North East Property Buyers tenants lose appeal against possession orders

Tenants of sale and leaseback schemes operated by North East Property Buyers (NEPB) have lost their appeal against a High Court ruling that they described as “potentially catastrophic” for them. The tenants, who claim that when they sold their homes to NEPB they were promised a home for life, had appealed against the November 2010 ruling of HH Judge Behrens that threatens to leave them homeless after NEPB defaulted on its payments to lenders. Etherton LJ said in his judgment: “It is impossible not to feel the greatest sympathy for the situation in which the appellant vendors find themselves. Having entered into a transaction, in complete good faith, which they reasonably thought would secure both their financial situation and the continuing occupation of their home, they potentially find themselves with no security in respect of either and, indeed, in a worse situation than if they had never entered into the transaction.” However, rejecting their appeals, he said that the problem would have been avoided by proper conveyancing, if the contracts for sale of the properties had given details of the entire contractual deal between the vendors and NEPB. He continued: “I do not know why details of those contractual arrangements were not contained in the contracts for sale, but, if the arrangements were intended to be binding on any third party as well as the purchaser – a matter the appellant vendors’ solicitor would have been bound to investigate and advise upon – their omission seems on the face of it plainly inconsistent with proper conveyancing practice.” He said that a further 90 cases are on hold pending the outcome of the nine test cases, and banks are likely to take action against tenants in many more. In November 2010, HH Judge Behrens, sitting as a deputy High Court judge in Leeds, gave a ruling on preliminary issues in nine test cases, and made possession orders against the tenants. He rejected their claim that the  sale and leaseback arrangements they had made with NEPB bound NEPB’s mortgage lenders as “overriding interests” under the Land Registration Act 2002. The tenants in four of those test cases appealed against the decision, arguing that NEPB had promised that they could stay for as long as they wanted or for life and that most of them were unaware that the purchases were being funded by mortgages. However, Etherton LJ today backed the judge’s ruling that any rights the tenants had been promised as part of the equity release scheme could not take priority over the legal mortgages that bind them. The tenants, who say they have nowhere to go and will have to apply for social housing, had asked the court to overturn the preliminary rulings and to rule that the judge was wrong to make the possession orders against them before the rest of their claim is tried. However, Etherton LJ ruled that the judge was entitled to make the possession orders against them. Cook v Mortgage Business plc and another; Tweddell and another v Southern Pacific Mortgages Ltd and another; Taylor and another v Southern Pacific Mortgages Ltd and another; Scott v Southern Pacific Mortgages Ltd and another Court of Appeal (Lord Neuberger MR, Rix and Etherton LJJ) 24 January 2012. Jonathan Small QC James Stark and Daniel Robinson (instructed by Clark Willis Solicitors) appeared for the claimants; Jonathan Seitler QC and Daniel gatty (instructed by Eversheds LLP) appeared for the defendants; Nicole Sandells (instructed by Cobbetts LLP) appeared for the interested party (Mortgage Express).