Leighton’s father, Tamati, passed away in 2017. Tamati’s main asset was his family home, which was subject to a $150,000 mortgage.
In his will, Tamati appointed Leighton’s aunt and uncle as the executors of his estate. However, the aunt was too sick to act as executor, and the uncle was not interested in taking on the role. Leighton decided to apply to the court to be appointed as executor, but the appointment process was taking some time.
Meanwhile, months had gone by without Tamati’s estate making any mortgage payments. The lender had been in touch with Leighton, and knew he was in the process of being appointed as executor, but months had gone by without any progress or updates. The lender decided to exercise its power to sell the mortgaged family home. It served the necessary Property Law Act notices on Leighton’s aunt and uncle.
Leighton’s view
Leighton went to his lawyer to see what he could do to stop the lender from selling his family home. His lawyer discovered that Property Law Act notices could only be served on the executors of an estate after they had applied to the High Court for probate. Since Leighton’s aunt and uncle didn’t want to act as executors, they hadn’t applied for probate. The lender’s Property Law Act notices had been served incorrectly, and the mortgagee sale process was defective.
Leighton pointed this out to the lender, and asked the lender to delay the mortgagee sale process until he was appointed as executor. The lender, refusing to grant any more time, served new notices and started a fresh mortgagee sale process.
Despite the lender’s refusal to give Leighton more time, the dispute delayed the process long enough for Leighton to be appointed as executor and refinance the mortgage. The mortgage was repaid, and the family home was not sold.
However, over the course of the dispute and the two mortgagee sales processes, the lender had charged Leighton’s father’s estate $15,569 in legal fees. Leighton felt this was unreasonable, as most of the fees related to the defective mortgagee sale process.
In order to resolve the complaint, Leighton wanted the lender to refund the $15,569 in fees it had charged to the estate, and to refund the $4,572.40 he had paid in legal fees disputing the initial defective mortgagee sale process.
The lender’s view
The lender thought its fees were reasonable. Under the mortgage contract it was entitled to pass on any fees it incurred while enforcing its rights.
The lender also disputed that its process was defective. It did not think its minor error was enough to make its entire mortgagee sale process defective.
Leighton complained to FSCL.
Review
We found that the lender’s mortgagee sale process was defective. Although the Property Law Act requirement which had been breached was obscure, it was still a legal requirement, and the lender had solicitors acting for it.
We found that it was unreasonable for the lender to charge Leighton’s father’s estate fees for its defective process. However, a large portion of the fees (roughly $8,750) would still have been incurred even if the lender followed the correct process.
Outcome
We issued a formal recommendation requiring the lender to refund $6,829 of the fees it had charged to the estate, and pay Leighton $4,572.40 as compensation for the legal fees he had incurred disputing the defective mortgagee sale process.
Key Insights for consumers
Loan contracts will usually contain a clause allowing the lender to pass their enforcement costs on to the borrower. However, this does not mean that any costs can be charged to the loan. If a lender acts unreasonably while enforcing its loan, it won’t be able to recover the costs of that enforcement action from you.
