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Solicitor’s failure to register mortgage – mortgage not discharged on sale of security property – loan not repaid – joint borrower unaware of debt – default listing removed
In early 2005 Mr and Mrs H received a letter from a debt collection agency demanding payment of an outstanding debt of about $14,000. The debt related to a home loan they had taken out in the early 1990s, to purchase a second property. Mrs H believed that the loan had been repaid to the bank when the property was subsequently sold, and said that it had not communicated with her about the loan after that.
Mrs H discovered that the loan had not been repaid on the sale of their property, and that Mr H had been making repayments to the bank without her knowledge. Two years before the debt was referred to the debt collection agency, Mrs H had phoned the bank to query a letter addressed to both her and her husband. Mr H would not allow her to read this letter. The bank told her that the letter concerned mortgage arrears. Mrs H told the bank that she had no mortgage with it, but the bank could not supply her with further information. As she heard nothing further from the bank, Mrs H assumed that any problem had been cleared up.
Before Mrs H received the debt collection agency’s demand letter in 2005, Mr H had been declared bankrupt. The bank told Mrs H that she, as a joint signatory to their account, was therefore responsible for repaying the debt.
Mrs H contacted her solicitor, who told her that the mortgage had not been registered, although a note on the original loan agreement specifically required this. Because it was not registered, it had not been discharged when the property was sold.
Mrs H complained to the bank, which told her that it had served a letter of demand on both her and her husband in 2002. Mrs H denied receiving this. The bank offered to accept half of the debt in full and final settlement if Mrs H made a lump sum payment. When Mrs H declined the offer, her complaint was referred to my office.
I found that Mr and Mrs H’s solicitors, and not the bank, were responsible for registering the mortgage, and that they had failed to do so. The bank had made every effort to ensure that the mortgage was registered by instructing the solicitors in accordance with its normal practice. Despite its enquiries to the solicitors, the bank was not informed about the property sale until a year after it took place. In the meantime the bank continued to receive loan repayments, seemingly from both Mr and Mrs H, and therefore had no reason to contact Mrs H.
As the loan was in the name of both Mr and Mrs H, they were jointly and severally liable for the debt. The bank did not know of Mrs H’s changed circumstances, and therefore quite understandably sent all correspondence to the last known address for her and her husband. I found that the bank could not be held responsible for Mr H’s decision to withhold the bank’s correspondence from Mrs H.
I recommended that Mrs H accept the bank’s original offer, and that the complaint be withdrawn. Both the bank and Mrs H accepted my recommendation, but Mrs H did so on the proviso that the default listing would be removed. After further discussion between my office and the parties, the listing was removed, with Mrs H paying the agreed amount.