Small claim?

[CerebralC]

Hi everyone, I would welcome some advice. In 2017 I lent a relative and his wife money towards a house purchase. It was stipulated as a loan and they agreed to set up a repayment plan. However this did not happen. Unfortunately the relationship between my relative and his wife broke down and they have been going through a lengthy divorce. She remained in the property. I wrote to her last year asking for the return of the money, either in full or as a repayment plan, as we are now in need of it. I have had no response. The divorce is ongoing and the couple cannot agree on financial issues so the case is going to trial. It is possible that the judge might order the house to be sold in which case I would like the loan to be repaid from the proceeds (there is plenty of equity). Is small claims the right way to go about this - if I win can I ask for a charge to go on the house? Is there a better way to do this? Thank you!

[islandgirl]

Do you have any proof it is a loan and not a gift?

[jaguarsuk]

If you win you have to give them opportunity to pay the judgement based on what the order says, be it a stated number of days or forthwith (28 days). You do this by requesting payment to your bank and enclosing a copy of the order.

If they then fail to settle the judgement you could apply for a charge on the property.

[CerebralC]

Do you have any proof it is a loan and not a gift?

Yes, I have a copy of the bank transaction and I gave the reference 'loan'. Family member was cross at the time as they said it might affect their mortgage application and asked me to change it to 'gift'... but I did not.

[jaguarsuk]

Yes, I have a copy of the bank transaction and I gave the reference 'loan'. Family member was cross at the time as they said it might affect their mortgage application and asked me to change it to 'gift'... but I did not.

The bank statement isn't proof in itself that it was a loan, anyone can put any reference on any payment.

You'll need to establish it was a loan better or they can just say it was a gift, but now as you have lost contact you are trying to claim it was a loan.

The best way to do that is show some communication about it and them agreeing to repay it or if they have made any repayment, no matter how small, that would demonstrate a loan because why else would they pay it.

Do you have anything other than the bank statement?

[islandgirl]

I agree entirely. If you have the reference plus an exchange of texts or emails that would be good. Also any repayment plans agreed.

[CerebralC]

Unfortunately I've nothing other than the bank statement. Everything else was verbal and no repayment plan was set up. My relative did repay a small amount in cash. They would verify that it was a loan, but given that I'm claiming off the wife as she remained in the home, and their relationship has broken down, would this be enough?

[jaguarsuk]

Well if the relative confirms it is a loan and you claim against the wife for the full amount of the loan, the relative can expect the wife to file a claim against them for half of the value of the judgement if you are successful if she consults anyone with legal knowledge.

The loan was made to them both, so both are liable to repay the full value of it.

However if you are only going to claim half from the wife and the relative confirms it is a loan that may be enough to get a judgement, but if I were the the wife I would discredit the relative as malicious due to the ongoing divorce and ask the judge to disregard their Witness Statement.

[CerebralC]

Well if the relative confirms it is a loan and you claim against the wife for the full amount of the loan, the relative can expect the wife to file a claim against them for half of the value of the judgement if you are successful if she consults anyone with legal knowledge.

The loan was made to them both, so both are liable to repay the full value of it.

However if you are only going to claim half from the wife and the relative confirms it is a loan that may be enough to get a judgement, but if I were the the wife I would discredit the relative as malicious due to the ongoing divorce and ask the judge to disregard their Witness Statement.

That's what I'm worried about - plus although there is a person who witnessed the repayment, they are also a relative and gave evidence against the wife in an unrelated court hearing, so their testimony is also likely to be dismissed. Because the house is very likely to be sold, and the loan was towards the house purchase, I just want to be sure I can place a charge on the house if the amount is not repaid, so that when it is sold I can get my money back regardless of how the proceeds are split - I know the relative will pay me back half but I don't know if he will be awarded anything from the sale of the house.

[jaguarsuk]

That's what I'm worried about - plus although there is a person who witnessed the repayment, they are also a relative and gave evidence against the wife in an unrelated court hearing, so their testimony is also likely to be dismissed. Because the house is very likely to be sold, and the loan was towards the house purchase, I just want to be sure I can place a charge on the house if the amount is not repaid, so that when it is sold I can get my money back regardless of how the proceeds are split - I know the relative will pay me back half but I don't know if he will be awarded anything from the sale of the house.

Okay, well another relative witnessing the repayment is different. The relative divorcing can be labelled malicious because of the divorce, but the other relative backing it up by witnessing a repayment however small actually then adds weight to the relative divorcing's witness statement.

Don't worry that they have previously given evidence, if they witnessed something they can't help that and it doesn't change the fact they witnessed it.

It's not water tight, but I'd say you have a good chance.

Because you have had no response to your request you don't know she is going to deny it was a loan, she may admit it and simply try to argue that she can't afford to repay it.

[jaguarsuk]

A note away from the rest of the thread, if you are going to loan someone money for the deposit of a house loaning them directly is not the best way to do it.

You should consult their conveyancing solicitor and inform them that you will be providing the deposit for the property, but you want a charge placing on the property to ensure when it is sold your loan of the deposit is repaid.

If the family or friends need this money again or part of it again for their next property and you want to provide it, you repeat the process until they can repay your loan in full from the equity and still purchase their next property.

Make sure you include this in your will though, don't be specific about the amount of the loan as it could change and you don't want to have to update your will every time someone else sells a property. Refer to it as 'the loan to X via a charge on their property' or something similar. You need to consider in passing whether you want to gift them the loan and release the charge or the charge be given to another family member, such as your spouse.

[CerebralC]

A note away from the rest of the thread, if you are going to loan someone money for the deposit of a house loaning them directly is not the best way to do it.

You should consult their conveyancing solicitor and inform them that you will be providing the deposit for the property, but you want a charge placing on the property to ensure when it is sold your loan of the deposit is repaid.

If the family or friends need this money again or part of it again for their next property and you want to provide it, you repeat the process until they can repay your loan in full from the equity and still purchase their next property.

Make sure you include this in your will though, don't be specific about the amount of the loan as it could change and you don't want to have to update your will every time someone else sells a property. Refer to it as 'the loan to X via a charge on their property' or something similar. You need to consider in passing whether you want to gift them the loan and release the charge or the charge be given to another family member, such as your spouse.

Thanks - I think I have learned from this incident not to lend money to family again