Property118 will take on BoI, Skipton and Manchester

Ryan Bembridge

June 10, 2016

row of houses street

Property118 will take on the Bank of Ireland, Skipton Building Society and Manchester Building Society if it gets the necessary funding after winning a landmark case against West Brom Building Society this week.

On Wednesday West Brom was ordered to repay £27.5m to buy-to-let borrowers affected by hikes in tracker rate mortgages without a corresponding increase in the Bank of England base rate after a Court of Appeal ruling.

Property 118 will now look to take on other lenders.

Legal & General and Skipton sign GI distribution deal

A ‘Property118 Action Group’ crowdfunding campaign has been launched to fight the court battles required and the campaign has raised over £20,000 in two days.

Currently the funding target sits at £60,000 but Mark Alexander, founder of Property118, revealed that he will set a new £3m target once the £60,000 is met.

Alexander said: “If we get enough funds then we will go after the Bank of Ireland, Skipton and Manchester Building Society.

“We always thought the case against the Bank of Ireland was stronger than West Brom, which dealt with residential mortgages as well as buy-to-let.

“The reason we didn’t take them on in the first place was we couldn’t raise enough funding.”

He added: “We are crowdfunding to effectively be a union for landlords.

“We will use member’s funds to instruct and pay for Mark Smith [the barrister central to the West Brom case from Cotswold Barristers] to take action on behalf of members.”

Alexander’s case against West Brom took nearly three years to conclude and he thinks other battles will take a similar time and cost between £500,000 and £1m.

However he ruled out taking on multiple lenders at once.

He said: “We have to pick our battles; we have to fight the battles that represent the bulk of our members.

“The principals are the same in all of them. We are arguing that a tracker mortgage should be what it says it is and that is the basis of the contract.

“We are just as confident in the others – possibly even more so than with the West Brom case.”

He added: “As soon as we raise half a million pounds we will send pre-action protocol letters to each of the other lenders which is the first step in the process.

“It will probably take the same amount of time (to fight other court battles).”

A source close to Manchester Building Society indicated that it is confident Property118 doesn’t have a case since its mortgage terms differed from West Brom’s.

Manchester’s terms decreed that trackers would only track the base rate for three to five years, after which borrowers could be given 12 months’ notice before the interest rate is changed.

It wrote to affected borrowers in 2013 after the loans had been running for five years.

Similarly a Skipton Building Society spokeswoman said it exercised its right to raise variable interest rates without a corresponding base rate rise after writing to members in 2010, adding that its variable rate mortgages were never sold as trackers.

The spokeswoman said: “We note that the recent decision of the Court of Appeal in the Alexander v West Bromwich Mortgage Company Ltd case was very fact specific to the offer letter and terms and conditions of business used by that society at the relevant time and is not of any wider application.

“Skipton remains firmly of the opinion that under the terms and conditions of its mortgage offer it lawfully had the right to remove the standard variable rate ceiling that applied until 1 March 2010 to the majority of its borrowers with SVR-linked accounts.

“The decision, taken over six years ago, to exercise the society’s right to remove the SVR ceiling was permissible because of the exceptional circumstances provision in its mortgage offer.

“The contractual right to remove the SVR ceiling under exceptional circumstances was fair and had been disclosed to affected borrowers in good faith.

“The right applied to borrowers with SVR-linked accounts (these are mortgages where the interest rate is set by the society; they are not base rate tracker mortgages).

“The existence of the SVR ceiling was never promoted or referred to in marketing literature. The first time prospective borrowers were made aware by the society of the SVR ceiling was in their mortgage offer, which clearly and concisely outlined the key terms of their mortgage.

“In the same section of their mortgage offer, and in equal prominence, the mortgage offer made it clear and unambiguous that the society reserved the right to remove the SVR ceiling under exceptional circumstances.

“The existence of the SVR ceiling and the right to remove it under exceptional circumstances were only referred to in the mortgage offer, and were not mentioned in any supporting documentation such as special conditions, standard conditions or mortgage conditions contained in any general terms & conditions or mortgage booklet.

“The society wrote to affected borrowers in early 2010 informing them that it would exercise its right to remove the SVR ceiling with effect from 1 March 2010, whilst also voluntarily committing to reinstate the SVR ceiling when exceptional circumstances no longer prevailed.”

Manchester Building Society and the Bank of Ireland declined to comment.