The Supreme Court has today (22nd October 2014) handed down judgment in Scott v. Southern Pacific Mortgages Limited which is better known as the “North East Property Buyers Litigation.”
Lady Hale and Lords Wilson, Sumption, Reed and Collins have dismissed the tenants’ appeal, concluding that they have no rights which can take priority over the rights of the mortgage companies involved.
The hearing, which was heard on 3rd and 4th March 2014, considered “equity release schemes”, where property owners had sold their homes to a company called North East Property Buyers (NEPB). NEPB promised the sellers a right to remain in the property with a long term tenancy agreement under a Sale and Rent Back scheme. Unknown to the tenants, NEPB took out a mortgage over each property, despite the terms of the mortgage preventing the grant of a long lease.
When the purchasers defaulted on the mortgage payments, the mortgage companies issued possession proceedings. The question for the Courts was therefore whether the tenant could have a right which took priority over that of the mortgage company. The Supreme Court has concluded that the tenant does not have a binding right, and so the mortgage companies are entitled to repossess the properties.
The lead solicitor acting for the tenants said “The Judgment is a devastating disappointment for the tenants. It is believed there are hundreds of cases across the country awaiting the outcome of this case, where property owners sold their properties under a Sale and Rent Back scheme – often because of serious illness or unexpected financial hardship. Many had lived in their properties for decades and, faced with financial difficulties, felt that a Sale and Rent Back scheme was the only way they could stay in their property.
“The Supreme Court has made it very clear that the tenants are innocent victims in this matter, but the current law does not give those tenants a right which takes priority over a mortgage company. However, the Law Commission is currently consulting on reforms which we hope will protect tenants in similar situations in future. Sadly, this will not be in time to help those unfortunate, innocent tenants of NEPB.”
“The Court has clearly said that it hopes that the mortgage companies will consider the effect that possession proceedings will have on these vulnerable tenants, and so we hope very much that the mortgage companies will show compassion and try to reach an acceptable compromise. However, it is a very worrying time for all involved.”
More information on the case, and a copy of the Judgment, can be found on the Supreme Court’s website here