When Friendships and Finances Collide

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 an even higher 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.

A Loan Made in Good Faith

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 serious arrears. Our client had recently received a significant windfall and she agreed to help Miss P by lending her the money to pay off her mortgage and credit card debts. All of this was on the understanding that Miss P would arrange a new mortgage once she was financially back on her feet. Miss P would then pay back the debt with interest.

A Formal Agreement was put in Place

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 by Miss P without her consent. The client duly paid off the mortgage and the debts, to the tune of almost £100,000.

Refusal to Repay and a Broken Friendship

A few years later, our 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 that she was amazed that our client would want her money back. She stopped returning calls and messages and said she considered their friendship to be over. Our client was astonished at this and hurt that her old friend would treat her like this – she felt taken advantage of.

Legal Action and a Positive Outcome

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 room and just before the hearing, Miss P – via her barrister – agreed to a sale of the property. She also agreed to pay our client’s full 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.

Don’t let an unpaid loan ruin a friendship or your finances. If someone you trusted has failed to repay a personal loan, speak to Feakes Legal today.