Family Loan - demand for immediate repayment

[sallybburn]

Hi All,

I need some help with a problem that I have. I wanted to buy my first house a few years ago and I was going to get a mortgage from a bank. My grandad found out about it and told me that he would just lend me the money and I could pay him back £440 a Month for the next 25 years or until he died.

I fell out with him last year and I’ve not spoken to him since because he did something very unpleasant.

throughout this period I have always paid the money on time and in full.
I recently received a letter from his solicitor demanding that I repaid him immediately. I ignored it because I didn’t know what to do.

I have just had a letter threatening to take me to court if I do not repay the money in full.

There was no written agreement.

I have always paid it back in time and have never missed a payment.

is he entitled to sue for repayment of the money. Also would the loan come under the consumer credit act? It was not for a business purpose it was solely to purchase my home. There is no charge on the property as my conveyancing solicitors wouldn’t allow it.

I have some debts that I pay, and whilst I am on top of these, they will make it difficult for me to get a mortgage to pay him back. Any advice would be really welcome

[des8]

If there is no written agreement and you have maintained the repayment schedule he is (IMO anyway) whistling in the wind.

You could respond to the solicitor, pointing out the circumstances and confirming you have no intention of breaching the contract; nor are you willing or able to repay the outstanding balance on demand.

[sallybburn]

Thank you for the reply x

In the absence of any written agreement do you know if it is assumed that the loan would be repayable on demand or not please?

[des8]

IMO it is most unlikely that a loan for £132,000 to a family member to save applying for a mortgage would be construed to be repayable on demand. It just doesn't make sense.

As there was no written agreement and you have maintained monthly repayments for a number of years, he will have difficulty proving there were other unwritten agreed terms.

It will be for him to prove his claim.

In view of the possible size of any claim (i assume it will still be over £100,000) you might wish to confirm the position with a solicitor.

[sallybburn]

Thank you.

Do you think that the consumer credit act would apply?

[des8]

The loan could well fall under the Consumer Credit Act 1974, but it does depend on the circumstances.

[sallybburn]

How would I know please?

[des8]

You will have to read and understand the act, and see if your loan agreement is exempt under the Act
As it wasn't written down...............


The real question is whether or not the loan is regulated or exempt under the Act.
if it is a regulated agreement and the lender failed to obtain authorisation from the Financial Conduct Authority. your loan may not be enforceable and he may be guilty of a criminal offence.
This crosses over with section 19 of the Financial Services and Markets Act 2000

If this was a one off loan it most likely is exempt

Here's an article about the exemptions to the Act which might help you decide.

Are you hoping to show this was a regulated loan under the Act?

[sallybburn]

Thanks for the reply. I am hoping that it’s a regulated loan, as it obviously makes it very difficult to impose an imaginary clause for immediate repayment. Sorry og I’m being silly but o couldn’t see the link to the article you mentioned.

[des8]

Oops, seems I didn't actually attach it... sorry
https://www.parisisolicitorsltd.com/...er-credit-act/

[sallybburn]

So he has issued court proceedings.

1.
plus interest,
The Claimant's claim is a claim for repayment of a loan the Claimant made to the Defendant
2.
On or around xx May 2018 in a verbal agreement between the Claimant and the Defendant,
the Claimant agreed to loan the Defendant the sum of £106,000.00 to enable the Defendant to
purchase a property at xxxx
2(a)
The verbal agreement was witnessed by the Claimants partner, the Defendants
Grandma
2(b)
The verbal agreement provided for the Defendant to repay the loan at the rate of £420.00
per month, on the 1st of each month, commencing in September 2018.
2(c) The verbal agreement provided that, in the event the Claimant's circumstances changed, the
Defendant would repay any balance of the loan on demand.

This is the main body of the particulars of claim. It’s clearly not compliant with 7.4 of PD 16, as he doesn’t state any of the required information about the oral agreement. Should I apply for a strike out?

[atticus]

You will need to file an acknowledgment of service with the Court and then a Defence.

In your Defence you can argue that the terms of the loan were as set out in your first post, i.e. "he would just lend me the money and I could pay him back £440 a Month for the next 25 years or until he died". If this is correct, state that you have always made all payments on time, and that you intend to continue to do so,

What do you say about para 2(c)? that seems to be the key question, and the judge's finding whether that term was agreed could well be the deciding factor.

I think he has said enough to meet the requirements of PD16. I cannot see a judge striking out the case on that ground.

This sounds like a case that needs to be settled. Can you obtain a mortgage to repay him?

[pt2537]

I dont think a strike out at this stage would succeed.

The bar is very high.

This case is quite interesting, its a family loan, which has not been reduced to writing, evidentially the Claimant has a problem or two, and there are all manner of issues it seems, including a potential s140A issue which would be raised. There are also potential unfair terms issues, if this is considered a business transaction, and of course if you do fall within the 1974 Act and do have a regulated agreement then there are questions over whether or not the creditor has complied with s77A for example.

Lots to consider for sure. But tricky to answer

[sallybburn]

Thanks for the replies. Atticus, In terms of settling this, I have been in the process of getting a mortgage since December and the claimant has been kept up-to date on this, however it is at the top end of affordability for me and it has dragged on as the bank required me to pay all my card debts off first. Had he not issued proceedings, I would have been able to pay it off within the next month, however he has now sued me so the costs of paying this in full are potentially £10k or so more than the balance as the court fee alone was over £4,000 and he’s asking for costs. I will try to settle it at the balance owed, but I know he will reject it. Am I correct in saying that a part 36 offer would leave me liable for costs, or can I make an offer for juts the balance with no costs please. I would say that for the claimant this is not about the money, it is a way of punishing me for taking my grandma in when he was arrested for the assault and coercive control. The litigation is all about control and punishment, he knew I was getting a mortgage and he has sued just as I was about to pay him, which show how his thinking is.

in terms of 2c, he has major issues. My grandma is his victim, he has been arrested for abusing her within the past year. She drinks heavily and she won’t survive giving evidence without breaking down. He is an angry abuser, he will get aggressive and argumentative in court and may even shout at the judge. The claim that a loan of 5 times my salary is payable on demand simply isn’t going to stand up to scrutiny even without the other information. I just don’t want to have to spend 2 years worrying about this.


Thanks to both of you for the advice re the strike out. I won’t apply, I was hopeful that the defect would allow for that.
Pt2537, Does s140a apply to non commercial loans please?
Are there any other laws that would regulate unfair terms in a family agreement please?

[atticus]

That is interesting, thank you. The idea of settlement always throws up a variety of ideas. Here are a couple that have occurred to me.

First of all, put in the strongest possible defence. Do this in any event. Then:

Idea 1. Offer a one off lump sum payment in full and final settlement including interest and costs (less than the full debt, say 75%). This would be on the basis of early repayment, to which, on your case, he is not entitled. You could make a Part 36 Offer to this effect.

Idea 2. Can you complete your mortgage and put the money on deposit? Tell him that you have the money available in full and final settlement, including interest and costs, and that if he refuses you will engage lawyers and use that money to pay their fees, which means that the available cash pot will reduce as the case goes on.

I am sure that there will be other ideas out there. Could you suggest mediation, at which you might float whatever offer you decide to make?