WHAT HAPPENS WHEN THE BANKS MORTGAGE IS SET ASIDE BECAUSE ONE OF THE LEGAL OWNERS SIGNATURES WAS THE PRODUCT OF UNDUE INFLUENCE?
The law is full of cases in which a husband or wife take out a mortgage by forging the other’s signature or by exerting some of influence known in law as undue influence on the other legal owner resulting to him or her singing the mortgage.
It is wise to consider the rights of a lender or a seller which has been conveyed the land to his name either by means of a mortgage or a purchase of the house. Is he left without security simply because of one the legal owner’s signature was the result of fraud or misrepresentation by the lender or even by the other legal owner?
As a starting point, since we are dealing with joint legal owners of the title of the land there is an implicit need for a mortgage to be in both names since joint legal owners have the so called unity of title thus treated as each owning the whole of the land and therefore both their consent and signatures are required for a legal mortgage or for an estate in land to be conveyed to a purchaser of the land since they are a considered to be a unity. When one of the legal owners mortgages the land without telling the other or either forges his or her signature (so as his or consent does not count) or even masterminds to sell the house as part of a mortgage fraud plan) this will operate as an act of severance of the legal title. The legal mortgage will not subsist since as explained above joint legal owners act as a unity and both their legitimate consent is a must for a legal estate in land to pass to a lender or a seller. Though the lender will not have a legal mortgage, he will have an equitable charge over the interest of the co-owner who mortgaged the land only. So if the husband forged his wife’s signature for the mortgage the bank will have an equitable charge over his interest whatever that may be. As previously said when the husband or wife mortgages his share of the property without the other’s consent then since the legal joint tenancy cannot be severed and operate as a tenancy in common( s 36(2) (2)No severance of a joint tenancy of a legal estate, so as to create a tenancy in common in land, shall be permissible, whether by operation of law or otherwise, but this subsection does not affect the right of a joint tenant to release his interest to the other joint tenants, or the right to sever a joint tenancy in an equitable interest whether or not the legal estate is vested in the joint tenants: LPA 1925) the equitable joint tenancy is severed and he or she becomes a tenant in common in relation to his or her share in the land. Consequently the lender becomes an equitable chargee over that equitable interest. The downside of this occurrence is that lender cannot seek possession of the land against the innocent legal co-owner as has no estate in land being an equitable chargee and not even an equitable mortgagee. the lender though can still apply for an order of sale under section 14 of TLATA, however a sale might be impeded or be postponed for year and cannot match the potency of a possession order. Moreover, the since the chargee’s interest takes effect in equity and not in law he will be entitled only to the interest of the legal co-owner ho mortgaged his land by consent, this interest in equity could vary from 100% ownership to nothing. This is because equity does not always follow the law, thus in the case of Abbey National Bank Plc v Stringer & Ors [2006] EWCA Civ 338 (07 April 2006) it was decided that the two joint legal tenants where not tenants in equity each holding the land as a whole. Therefore when the joint tenancy was severed by the son who took a mortgage by exercising undue influence on his mother, the bank was not even left with an equitable mortgage of a 50% interest of a tenancy in common after the severance of the equitable joint tenancy, since the whole equitable share belonged to the mother, the son was jointly holding the land with her in law for practical considerations. What is disturbing about the finding of this case is that the bank could do nothing but assume that the a joint equitable tenancy followed the joint legal tenancy thus each tenant held in equity a 50% and after severance of the joint equitable title a 50% each as tenants in common. However this assumption turned out to be wrong since the son had no interest in the land, and there was nothing the bank could do about it.
