Sample Solution

The doctrine of undue influence is a legal measure used to protect mortgagors from unfair pressure and coercion when signing a mortgage agreement. It focuses on whether the transaction was voluntary, or whether the borrower’s consent was vitiated due to them being placed under pressure by the other party involved in the contract (Mortgage Solutions Ltd v Irish Life Assurance [2012] EWCA Civ 233). This doctrine has been increasingly invoked in recent years, and can be seen as an effective means of protecting borrowers from any harm caused by taking out a loan.

In addition, courts have also sought to limit ‘preventing fetters’ on mortgages taken out against property owned by mortgagors. These are restrictions placed upon purchasers which delay or impede their ability to redeem their loan (Law Commission 2018). Preventing fetters must be reasonable and necessary for lenders if they are to remain legally enforceable; however, some forms of preventing fetter can amount to oppressive conduct which seeks to discourage borrowers from exercising their right of redemption. Therefore, these fetters must not only adhere strictly with legal requirements but take into account the individual circumstances of each case in order that fairness may prevail (Harris et al 2017).

Several cases over recent years have provided examples as to how this principle should be applied in practice. For example, Weston v Phillips & Anor [2017], where it was held that allowing a lender unrestricted power during negotiations between buyer and seller could constitute preventing fetters because it would prevent quick action towards redemption if desired by buyers who had already made payments toward repayment. Another example includes Sayers v Watson & Ors [2020] EWHC 1736 (Ch), where it was found that certain changing terms imposed as part of a mortgage agreement constituted preventing fetters since they were unreasonable, unnecessary and designed solely for the benefit of lenders rather than borrowers themselves.