Not upheld: Mortgage administration / arrears handling complaint against Hampshire Trust Bank Plc

Decision detail

Summary

C, a limited company, borrowed £2.83 million from HTB in 2022 to purchase a £3.7 million property comprising 24 rental units. By 2023, HTB identified multiple breaches of contract including consistently late payments, insufficient rental income coverage (166% vs required 180%), and unauthorized second charges. HTB appointed receivers in December 2023. The receivers marketed the property and accepted an offer of £3 million in April 2024, completing the sale in October 2024. After fees and costs, a shortfall of approximately £108,000 remained. C complained that HTB unfairly appointed receivers and that the property was sold without proper marketing, resulting in an unfair shortfall. The ombudsman found HTB acted fairly in appointing receivers due to legitimate breaches and concerns, and that the receivers (acting as the borrower's agents, not HTB's agents) conducted a reasonable sale process. HTB was entitled to pursue recovery of the shortfall including via the personal guarantee.

The Ombudsman's reasoning

The ombudsman found HTB's concerns about the loan were reasonable given multiple breaches of contract (late payments, insufficient rental cover, unauthorized second charges) and concerns about long-term sustainability. The appointment of receivers was justified as an event of default had occurred. Crucially, once receivers were appointed, they acted as the borrower's agents under the Law of Property Act, not as HTB's agents, meaning HTB was not responsible for the receivers' actions including the sale decision and handling of contents. The sale price of £3 million was reasonable as it was the highest offer received after marketing and within the projected value range. HTB was therefore entitled to pursue recovery of the shortfall including via the personal guarantee.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website