contact was with my ex, and that he had verbally promised to make arrangements to pay it and never did, and they have admitted making an error with my address and never writing to me. So as I never agreed to the new unsecured terms and was never notified of the changes, would this make the debt unenforceable? Or am I clutching at straws now?!

 

Any advice would be very gratefully received, I really feel out of my depth on this one. I’d really hoped that London Scottish would just write back and say “oops, sorry, we made a mistake. You owe us nothing and your credit file will be restored with a wave of our magic wand”. But I guess that would have been too easy!!!

Edited October 2, 2010 by HL123

[HL123]

Judging by lots of views and no replies, I'm guessing this is too complicated - sorry! I was going to edited my post to just give a quick summary of the main points instead but I don't seem to have the option to, so thought I'd just put them here:

· In 2007 I sold a property jointly owned with my ex. We were not in contact so everything was done through the solicitor. The Halifax mortgage and London Scottish secured loan were paid off in full, and this was all confirmed by the solicitor. My ex received all the leftover cash from the sale.

· Out of the blue London Scottish are now chasing me for a shortfall on the account as they said it was not paid off in full at the time of the sale. They state only £3k was paid and £17k is still outstanding. I found out they registered a default against me for this £17k when the property was sold three years ago, which has only recently come to light. I've heard nothing off them for these past three years.

 

· The solicitor insists that she was never told about any £17k balance, and that London Scottish only asked for the £3k, so as far as she is concerned the loan was repaid in full. On the back of this I complained to London Scottish.

 

· London Scottish say this is not correct. They say they made an ‘agreement’ with my ex over the phone that they would accept a £3k partial payment to remove their charge on the property, with the rest to go unsecured. Apparently my ex agreed to make arrangements to repay the £17k but never did. I don’t know why they agreed to this, as there was enough money to repay the loan in full from the sale proceeds. It was all done without my consent.

 

· They say the solicitor was aware of the above arrangement, she says she wasn’t. Neither side have provided concrete proof either way, as yet.

 

· They’re still planning to chase me for the money, but have now removed the default from my credit file as it turns out they were still writing to me at the old address after I informed them I’d moved. They said the £17k debt will still show as outstanding but that the records will now show that the account was part settled, rather than defaulted.

 

I've decided I should write to London Scottish requesting more information before contacting the solicitor to complain, as they've yet to actually prove they actually informed her/them of the balance. If the solicitor was aware, obviously this was a serious error and I'll hopefully be able to make a complaint against her (or the firm) and recoup the money to pay the debt.

 

Obviously it's all very complicated and I realise I will probably need to get legal advice once I've received more info from London Scottish. But for now, can anyone tell me:

 

1) If a lender removes a default because it was sent to the wrong address three years ago, can they now reissue a new default using the correct details? Or does the 'one debt = one default' rule that I've heard of come into play? Basically, can I be sure the default is now gone for good?

 

2) Can a lender agree to change the terms of a secured loan (i.e. make it unsecured) after a verbal agreement with one just one of the borrowers (without getting the other borrower's consent) if it was a ‘joint and several agreement’ and they were aware the borrowers were no longer in contact with each other?

 

Thanks!

 

[sillygirl1]

London and Scottish are now in administration and their chances of getting the money they claim are minimal.

 

You need to put in a complaint against the original solicitor with the Solicitors Regulatory Authority and you also need to put in a claim against London and Scottis with the Financial Service Ombudsman and the Office of Fair Trading.

 

It is wholly unreasonable of them to chase only you for this amount, do you know if they have chased your ex....

 

Basically it is now an unsecured debt and therefore there is no real liability on your part to pay the alleged shortfall and their outrageous demands.

 

I would also get your local MP involved as many MPs are now becoming proactive in dealing with these debt companies.

 

DO NOT pay anything towards this, it is not really your liability and London and Scottish are trying it on.

[sillygirl1]

You actually have answered one of your own questions, the £3k payment made by your ex to 'unsecure' the loan, that is why the solicitor didn't really take it into account when totting up what was owed on the original sale... a very grey area

 

However if the loan IS unsecured as they now claim, it is NOT your liability as your ex had authority on this by payment of the £3K.

