Trustees be aware – Do not sell that repossessed property at an under value!
The case serves as a reminder to take care to adopt best practice when selling. Mortgage lenders in particular are always best advised to obtain professional advice from surveyors both on value and the method of sale.
Even if the asking price is not achieved, mortgages in possession need to be able to show that the property has been tested in the marketplace and that the price achieved reflects the true market value. If such action is followed, claims for damages by a disgruntled mortgagor are less likely to succeed.
The Factual Matrix
In the Meah case, GE Money Home Finance Limited, as mortgagee in possession, placed the property on the market for £185,000. The sales particulars did not mention however, the development potential of the property in issue.
The property was eventually sold to a developer for a purchase price of £221,500, but only after receiving several offers.
The borrower claimed that the property was actually worth £325,000 and issued a claim for the shortfall.
The court agreed that although there had been some deficiencies in the marketing exercise undertaken by the mortgagee; the price suggested by the aggrieved borrower might only have been achieved had there been a bidding war between two competing potential purchasers.
One perceived criticism was that the marketing material did not refer to the development potential and the possibility that the asking price was too low.
However in all the circumstances, the market price was in fact found to have been achieved and as such, no damages were payable as there had been no loss.
What lessons can be learnt?
Its trite law that if a mortgagee decides to exercise its power of sale, it owes the mortgagor a specific duty to take reasonable care to obtain the best price reasonably available at the time (see Dean-v-Barclays Bank Plc  EWHC 1390 (Ch.)).
There is obviously however no duty on the mortgagee to take steps to improve the property or to delay the sale to gain a higher price, for example by applying for planning permission.
As a trustee in bankruptcy, you do however need to think about the marketing strategy carefully and listen to your professional advisers and take heed of their advice.
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