Court of Appeal decision on sale and leaseback transactions
In Cook v The Mortgage Business Plc [2012] EWCA Civ 17, the Court of Appeal gave judgment in four test cases concerning competing priorities following sale and leaseback transactions. Jonathan Small QC and Daniel Robinson appeared for the occupiers who had entered into the transactions.
The occupiers originally owned their homes, subject to mortgages. Faced with rising debt, the occupiers agreed with representatives of an entity known as North East Property Buyers to sell their homes in order to pay their debts and redeem their mortgages and then remain in their homes pursuant to a tenancy. The North East Property Buyers purchasers funded the purchase of the occupiers’ homes by obtaining mortgage finance from the respondent banks. At the same time as, or shortly after, purchasing the occupiers’ homes, the purchasers granted the occupiers tenancies of their homes with assurances that the occupiers could remain in their homes for as long as they wished. Thereafter, the purchasers defaulted on their mortgage payments and the banks sought possession of the occupiers’ homes. The judgment considers whether the occupiers’ interest in their homes under a constructive trust or proprietary estoppel bound the banks on the basis that the purchasers can only have granted the banks a charge over that which they acquired, namely the reversion to the occupiers’ promised tenancies.
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