Loan documents showed guarantee applied to all properties

Categories:

Bank decisions, Lending,

Summary:

When Adam tried to discharge the mortgage over the property owned in his name, the bank told him it would need a full statement of financial position because the property was included as part of an interlocking guarantee signed by Adam, his wife and a company of which they were both directors. Adam replied that he had excluded the property from the interlocking guarantee in his lending application, that his property had been wrongly included in the guarantee, and that the bank should discharge the mortgage without requiring any statement of financial position. He also said the bank hadn’t given him enough time to consider the documentation before signing it. The bank would not accept these arguments and Adam came to us.

Published:

October 2021

Our investigation

We found that, despite Adam’s assertion he had told the bank to exclude the property from the guarantee, the documentation approved by the bank and signed by Adam did indeed include the property. The guarantee clearly stated that all debts owed to the bank by Adam, his wife and their company were secured by all the properties the three owned. Adam said the bank gave him only two working days between presentation of the approved lending documentation and the date of accessing the funds, and this was not a reasonable amount of time to consider the lending structure. However, we found this timeframe was not a basis for wrongdoing in itself, and that Adam had not raised any objections with the documentation at the time or in the following weeks or months. We therefore found that the guarantee did indeed apply to the property, and the bank was entitled to request a full statement of financial position before discharging the mortgage.