Undue influence in mortgages Flashcards
What is the problem of undue influence in mortgages?
If a wife seeks a mortgage over family home to finance her business and then defaults on the loan the bank will want to reposes the house
The interest of the husband will rank higher than those of the bank if the husband can claim he was unduly influenced by the wife to sign the mortgage deed - problem for the bank
What are the rules in RBS V Etridge?
Guidelines provide that the lender must write to the party that is writing the mortgage not for their benefit explaining that the bank needs confirmation from an independent solicitor that he has explained the transaction to him
The relationship between the parties must therefore be non commercial
Bank will not lend until it receives the confirmation from the independent solicitor
What must the independent solicitor do?
Meet the party not benefitting from the transaction face to face and on their own
They must explain the purpose of the meeting, the documents and risks in non technical way
He must write an attendance note
Then the bank’s interest will override the husbands in first example
