Scenario
4 years ago, Walter and Venus bought a house, Hillview, with his parents Anna and Bert who are in their 80s. Each couple sold heir own home to buy Hillview and made equal contributions to the purchase price. The house was registered in the joint names of Walter and Venus at the Land Registry and all 4 of them moved in and now live there.
Hillview is almost brand new, having been built by their neighbour Colin on a large plot of land to the side of his house. Colin sold Hillview to Peter who only lived there for a year before selling to Walter and Venus. Colin retained the rest of the land when he sold off Hillview and imposed the following covenants on Hillview for the benefit of his retained land:
(a)To build and maintain a fence between the properties
(b)Not to run a business from the property.
Shortly after Peter sold Hillview to Walter and Venus, Colin had to move overseas for work, so he let his sister live in his house while he was away. Walter and Venus have had a long-term goal of setting up a health studio/relaxation centre and decided to make use of part of the ground floor of Hillview to do so.
About 3 months after moving in, Walter and Venus took out a 20-year mortgage with Tadpole Building Society to fund the start-up costs and to do some conversion work on the property. The mortgage was secured on Hillview with Venus and Walter responsible for the payments. They didn’t mention it to Anna and Bert as they didn’t want to worry them about it.
They ran this successfully for over 2 years building up a good client base and being able to care for Anna and Bert. However, over the last 9 months, they have had to reduce their opening hours as Anna and Bert have become increasingly frail and in need of more support. They are having to pay for some additional help and with the reduced income from the business, they have not been able to make all their repayments on the mortgage and for the last 3 months have made no payments at all.
Recently, Colin returned to his house, his secondment overseas having come to an end. He finds out about the business being run at Hillview and pointing to the covenants, asked them to stop running the business as he finds the noise from the traffic disturbing and because he does not like the idea of having a business run from the neighbouring land next door. They told him that it is too late to protest as the business is well established and that they did not know about the covenant before they bought Hillview. They also tell him that they had received planning permission for the change of use.
A couple of weeks ago they received a letter from Tadpole Building Society saying that they would be taking possession proceedings for non-payment of the mortgage. Walter’s brother has started to pay half of Anna and Bert’s additional care costs which means that Walter and Venus can open the business for longer which will help them meet demand. They are sure that with careful budgeting they will be able to make the usual repayments and pay off the arrears in about 7 years’ time. Anna and Bert have found about the possession proceedings and are really worried that they will lose their home even though they knew nothing about the mortgage.
Questions
Your answers must include detailed application with relevant authorities.
You must answer all questions.
1.Advise Anna and Bert
(a)how Venus and Walter could have taken out the mortgage without their knowledge.
(b)whether they will have to move out if the house is repossessed as they knew nothing about the mortgage.
(c)how they could have protected themselves against this.
2.Advise Walter and Venus whether Colin can stop them from running the business at Hillview.
3.Advise Walter and Venus
(a)why Tadpole Building Society can apply for possession of Hillview.
(b)What factors the court will take into account in deciding whether to grant a possession order to the Tadpole Building Society and the likelihood that they can remain in the property.
(c)If the payment plan is not acceptable to the court, whether they can ask to sell Hillview instead of it being repossessed.
