Yeovil Court Dismisses Compensation for Mortgage Release Delay

It is obviously common that a divorce settlement will involve the transfer of the former matrimonial home from one party to the other.

And if there is a mortgage on the property the party transferring their share (the ‘transferor’) will want to be released from it, as remaining a party to the mortgage could obviously affect their ability to raise another mortgage, and could also affect their credit rating if the party to whom the property is to be transferred (the ‘transferee’) fails to keep up with mortgage repayments.

But what if the transferee can’t clear the mortgage?

The answer then is for the transferor to be released from mortgage.

The problem is that the court can’t order their release – this is a matter for the bank or building society who hold the mortgage (the ‘mortgagee’). Accordingly, the best that can be done is for the transferee to give an undertaking, or promise, to the court to try to obtain the transferor’s release from the mortgagee, within a reasonable time.

But sometimes that is not possible, because the mortgagee does not agree to the release. Where does that leave the transferee? Can they get compensation?

The answer was provided by a recent case in the Family Court at Yeovil.

Best endeavours to procure release from mortgage

The facts of the case were fairly straightforward, and typical of many similar family court cases.

The wife applied to the court for a financial remedies order. The only significant asset was the former matrimonial home in which the wife lived with the two school-aged children of the family. The property had an outstanding mortgage of £90,000 and an equity of a little over £37,000.

An order was made on 11th March 2019, providing for the property to be transferred to the wife, on her undertaking to use her best endeavours to procure the release of the husband from the mortgage on or before 1st April 2019, and to indemnify him in respect of any liability arising under it.

The property was duly transferred to the wife, but she was not able to obtain the husband’s release from the mortgage.

In September 2021 the husband applied to the court for a sale of the property, claiming that the wife had failed to use her best endeavours to obtain his release from the mortgage. He also sought an order that the wife pay him £80,000 to compensate him for not being able to take out a mortgage on another property, and for having to pay larger sums by way of interest on loans as a result of the poor credit rating that he had incurred as a result of the wife’s alleged failure to keep up with mortgage repayments (which the wife denied).

In the event in January this year the wife finally succeeded in re-mortgaging the property and obtaining the husband’s release from the mortgage. She therefore applied to have the husband’s application struck out.

The husband agreed that there should no longer be a sale of the property, but continued with his claim for compensation.

Misguided compensation claim

The judge found the husband’s compensation claim to be misguided.

The indemnity contained in the wife’s undertaking was only in respect of any liability under the mortgage, nothing else.

If the husband had suffered any loss then his remedy was to apply for an order for the sale of the property, which he did. The fact that the wife had obtained his release from the mortgage before it was heard made the application superfluous.

The court had no power to award compensation, and the husband’s application was therefore struck out.

The husband had argued that the court should have obtained a mortgage capacity report in relation to the wife, before making the order. Such a report would have given an indication of what level of mortgage the wife was likely to obtain. The judge did not accept this argument, but it does give an indication of what could be done to prevent such a situation as occurred in this case from happening.

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