The Court of Appeal has ruled that a lender can repossess a property, even though mortgage payments were being made.
The mortgage was being paid by a tenant – although the lender, Paratus AMC (formerly GMAC-RFC) did not know that at the time.
The property, in Watford, had been fraudulently purchased with an ordinary residential mortgage. The person who committed the fraud, a phoney estate agent Dixit Shah, then let the property, through an agent, to Doe Fosuhene, described in court as a solicitor.
Shah, it turned out, had bought the property in the name of a Mr Maru, whose identity he had stolen. The terms of the mortgage, taken out in 2008 for £425,000, stipulated that the property should not be let out without the agreement of the lender.
Shah was subsequently sentenced to five and a half years in prison for mortgage fraud. Paratus meanwhile continued to accept the payments from Fosuhene, who became a tenant in the property in August 2009. She entered into an agreement to rent it for five years at £1,000 per month for the first year.
In November 2009, an agent for Paratus had visited the property and discovered from a child there that his parents were renting the property and that the person believed to have bought the property – Mr Maru – did not lived there. The parents were not at the property at the time.
In subsequent court hearings, Fosuhene produced evidence to show she had deposited payments of £1,000, going up to £1,100 per month, with Paratus. The actual mortgage monthly payments should have been £902.85 and she claimed that the amounts she paid were as a result of an agreement with the lender to pay down arrears which had built up before she rented the property.
Paratus denied knowing she had been a tenant, and denied knowing that she had made the mortgage payments, and pointed to the stipulation in the original mortgage agreement banning the house from being let out.
In April 2011, Paratus began proceedings for possession against Maru and Shah, with Fosuhene being joined in the action in July of that year, and an order was made for possession. The order was, however, stayed. It was later confirmed by another court, but again stayed pending an appeal.
The High Court then upheld the order for possession, but Fosuhene appealed again, this time to the Court of Appeal. She argued that Paratus had effectively recognised her as a tenant.
Paratus said that even if it had noticed her name on the bank transfers, there was no reason to connect that name with the person in possession.
The Court of Appeal decided that there was no evidence that Fosuhene had identified herself as a tenant as opposed, for example, to someone speaking on behalf of the mortgagor. There had been nothing to alert Paratus to the fact that it was the occupier who was paying, in the capacity of tenant.
The appeal was dismissed and Paratus was given permission to enforce the earlier possession orders. The Court of Appeal also said it had no powers to give the tenant a further 28 days to give up possession, as she was a trespasser. The court further ruled that Paratus was entitled to its costs of around £10,000.
It is not unusual for lenders to accept mortgage payments from unidentified third parties, or for lenders to appoint ‘receivers of rent’ where rental properties have been possessed but the tenancy continues.
However, the case makes it clear that if the lender is not aware of the source of the payments and the capacity in which those payments are being made, then it is not bound by any tenancy with the occupier.
How we reported the court case against Shah:
https://www.estateagenttoday.co.uk/News/Story/?storyid=3803&type=news_features
.jpg)
Comments