Court finds for lender on RMC argument

The Court of Appeal has recently upheld the judgements of lower courts in a case where a loan was entered into on the express representation from the borrower that the property would not be used as a residence. When the borrower defaulted, it sought to argue that, despite having completed a question on the application form on who would live in the property with “N/A” and having agreed to a special condition that no-one would live there, the fact was that the property was lived in and the lender should have known that.  As a result, the borrowers argued the contract was a regulated mortgage contract, which the lender had entered into in breach of FSMA and was therefore unenforceable.

Judges in lower courts had refused to make orders sought on various grounds, including the stage at which the appellants had sought to raise the FSMA issue and the implication that the applicants knowingly made false statements and that the respondent knew those statements were false. The Court of Appeal agreed with all their findings, commenting additionally that an exercise to determine whether the entry into the mortgage or the consent order relating to it involved the lender in regulated activities would be a “highly unsatisfactory exercise” at this stage in the proceedings.