A solicitor can represent two or more borrowers, provided that there is no conflict of interest. While this is the general practice, there is a likelihood of problems in situations like, where the husband needs to borrow money, and pledges a property that is in joint name of the husband and wife. In such a situation, even if the wife agrees to the mortgage, she can petition to set the mortgage aside claiming undue influence in the event of the husband defaulting on the payment.
A guideline for lawyers acting in such situations was laid in detail by the House of Lords. Thus, the onus of proving that the landowner entered into the mortgage lies with the landowner himself. But, when the relationship between people is special, for instance, parent-child, solicitor-client, etc. (but not husband-wife), there exists an assumption that undue influence was used.
Similarly, when the wife proposes to offer the matrimonial home as a security to the bank loan in the name of the husband, it is assumed that undue influence has been used, because a wife cannot agree to a transaction that is primarily to her disadvantage. In circumstances of a relationship between husband and wife, such a presumption is not accepted and undue influence will have to be proved by the landowner.
In a situation where the title is in the joint name of husband & wife, the lender is expected to conduct reasonable enquiries to be sure the wife is aware of the implications of the charge. Usually, lenders rely on solicitors acting for the wife for confirmation, before proceeding with the charge. Deficiencies if any, are between the wife and her solicitor and the lender has nothing to do with this. Thus, it is the job of the solicitor to ensure that:
- The wife has been explained the purpose of the solicitor’s involvement,
- The wife has been explained clearly, that if there is any dispute in the future, the lender shall rely on the fact that the solicitor has explained everything clearly and no undue influence has been used, and
- The wife has confirmed to the solicitor that she wishes the solicitor to act for her in the transaction and even advise her on the implications of the agreement.
While the nature and the extent of the advice would depend on every situation, all the points should be clearly explained, along with the seriousness of the risks. The solicitor should also make sure to include a point that clearly states that the wife has a choice to accept o refuse the transaction, and it is her choice alone.
The solicitor should make sure that the wife has requested to proceed, and should also be asked, if she wants the solicitor to inform the lenders that, matters have been explained clearly to her. Unless such instructions are not expressly received from the wife, the solicitor should not contact the lender. He should also not confirm the wife’s approval, until all relevant documents have been submitted by the lender. On his part, the lender is required to:
- Give information about the purpose for which the loan is availed,
- Give information about the husband’s current level of debt,
- Give information about the amount of current overdraft facility,
- Give information about the terms of the new loan,
- Give a copy of written application made by the husband for the facility.
But, such information cannot be released except under the express agreement of the husband. If the husband does not allow this, the lender does not have the right to disclose these details to the wife. She should be briefed about the details in a face to face interview with the solicitor who explains everything in simple language that is non-technical. While the solicitor cannot veto the transaction, he is empowered to do so, if he feels that the deal is not in the best interest of the wife. It is however, the discretion of the wife if she chooses to stay with a transaction that is detrimental to her interests.
If it is obvious that the wife is being misled or is wronged, the solicitor will have to refuse to act. While the above laid principles are intended for a husband and wife, the same holds true in a relation between co-habitees or civil partners. In fact, these principles are to be followed in every case, when property is pledged in return for loan that is not intended for the owners.
Photo courtesy: Icm1863
