Money loaned

[weyheyman]

A friend (Claimant) loaned £52,000 to his partners son (Defendant). The money was loaned over a period of time (approx 18 months) £5k here, £10k there, some was paid in cash and some was transferred from his account to defendants account titled "loan". No paperwork was put in place and there was a verbal agreement that the money would be paid back in full in June 2016, the idea was the defendant would remortgage and pay the money back.

The payment was not made in June 2016 and in fact the claimant loaned a bit more money to the defendant after this date which then brought the total to £52,000.

The defendant has not paid back any money nor has he attempted to.

The claimant hired a solicitor in late 2017 to try and resolve the situation, after numerous communications between the solicitor and defendant £3,000 has been paid back (£1,000 initial payment and £500 a month which is to continue), however even though in a solicitors letter the defendant has agreed that he believes he owes £50,000 he does not agree to oweing interest or legal costs.

The solicitor instructed demanded the money to be paid at the end of last year and advised that interest would be charged if the demand was not met, the money was not paid. It has been suggested that the defendant agrees to a charge being put on his property if a re-mortgage to raise the funds was not possible. However having confirmed the re-mortgage is not possible the defandant has not responded to any correspondence and even though Court action has now been threatened, no response has been received.

The issue now is that a considerable amount has already been spent on legal fees, taking the claim to Court will cost £2,500 Court Fee (claimable back) but the legal fees to take it to Court the solicitor says are not claimable as he would only get fixed costs of £100.

If we get judgement then the claimant would have to go back to Court to get an order to place a charge on the property, which will cost more in Legal costs.

Is there anyway all the Legal costs can be claimed back as the defendant has had over 6 months to either re-pay the amount or agree to a charge on his property?

Is there any cause of aciton that can be taken?

[jaguarsuk]

It's not clear how much is still outstanding as you have said the debt was £52K and money has been paid back?

[weyheyman]

Thank you for your response Jaguarsuk

Sorry £52,000 was owed and £3,000 has been paid off so £49,000 still outstanding (this does not include any legal costs, interest or court fees)

[jaguarsuk]

Thank you for your response Jaguarsuk

Sorry £52,000 was owed and £3,000 has been paid off so £49,000 still outstanding (this does not include any legal costs, interest or court fees)

Okay then it's a bit puzzling the Solicitor thinks he can only claim fixed costs of £100 as this would be claimed in the fast track as opposed to the small claims track. In the fast track fees can be huge, so it's very strange.

Okay, so the good thing is that in correspondence to the solicitor he has admitted the loan and in making repayments that it was agreed to be repaid. As such there should be no issue with proving the claim and obtaining a judgement.

You can claim for the legal costs you have incurred to date trying to recover from him and add this to the £49K as that is a loss incurred due to his default on paying you. You can also add the fees and you can pursue interest up to 8% per year (up to a max of 1 year) from the date of the cause of action (the date he first missed a payment).

You need to weigh up though that if he gets a judgement against him he may ask to pay at a monthly rate affordable to him and submit income & expenditure forms to the court. The amount might be a lot less than the £500 previously being paid that he ordered to pay.

You could only apply for a charging order on his property if he did not pay the judgement, so if ordered in full with 28 days or if he was paying in instalments and he just stopped.

However if the court set £200 a month and he paid you wouldn't be able to enforce even though unlikely to ever see the full amount repaid.

[weyheyman]

Thanks

So as currently advised the defendant pays £500 a month, this was increased from £115 initially offered as he has got a second job. So whilst he pays £500 a month now, if the claimant goes to court and the defendant turns up, the defendant can argue that he should pay less each month? If the Court then agrees the £500 being currently paid or less each month, then the defendant could argue I suppose that he should not have to pay any legal fees or the Court costs?

The solicitor advised that once the judgement has been awarded the claimant would then have to go back to court to get a charging order, based on what you have advised if the judge agrees a monthly amount to be paid by the defendant, a charging order could not be obtained unless the defendant defaults on a payment?

[jaguarsuk]

Thanks

So as currently advised the defendant pays £500 a month, this was increased from £115 initially offered as he has got a second job. So whilst he pays £500 a month now, if the claimant goes to court and the defendant turns up, the defendant can argue that he should pay less each month? If the Court then agrees the £500 being currently paid or less each month, then the defendant could argue I suppose that he should not have to pay any legal fees or the Court costs?

The solicitor advised that once the judgement has been awarded the claimant would then have to go back to court to get a charging order, based on what you have advised if the judge agrees a monthly amount to be paid by the defendant, a charging order could not be obtained unless the defendant defaults on a payment?

Okay, so if the defendant is currently paying you at the agreed amount then there is no cause of action as he is maintaining the agreed repayments. Until the point he defaults on the agreement there is no cause of action.

If he has defaulted on the payment to then forma cause of action resulting in a claim then he would be liable for you costs of obtaining a judgement in the fast track including legal costs.

