Following today’s unanimous decision by the UK Supreme Court in Waller-Edwards v One Savings Bank Plc, Liam Bell, Real Estate Disputes Partner at Fladgate, has shared his perspective on the ruling’s implications for lenders involved in joint borrowing scenarios.
Liam Bell, Real Estate Disputes Partner at Fladgate, commented:
“This decision will come as a huge disappointment to lenders, who will have been keenly monitoring the progress of the claim to the Supreme Court and its potential impact on joint borrowing situations.”
“In allowing the appeal, the Court has confirmed that there is an additional burden on lenders in so-called ‘hybrid’ borrowing cases. These arise when a mortgage is provided to joint borrowers for more than one purpose—one of which benefits only one borrower financially—such as the classic example of a wife guaranteeing repayment of her husband’s debts.”
“Lenders will now always be treated as being ‘on notice’ of possible undue influence in such situations, even if that element forms only a small part of a wider, multi-purpose loan. To ensure such transactions aren’t later set aside, lenders must now confirm that the ‘surety’ borrower’s consent is free from improper pressure by the co-borrower.”
“Previously, lenders could assess the transaction holistically to determine whether it primarily served both parties’ interests. Under the new ruling, any meaningful element of surety lending will require lenders to follow the so-called ‘Etridge protocol’—a set of practical steps designed to protect the validity of their security.”
“This marks a significant administrative and legal shift, placing an added burden on lenders already navigating a complex and competitive lending environment.”
