----< Appeal Court blows out shortfall claim >----------------------------
Lenders may no longer have *any* claim against repossessees' whose houses they sell for less than the house's market value.

That is the implication of a recent decision by the Appeal Court against Skipton Building Society.

The key element of the court's ruling were that:

1. If there are any signs that the lender undervalued the property then the fact that it was a forced sale should not count in the lender's claim that it could not get full value for the property. In other words, the burden of proof on lenders to justify their sale prices in court has been increased.
2. If the lender sold the property to someone who owned adjacent property or to the landlord of a block of flats of which the repossessed property was one - then the sale price should reflect "marriage value". Marriage value is an addition to the price paid that reflects the higher value to the purchaser of a property that is adjacent to property they already own.

The first point means repossesses could require lenders who threaten to take them to court for shortfall claims to show that they sold the property with the same gusto that an estate agent sells an unrepossessed property.

One implication is that lenders might be required to sell repossessed properties for a higher value than a normal property because there is no chain to prevent the buyer taking possession whenever they want.

The second point has implications for the thousands of flat owners repossessed in the late 1980s, early 1990s. Lenders who repossessed such flats frequently sold them to the landlord - without adding marriage value to the sale price.

The second point may also mean that repossesses facing a shortfall claim could require the lender to identify the purchaser before they deal with any other aspect of the claim - in case the lender sold it to a neighbour or landlord.

These are initial impressions. We await analysis of the court's decision. As usually we welcome input from any readers who discuss this issue with their own lawyer.

There is a third point to be taken from this story: the borrower - John Stott - lost in the courts below the Appeal Court. But what this outcome means is that he fought the lender into the first court and when he lost there... he just kept on fighting.

The Guardian ran a report on the case by barrister Richard Colbey in the Jobs and Money section of the Saturday 24 June edition.

It is also available on the Guardian's web-site at:
http://www.guardianunlimited.co.uk/jobs_and_money/story/0,3605,335706,00.html

----< Changes to the web-site >---------------------------------
We have added to the "What happens if the lender will not cooperate?" page in the Do's and Don'ts section of the Home Repossession Page.

[ends]

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