[HL123]

You actually have answered one of your own questions, the £3k payment made by your ex to 'unsecure' the loan, that is why the solicitor didn't really take it into account when totting up what was owed on the original sale... a very grey area

 

However if the loan IS unsecured as they now claim, it is NOT your liability as your ex had authority on this by payment of the £3K.

 

Thanks for your replies sillygirl.

 

I think the whole secured/unsecured thing is very confusing to be honest, as I'm not sure if it technically went unsecured. The property sold on 24th August 2007 - they're saying that £22,981 became due on this date, as the property was a secured loan. But because only £3,000 was paid (as per their agreement with my ex, of course!) they entered the balance as a default. This was recorded on 31st August, exactly a week after the sale (only the balance should have been £19,981, not £17,183 - still no idea where this figure came from). Their letter states that had made an 'agreement' with my ex to make payments after the sale, but they still went ahead with the default straight away. So did the loan actually become 'unsecured', or did it just default?

 

Either way they didn't send the default notice to the correct address, so they've agreed that it will be removed. But they're still chasing the £17,183.

 

I think I'll link to this thread from the 'legal issues' section as well, as it's very complicated and I'm just getting myself more confused!

[Ganymede]

it is NOT your liability

 

 

I don't think it's a simple as that.

 

The original loan was a joint one so the OP may still be joint and severally liable...

[HL123]

I don't think it's a simple as that.

 

The original loan was a joint one so the OP may still be joint and severally liable...

 

 

You're completely right Ganymede, that's what makes this all so complicated

 

I knew that I was joint and severally liable for the loan, that's why I insisted on it being repaid in full from the sale proceeds. On the plus side, the solicitors have acknowledged this in their letter to me. Their defence is that London Scottish said the £3k was for full repayment, therefore they have acted as per my instructions and any queries on this should be directed to London Scottish etc etc. So as far as they are concerned, they were never made them aware of any shortfall. This is what I based my complaint letter to London Scottish on.

 

However, London Scottish contest this and say the solicitor was made aware - not just once, but twice. I sent them a copy of the solicitor's letter with my complaint, so they know she had already denied it in writing. This makes it a whole different ballgame, as it calls into question the solicitor's conduct and integrity, which means if they're correct I'll have a legal battle on my hands.

 

However, if it turns out that London Scottish didn't make the solicitor aware of an outstanding balance (they've yet to provide actual evidence of this) and only ever asked for £3k - where do I stand then? London Scottish claim they made my ex aware that the £3k was only a partial statement over the phone. But as far as I can tell they only have file notes about the phone call to back this up, not an actual recording (otherwise I'm sure they would have said in their letter - they only said 'our records show that during this conversation...'), so it would be difficult to prove who said what. And the letter they sent to my ex following this phone call doesn't back their story up - it just says 'we have agreed a settlement figure of £3,000' (no mention of it being a 'partial settlement' or any shortfall remaining payable). So if the solicitor is telling the truth and London Scottish only told them about £3k, can they really expect to enforce payment of the shortfall now, on the basis of an vague phone call with my ex which their own letter doesn't confirm? Especially when they've already admitted that they failed to speak or write to me about it?

 

 

I also realised something else about the default:

• Their letter states that £22,981 became due on the day the property was sold, which was Friday 24th August 2007.
  
• The solicitor paid £3,000 of this, leaving a balance of £19,981. Nothing else was paid.
  
• They registered a default for £17,183 on Friday 31st August 2007 - exactly seven days after the property was sold (i.e. the day the funds became payable).
  

So in addition to sending it the DN to the wrong address (which they have admitted) and the amount being wrong, they also failed to give 14 days for the balance to be paid before defaulting the account. Therefore it is wrong on three counts, the address being the least of it.

 

Am I correct about this, or are there different rules for secured loans?

[ndcdavis]

My view is that you would benefit from taking legal advice on this - try to find a local solicitor who will give an initial free interview.

 

Question: Were the solicitors who handled the sale the same solicitors who had handled the purchase? I ask this because it is not yet clear which form of joint ownership applied.

 

You may need to make a formal complaint to the solicitor, but there may actually be a negligence claim.

 

Think about some of the issues:

 

(1) what agreement did you reach (if any) about the proceeds of sale?

 

(2) It seems to me that the solicitors handling the sale may have had a conflict of interest, as it is clear that the iterests of the joint owners differed. This means that they should have advised you to take independent advice.

