Property 118 dismisses Skipton and Bank of Ireland defences


Landlord group Property 118 has dismissed defences from Skipton Building Society and Bank of Ireland as its members prepare to legally challenge the lenders.

In June, the Court of Appeal found for Property 118 against West Bromwich Building Society and said the lender had wrongly raised interest rates on tracker loans without a rise in base rate.

The outcome was claimed by some to set a precedent for how the wider mortgage market can treat interest rates.

Property 118 then set up an action group to challenge Skipton and BoI, arguing they have acted in the same way as West Brom.

Both lenders say the West Brom case cannot apply to them and that the terms of their mortgage offers allowed them to raise rates in exceptional circumstances.

A Skipton spokesman says: “Skipton remains firmly of the opinion that, under the terms and conditions of its mortgage offer, it lawfully had the right to remove the standard variable rate ceiling that applied until 1 March 2010.

“The recent decision of the Court of Appeal in the Alexander v West Bromwich Mortgage Company Ltd case was very fact specific regarding an inconsistency in mortgage documentation. No such inconsistency can exist with Skipton’s documentation because the relevant key terms were very clearly and fairly laid out in only one document, being the mortgage offer.”

A BoI spokeswoman adds: “The West Bromwich case is not com­parable to Bank of Ireland UK.

“BoI’s offer document and mortgage terms and conditions expressly stipulated that the tracking margin or differential could be varied, and the offer and mortgage conditions documents are consistent, allowing for the differential to be lawfully changed.”

Skipton hiked its SVR on residential mortgages from 3.5 per cent to 4.95 per cent in 2010 and BoI raised rates for 13,500 base rate tracker mortgage customers in February 2013.

But Property 118 Action Group says: “There is no definition in the terms of the contracts and there is precious little case law on what ‘exceptional circumstances’ means in this context.

“To make our case we will show that the mortgage lenders are merely trying to escape the consequences of a bad bargain, for example they could have easily included an interest rate floor in the mortgage contracts, just as other lenders did, in order to mitigate losses in a low interest rate environment.”

An anonymous barrister says: “There is no definition in the terms of the contract and there is precious little caselaw on what ‘exceptional circumstances’ means in this context.

“The contra proferentem rule can be of assistance here as the contract is a standard form contract and ‘exceptional circumstances” will be interpreted against the interests of Skipton as they introduced it into the contract.”

The contra proferentem rule says that when two sides disagree about what a contract means, the clauses in question should be interpreted against the interests of the body that put them forward.