When Nicholas and Laura’s relationship broke down, Sonia and Laura decided to sell the property. However, Nicholas told the bank the three of them were in a dispute. The bank froze the loan accounts and refused to act on any instructions from any of them until they had resolved the dispute. Sonia offered to repay the loan in full so the mortgage could be discharged and the property sold, but the bank still refused to act, citing a dispute among the partnership’s members.

Our investigation

We found the dispute among the partnership had no effect on the right of each of them, as joint borrowers, to repay the loan. The terms and conditions of the loan allowed for just such a step. Furthermore, section 97 of the Property Law Act 2007 said each mortgagor had the right to “redeem property”, that is, pay off any loans and reclaim the property. The mortgagor was the partnership, and we found the dispute had no impact on the ability of the partnership to give instructions to the bank. Furthermore, Sonia, with a 77 per cent stake in the partnership, was able to pass resolutions without the consent of the other two trustees and could give the bank an instruction on behalf of the partnership.

We told the bank it had acted wrongly in refusing to discharge the mortgage over the property upon repayment of the loan. The bank offered Sonia $10,000.

Outcome

Sonia accepted the bank’s offer.