Solicitor highlights anomaly in Ulster Bank mortgages

SBP  By Emma Kennedy
A solicitor has highlighted an anomaly in Ulster Bank’s mortgage conditions.

In a letter to the Law Society Gazette, John Redmond of Fitzsimons Redmond solicitors in Dublin 2 pointed out that Ulster Bank’s mortgage contracts contained an unusual condition.

Redmond said the contracts stipulate that a borrower must repay the mortgage once the lender gives a month’s notice. He said this indicated that the bank could call in a loan with the required notice at any time, even if there was no default by the borrower.

He added that borrowers should be aware of this condition and ‘‘should be advised to look at alternative sources of funding where this is possible’’. But Ulster Bank told The Sunday Business Post this condition was not unusual , ‘‘although it may appear in a different form in some mortgages’’.

In his view, the bank should be clearer in its intent. ‘‘If the bank intends that no demand will be made for the loan unless there has been a default by the borrower, then this is what should be stated in the conditions,” he said.

The bank’s spokeswoman said the condition was initially incorporated as a method to fix the legal date of redemption, ‘‘to ensure that a purchaser of a property took a clear title, free from any claims of third parties’’. She said this redemption date was now fixed by statute by the 2009 Land and Conveyancing Law Reform Act.

She said the bank could not demand repayment of the loan immediately, ‘‘as the borrower has the protection of his common law equity of redemption and the statutory protections of the 2009 act’’.

‘‘It is not the case that a lender may call in a loan at any time simply by serving notice, as has been suggested,” Ulster Bank’s spokeswoman said. ‘‘The power set out has never been exercised in the manner which is being suggested in Mr Redmond’s letter.

An act of default must first occur, and the bank is then obliged to furnish a 28-day notice calling in the loan before taking any action. This applies to all lenders of housing loans.” However, after hearing Ulster Bank’s response, Redmond said he was still unclear why Ulster Bank required this condition in its mortgage contracts.

‘‘The bank admits that it is not required to fix the legal date of redemption since the passing of the Land and Conveyancing Law Reform Act 2009,” Redmond said. ‘‘The borrower’s ‘equity of redemption’ is, in short, the borrower’s right to repay the loan and to have the mortgage released by the bank.

This is a separate issue and does not, in my view, preclude the bank from demanding repayment.”

He described the condition as ‘‘unwarranted and unsettling’’ for any borrower. ‘‘This condition does not relate to a statutory provision and, in my view, is not required in relation to any statutory provision. Accordingly, I do not accept that its purpose is to set out in plain language the statutory provision,” he said.

Redmond said that in a better economic climate, the condition would be less of an issue. ‘‘In former times, when refinancing was widely available at competitive rates, one might have had fewer concerns about a condition of this sort. But currently, obtaining mortgage finance is difficult and, with [property] values having fallen significantly, many borrowers will have serious problems in refinancing.

A borrower can only repay where he can access the funds to do so.”

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