 

(3) On a sale, secured loans are normally paid. If (as is suggested here) one secured lender agreed to release its charge on payment of a smaller sum then you would expect to see (based on your summary):

net proceeds of sale = sale price LESS expenses of sale LESS amounts to redeem charges

 

out of net proceeds of sale £5K to repay your parents then the balance divided 50/50 between you and your ex.

 

(4) in your case, it seems that there was an agreement between you and your joint owner. The key to this is to understand what that agreement was.

 

 

As a start, you need to ask the solicitor in writing for a full copy of the file.

[ndcdavis]

sorry, was the house in scotland or England?

[HL123]

Thanks for your reply ndcdavis.

 

The property is in England, but I am resident in Scotland (and was at the time of the sale). That’s another complication really, as I’d need to find a solicitor that can advise on English law, which isn’t easy. My uncle is a lawyer and has kindly offered to look at it all for me, but he specialises in criminal law rather than family/conveyancing issues and only works in Scotland, so he doesn’t know how much help he’ll be able to offer me. Still, once I have all the information I need, I plan to take him up on his offer before I go any further.

 

In answer to your questions:

 

 

The solicitor who handled the sale was not involved when we purchased the house (we got free legal work with the Halifax mortgage from one of their panel solicitors, can’t even remember the name of the firm). But we were equal owners, and both the mortgage and loan were set up under joint and several liability.

 

Our agreement for the sale was that I would receive £5,000 for the deposit and all the debts secured against the property would be cleared in full. That’s all I asked for - my only concern was to be debt free and sever all ties with my ex, rather than getting any profit from the sale. The balance was earmarked for my ex’s deposit on his new property (which was compulsory, as the builders only purchased the house so he could buy the new one on the same date) and my ex was to receive any cash that was left at the end. This should have amounted to very little, a few hundred pounds if anything at all. But because the loan wasn’t repaid in full, he ended up walking away with over £9k cash plus his stamp duty etc. I wasn’t aware of this until I received the breakdown off the solicitor a few weeks ago. Had the loan been repaid in full, he would have got nothing.

 

 

Regarding the conflict of interest, I wrote to the solicitors at the beginning stating my conditions for the sale (i.e. £5k plus all the debts cleared). They confirmed this in writing back to me, so there should have been no conflict - it was all very simple. The problem has only arisen now that London Scottish claim a shortfall went unpaid. The solicitors claim that they fulfilled my obligations to me, because they considered £3k to be for full redemption and were unaware of any shortfall. This is fair enough. But London Scottish claims that the solicitors were aware, which would mean they didn’t fulfil their obligations to me, and even worse are now lying about it. The fact that the solicitor concerned no longer works for the firm makes it even more complicated, as they are speaking on her behalf.

 

I know my complaint against the solicitor won’t be easy, which is why I’m going to write to London Scottish and ask for evidence of their claims before I go any further down that road. If London Scottish can provide proof that she knew about the shortfall and therefore acted against my instructions, it shouldn’t be too hard to prove negligence - in which case I’ll get my uncle to handle things for me, as the Scottish/English thing shouldn't really matter for that type of case.

 

But before I can go any further with the solicitor, I need to write to London Scottish asking them to back up their claims. As I’m writing to them anyway, I thought I would raise the points above (i.e. the invalid default, the fact they didn’t seek my consent to their agreement with my ex, etc), in the hope they’ll realise that pursuing me would be more hassle than it’s worth and agree to write off the debt (or transfer it solely to my ex, anyway). Slim chance, I know, but they’re already in administration and they’d have to take action against me through the Scottish courts system because I’m resident here, so it won’t be easy for them - especially as they'd have to explain all the errors they’ve made.

 

Problem is I don’t want to write to London Scottish until I’ve got all my facts straight about the 14 days for the default notice etc, otherwise it’d be pointless.

 

Trust all this to happen to me

[ndcdavis]

I think you should also write to the solicitor and ask for a full copy of the file.

 

It would be useful if you could post the actual exchange of letters about the agreement, but it appears that the solicitor failed to carry out your instructions and this has caused you loss. That means that you should be bringing a claim aganst the solicitor not a complaint.

 

Much can be done at a distance as you will need an English Solicitor. external link removed

 

Good luck

Edited October 21, 2010 by IdaInFife
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