When old friends fall out, there is often hurt and an emotional cost on both sides. When money is involved the hurt and emotion goes to another level. That was the unfortunate situation with a client who came to us about a large sum of money she had loaned to a friend.

The client’s friend – Miss P – was deep in debt after a divorce. She was struggling to pay the mortgage on her house in Monmouth, and her credit and store cards were in arrears. The client had recently received a windfall, and she agreed to do Miss P a favour by lending her the money to pay off the mortgage and card debts, on the understanding that Miss P would arrange a new mortgage once she was back on her feet financially. Miss P would then pay back the debt with interest.

The two friends drew up a formal agreement, with the client becoming a co-owner of the property (in equity). The client placed a restriction on the property register with the Land Registry so that it could not be sold without her consent. The client duly paid off the mortgage and the debts – for not short of £100,000.

A few years later, the client wanted to buy her own house, and asked for the money back. With that, Miss P’s attitude suddenly changed – she claimed that she couldn’t raise a mortgage, and said she was amazed that the client would demand the money back. She stopped returning calls and messages, and said she considered the friendship to be over. The client was astonished at this, and hurt that her old friend would treat her like this – she felt taken advantage of.

The client instructed us to pursue the debt, and when Miss P refused to pay, we had to bring court proceedings for an order for sale. Our client was a co-owner of the property, and so had the right to ask the court to sell it. Outside the court toom, just before the hearing, Miss P – through her barrister – agreed to a sale of the property. She also agreed to pay our client’s legal costs.

The debt in this case was secured by the client becoming a co-owner of the borrower’s property. This gave her the right to seek a sale, much like a bank with a mortgage.