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 raised concerns with the bank about its refusal to allow Sonia to pay off the loan. We pointed out the dispute among the three borrowers had no effect on the right of each borrower to repay the loan at any time. The terms and conditions of the loan allowed for just such a step. Furthermore, section 97 of the Property Law Act 2007 says that a mortgagor has the right to “redeem" the property, that is, to have the lender discharge the mortgage upon payment of the amount owed in full. The dispute had no impact on the ability of Sonia to give instructions to the bank on behalf of the partnership. Sonia held a 77 per cent stake in the partnership so was able to pass resolutions without the consent of the other two partners.

We told the bank it had acted wrongly in refusing Sonia's offer to repay the lending in full, and to discharge the mortgage over the property upon repayment of that lending. The bank offered Sonia $10,000.

Outcome

Sonia accepted the bank’s offer.