RESPONSE TO BBC TV/ RADIO ITEMS ON MORTGAGE RIGHTS CASES

On the 21st and 22nd January 2008, the BBC broadcast TV and radio reports on legally aided mortgage rights cases.

We were happy to assist the BBC with this news feature although we did express our concern that it was important that what was broadcast was balanced and accurate; since misleading or inaccurate information could put people off applying for legal aid, when clearly the legal aid system has been providing help to more and more people.

Whilst the BBC did state the Board’s position of being obliged by law to reclaim costs and tax payers’ money, we feel that some aspects of the reports were not wholly accurate or reflective of the actual position.   

We have set out below our position on and evaluation of mortgage rights cases and the BBC’s reports, so that the public and the profession can take a more balanced view.

• Legal aid is helping growing numbers of people to make use of mortgage rights legislation - without legal aid, homes would have been repossessed.
• Board Policy has not changed as regards property recovered or preserved - we have sought payment in these cases since 2003.       
• The Board is doing what it has to do by law – where applicable we are recouping public / tax payers’ money - - we have no discretion within the statutory framework other than to seek payment.
• Any change to that statutory framework is a ministerial / parliamentary matter.
• As the numbers of applications for these types of case have increased so have the number that would need to be considered for clawback, and recently more of these cases are being concluded.
• Solicitors are expected to explain to their clients at the outset of their cases that they may have to pay some money back if they get or keep money / property. This is also made clear in the information provided by the Board to applicants for civil legal aid.
• If someone uses legal aid, then they have used public money to stop a repossession and to keep their property; as such they might owe tax payers’ money
• In most cases applicants do not have to pay anything.
• Where there is payment to be made it is often in the low hundreds of pounds.
• We will arrange easy, affordable monthly payments.
• If an applicant has only received advice and assistance (not full civil legal aid for a court case), their house is exempt, so there would be no clawback.

The BBCs report we feel:

• Was unrepresentative of the legal profession, concentrating on the experience of law centres, whereas the majority of these cases (approximately 85%) are dealt with by private civil legal aid firms.

• Sensationalised a threat of debt and homelessness – despite us advising that payment is not needed in most cases, that the sums involved are often relatively low, that affordable payments are available and that legal aid has been used successfully to assist people in these cases.

• Implied that solicitors might not take these sort of cases on in the future. There is no evidence for this.

• Implied that the Board do not know what has happened to tax payers’ money. This is wrong. Of those cases we are still considering if clawback applies to, we are rightly making sure that the client has to pay any money before we ask for payment. Often these cases take time because we are waiting on information from applicants / solicitors on which to base our decision.

• We have only received one letter from a solicitor on this subject, expressing concern about the application of property recovered or preserved in mortgage rights cases. We responded to the letter explaining our approach and the House of Lords decision on which it is based.

Below we’ve included some case studies based on real cases, that are typical examples of how a mortgage rights case might work out.

Often they result in the applicant either coming to an arrangement with their lender on payment or being allowed to sell the property themselves on the open market, so avoiding repossession.

CASE STUDIES:

• Mr R defended an action from his lender to repossess his home. He had originally bought the house from a housing association but fell into difficulties paying the mortgage. The solicitor acting for the client managed to get the housing association to buy back the house and rent it back to Mr R, so he managed to stay in his home. He did not have to pay anything to the Board.

• Mr M. defended an action from his lender to repossess his home. Mr M. was then able to sell his house privately rather than have it repossessed. There was no equity after the sale, so Mr M. did not have to pay anything to the Board. The Board paid his solicitor’s bill of £313.

• Mrs V. defended an action from her lender to repossess her home. Mrs V. kept her house. The house had a market value of £140,000. The outstanding mortgage was £23,000. So the amount that Mrs. V had preserved was the net value of £117,000. However, Mrs V. only had to pay £284. in legal fees.

• Miss W. defended an action from her lender to repossess her home. Miss W. was then able to sell her home privately. The proceeds were £4,000 after the mortgage and arrears were paid. Miss W. paid £76. towards her solicitor’s bill.

• Mrs M. defended an action from her lender to repossess her home and kept her home, which had equity of £23, 000. Mrs M. paid £453 towards the cost of her case.  

• Mrs S. defended an action from her lender to repossess her home. Mrs S. paid some contributions to her legal aid as her case progressed. These contributions totaled £263. and covered the costs of the case. Mrs S. did not have to pay anything else and kept her house, which had equity of £9,000.  

• Mrs A. defended an action from her lender to repossess her home.  Mrs A paid contributions to her legal aid as her case progressed. These contributions totaled £425 and covered the costs of the case. Mrs A. did not have to pay anything else and kept her house. 

• Ms. B. defended an action from her lender to repossess her home. Ms. B. paid contributions as her case progressed. The contributions totaled £174 and covered the cost of her case. Ms B. was later able to sell her house privately and keep the proceeds of £20,000. 

• Ms. M defended an action from her lender to repossess her home. Ms M. paid £95 at the end of her case to cover costs. Ms M. kept her home, which had equity of £156,000.
    

TABLES:

Table 1 Applications and grants in mortgage rights cases

*Please note that table 1 shows financial years.

Table 2 Clawback:

The majority of cases do not result in clawback.

As a guide, from 2003 to 2007 there have been 93 instances of some payment to be made to public funds, this is only 14% of all grants (655).