Settlement reached in shared appreciation mortgage claim, but more to be done, says lawyer

The long-awaited six-week trial between one of Britain’s biggest banks and homeowners left in debt by taking out a controversial mortgage product, has been settled on confidential terms.

The trial was due to commence on 29 January but the Bank of Scotland and a law firm representing 160 current and former customers reached a confidential out-of-court agreement in relation to the selling of shared appreciation mortgages.

Lawyers say that the judgment would have provided a valuable precedent for individuals who have shared appreciation mortgages or who are handling the estates of those who did.

The claim centred on there being an ‘unfair relationship’ between the bank and borrowers. If the court had concluded that there were ‘unfair relationships’ in these cases, it might have opened the floodgates for claims from an estimated 15,000 people – or their estates – in relation to shared appreciation mortgages (SAMs) issued by banks, including Barclays.

Thousands of homeowners took out these mortgages in the 1990s, and it has been reported that they now owe more than 10 or 12 times the original sum they borrowed, with some facing debts of more than £1 million.

Whilst Barclays also sold SAMs, claims don’t appear to have reached the courts.

Laura Robinson, a partner within national law firm Clarke Willmott’s specialist financial services litigation team, is helping individuals and their families affected by Barclays’ shared appreciation mortgages. She said:

“It’s not very often that something like Barclays’ SAMs comes across my desk. The terms were outrageous in my opinion, and the effect that they have had on elderly individuals and their families is heartbreaking.

“In my view, SAMs arguably shouldn’t have been offered to anyone; it’s very difficult to imagine that anyone who was made aware of the true reality and potential extent of the agreements would have taken them on.

“I am working with many people affected and, usually, the reality of these mortgages is only coming to light when a borrower enters a care home or dies. Had that reality been set out at the time the mortgages were taken, it’s very hard to believe that anyone would have agreed to borrowing on those terms. For example, borrowing of just £20,000 can result in a person (or their estate) being asked to repay around £160,000 because the bank would take such a large percentage of any increase in value.

“Barclays were well-placed to know how the housing market was likely to perform. The SAMs seem to have been targeted at retired individuals who wouldn’t have had the same resources and knowledge.

“For anyone who has a shared appreciation mortgage, or acts for the estate of someone who did, time is of the essence and I would urge you to take legal advice sooner rather than later.”

If you have a shared appreciation mortgage get in touch with Laura Robinson [email protected] for advice. Where possible, Clarke Willmott can assist clients on a no win no fee basis.

Clarke Willmott is a national law firm with offices in Birmingham, Bristol, Cardiff, London, Manchester, Southampton and Taunton and is this year celebrating its 135th birthday.