At the point you obtain a judgement he could ask the court to allow him to pay an instalment of a lesser amount or after the amount has been set apply to vary the order.

Yes, once the court has ordered an amount and if he continues to keep paying the amount ordered then you could not look at enforcement options. If he defaulted on paying the order, then you could go back to court to apply for a charging order on his property.

Now hear is where it could get interesting. If the court were to agree an annual interest rate of 8% whilst the debt is outstanding that would accrue £4,800 and thus the capital would only reduce by approximately £1,200 in the first year and whilst slightly higher each year would make very little dent in the capital. It could be argued that the defendant offering £500 would mean that you would have no real prospect of ever recovering the capital and that actually the court order at the hearing a charge be placed on the property immediately. If at the hearing the charge was agreed instead of a repayment plan then that would be the judgement.

That could either go in your favour or against you depending on the judge you get - as they might see it differently to you.

You would then have to give the defendant an opportunity to raise the sum to settle the judgement, say 3 months if you are feeling generous and if not you could go back to court to force sale of the property to recover the judgement.

All of this comes down to whether there is a cause of action though, so whilst he's still paying the agreed amount you are a tad stuck.

[Amethyst]

Has your solicitor discussed agreeing a voluntary charging order with the debtor? Would save both parties court costs ( you now and the debtor eventually when he's paying it off or sells the property ) under an agreement that he repays £500 a month and you hold a charge over his property and when/if he sells or remortgages he pays off the remainder secured by the charge. Might be worth looking into if security via a charging order is the end result you are after - https://www.gov.uk/government/public...n-the-register

[jaguarsuk]

Has your solicitor discussed agreeing a voluntary charging order with the debtor? Would save both parties court costs ( you now and the debtor eventually when he's paying it off or sells the property ) under an agreement that he repays £500 a month and you hold a charge over his property and when/if he sells or remortgages he pays off the remainder secured by the charge. Might be worth looking into if security via a charging order is the end result you are after - https://www.gov.uk/government/public...n-the-register

From post #1

It has been suggested that the defendant agrees to a charge being put on his property if a re-mortgage to raise the funds was not possible. However having confirmed the re-mortgage is not possible the defandant has not responded to any correspondence and even though Court action has now been threatened, no respons

seems like he’s savvy enough to try to avoid it!

[Amethyst]

Ahhhh I didn't see that, my apologies..... is he likely to engage with the court process if he's gone to ground now?

It would be quite possible to issue the court claim, and likely obtain judgment, and apply for enforcement, without using a solicitor. You don't have to wait for him to miss an instalment ( if instalments are ordered - if he doesn't engage just ask for a forthwith judgment ) to apply for a charging order. ( rules changed in 2012 re missing instalments )

[weyheyman]

Thank you both for your responses.

I am unsure if he will continue to not engage, i think he may be thinking that it will not get taken to Court.

So if the claim is issued and he does not respond, the Judge could award installments however the claimant could ask for a Judgement Forthwith and for a charging order against the property.

If the defendant appears in Court and the Judge awards a payment plan then claimant could ask for a Judgement Forthwith and for a charging Order against the property.

What do you think the chances are of getting an order for sale as even at £500 a month without interest and costs being added it would take just over 8 years to pay the debt?

.

[jaguarsuk]

Thank you both for your responses.

I am unsure if he will continue to not engage, i think he may be thinking that it will not get taken to Court.

So if the claim is issued and he does not respond, the Judge could award installments however the claimant could ask for a Judgement Forthwith and for a charging order against the property.

If the defendant appears in Court and the Judge awards a payment plan then claimant could ask for a Judgement Forthwith and for a charging Order against the property.

What do you think the chances are of getting an order for sale as even at £500 a month without interest and costs being added it would take just over 8 years to pay the debt?

.

Likely because of how long the money has been outstanding already and the length of time it would take to pay back at £500.

[des8]

Regarding a court order to sell I don't think anyone has brought up the matter of the necessity of the defendant having sufficient equity in his property, or of the possibility of another (partner perhaps + children) having a beneficial interest in it.

[jaguarsuk]

Regarding a court order to sell I don't think anyone has brought up the matter of the necessity of the defendant having sufficient equity in his property, or of the possibility of another (partner perhaps + children) having a beneficial interest in it.

I assumed that as the defendant tried to remortgage and couldn't get a deal that there is, but it's a good point that if he doesn't then it's all a little futile.

[weyheyman]

From what is known there is more than enough equity in the property, however it is presumed the re-mortgage was knocked back on his ability to re-pay a higher mortgage rather than there not being enough equity. Also he has a partner and two children under 18, however he is the sole owner of the property.

[Amethyst]

You don't need a forthwith order to get a charging order, it can be an instalment order and secured with the charging order so if instalments ceased you COULD look at a sale order ( but as a family home with children it is extremely ( like less than 5%) that you'd get a sale order ) Most likely is the charge will just sit on the house until such time as he decides to move or remortgage, IF there is equity after the mortgage is paid up.