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Students preparing for the CeMAP exams should note that the syllabus requires a knowledge and understanding of those people who are unable to borrow, as well as those who have the capacity to do so. The MAQ syllabus, on the other hand, makes no reference to this.

There are three groups of people who are not allowed – or have restricted ability to – borrow. They are minors, the mentally incapacitated and undischarged bankrupts.

A person under the age of 18 cannot hold a legal interest in land. Furthermore, a minor normally cannot be held accountable for their obligations under a contract, except in the case of contracts entered into for the purchase of &#39necessities&#39. Consequently, mortgages are only made available to persons aged 18 and over. It should be noted that the situation is Scotland in different. Those over 16 years of age are, under Scots law, considered to have full contractual powers.

The Mortgage Code makes specific reference to the marketing of loans to minors with section 2.1 stating that subscribers “will not send marketing material indiscriminately and, in particular, we will be selective and careful if you are under 18 years old and where material relates to loans”. It is important to remember that the Code does not prohibit the sending of marketing material to minors, but simply requires care to be exercised. A person who is mentally incapacitated cannot borrow in his own right. In England and Wales, a person of unsound mind who requires housing to be funded by a mortgage is represented by an attorney appointed by the Court of Protection. In Scotland, the court appoints a curator bonis. If an individual has anticipated the possibility of becoming mentally incapable, he may have already appointed the person that he wishes to act on his behalf by means of an enduring power of attorney (EPoA). An ordinary power of attorney ceases when the donor becomes mentally incapacitated. EPoAs must be set out in a specific form and must be registered with the Public Trust Office.Under the Insolvency Act 1986 or the Bankruptcy (Scotland) Act 1985, a bankrupt is any person who has been made subject to a petition for bankruptcy by the County (or Sheriff) Court.

Bankruptcy arises when a person&#39s liabilities exceed their assets and they cannot meet their financial obligations within a reasonable period of them falling due. A bankruptcy order usually remains in force for three years or, occasionally, two years. During that period, the person subject to the order is said to be an undischarged bankrupt and will be unable to borrow, other than nominal amounts, during the period that the order is in force. Once discharged from bankruptcy, the person is entitled to borrow. It is, of course, quite another matter as to whether a lender would be prepared to lend them money. The existence of a previous bankruptcy must be declared by law and failure to do so can render the person guilty of fraud. Previous bankruptcies should be revealed by a credit search. Many lenders will automatically decline a mortgage application from those with a history of bankruptcy, while others may set down a minimum period of time after being discharged before a mortgage application will be considered.

An individual voluntary arrangement (IVA) is an alternative to bankruptcy. This is a method whereby a debtor can make an arrangement with creditors to reschedule outstanding debts over an agreed period, supervised by an insolvency practitioner. For an IVA to be permitted, creditors representing 75% or more of the debts must agree. The requirement is for creditors representing 75% or more of the debts and not 75% or more of the creditors.

Clearly, persons subject to IVAs are likely to be considered as a relatively poor risk although, in a minority of cases, a mortgage may be a solution to the overall problem. Company voluntary arrangements (CVAs) are the limited company equivalents of IVAs.


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