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Settlement reached in shared appreciation mortgage claim, but more to be done says lawyer

The long-awaited six-week trial between one of Britain’s biggest banks and homeowners left in debt by taking out a controversial mortgage product, has been settled on confidential terms.

Why was there a trial?

The trial was due to commence on 29 January but the Bank of Scotland and a law firm representing 160 current and former customers reached an out-of-court agreement in relation to the selling of shared appreciation mortgages (SAMs).

Lawyers say the judgment would have provided a valuable precedent for individuals who have shared appreciation mortgages or who are handling the estates of those who did.

The claim centred on there being an ‘unfair relationship’ between the bank and borrowers. If the court had concluded that there were ‘unfair relationships’ in these cases, it might have opened the floodgates for claims from an estimated 15,000 people – or their estates – in relation to shared appreciation mortgages (SAMs) issued by banks, including Barclays.

Thousands of homeowners took out these mortgages in the 1990s, and it has been reported that they now owe more than 10 or 12 times the original sum they borrowed, with some facing debts of more than £1 million.

Whilst Barclays also sold SAMs, claims don’t appear to have reached the courts.

Laura Robinson, a partner within Clarke Willmott’s specialist financial services litigation team, is helping individuals and their families affected by Barclays’ shared appreciation mortgages. She said:

“It’s not very often that something like Barclays’ SAMs comes across my desk. The terms were outrageous in my opinion, and the effect that they have had on elderly individuals and their families is heart-breaking.

In my view, SAMs arguably shouldn’t have been offered to anyone; it’s very difficult to imagine that anyone who was made aware of the true reality and potential extent of the agreements would have taken them on.

I am working with many people affected and, usually, the reality of these mortgages is only coming to light when a borrower enters a care home or dies. Had that reality been set out at the time the mortgages were taken, it’s very hard to believe that anyone would have agreed to borrowing on those terms. For example, borrowing of just £20,000 can result in a person (or their estate) being asked to repay around £160,000 because the bank would take such a large percentage of any increase in value.

Barclays were well-placed to know how the housing market was likely to perform. The SAMs seem to have been targeted at retired individuals who wouldn’t have had the same resources and knowledge.

For anyone who has a shared appreciation mortgage, or acts for the estate of someone who did, time is of the essence and I would urge you to take legal advice sooner rather than later.

Time is running out – Contact a specialist today

Clarke Willmott’s Financial Services Litigation team has a long track record of successfully managing complex group actions and we know that it can be daunting embarking on a dispute with a large corporation like Barclays. We can help you. If you or someone you know has, or had, a Barclays Shared Appreciation Mortgage (SAM) and would like to talk to us about the possibility of making a claim, please email Laura Robinson or call 0345 209 1074.

Frequently asked questions about shared appreciation mortgages

What is a shared appreciation mortgage?

A shared appreciation mortgage is a form of equity release – it’s a way to access the value in your home without selling it. It’s expensive and generally regarded as a last resort option.

Barclays’ shared appreciation mortgages (‘SAMs’) were sold for a brief time in 1998 and involved lending 25% of the value of the borrowers’ home. This was effectively an interest-free loan secured on the property. The catch? Upon sale of the property, the homeowner or their estate had to pay Barclays the sum borrowed as well as 75% of the increase in the property’s value. The value is determined by Barclays rather than independently. When it comes to ending the mortgage, sums of around 15 times the amount borrowed are being repaid to Barclays. Here’s an example:-

Mr and Mrs Jones were in their mid-60’s and retired in 1998. They borrowed £15,000 for home improvements and holidays under a Barclays SAM, when their home was worth £60,000.

In 2024, Mr and Mrs Jones pass away. Their home is valued by Barclays at £360,000, but after a year on the market it eventually sells for £310,000.

The 75% is still calculated based on Barclays’ valuation, even though it appears that the property was overvalued. Mr and Mrs Jones’ estate has to pay Barclays 75% of the £300,000 increase in value (i.e. £225,000) plus the £15,000 borrowed. Barclays receives £240,000 from the £310,000 sale proceeds.

Barclays sold a shared appreciation mortgage to me or my family, how I do I know if I have a claim?

In our view, shared appreciation mortgages shouldn’t have been sold at all. The terms are grossly unfair, and there was a clear imbalance of knowledge – Barclays would have had access to UK house price history and would have known that in the 10 years leading up to 1998, UK house prices increased by over 10% on average. They would also have been well placed to analyse, or access analysis, regarding housing market forecasts in terms of likely future movements. The borrowers, however, did not.

Arguably, anyone who was sold one might have a claim and should take legal advice sooner rather than later. Generally speaking, one of the main obstacles to claims about historic events will be the passage of time.

How do I get out of a shared appreciation mortgage, or make a claim?

You can make a complaint to the Financial Ombudsman Service (‘FOS’), which is a free service, and there’s no requirement to have representation (you can make the complaint yourself). The FOS can, and have, considered complaints in relation to advice given to borrowers about SAMs (one of the more recent final decisions published by the FOS can be found here). However, the FOS are heavily dependent on paper evidence in our experience so, without that, complaints about advice are unlikely to succeed. None have succeeded as yet, as far as we know.

Further, the FOS are restricted by their jurisdiction and cannot consider complaints about the fairness of a product, which is really the crux of the matter. In addition, both banks set up separate subsidiary companies through which the money was lent (e.g. Barclays SAMS Limited) and, as those companies aren’t regulated, the FOS cannot consider complaints against them.

All is not lost though. The Consumer Credit Act 1974 makes court proceedings possible against Barclays during the life of the shared appreciation mortgage, and within six years of it being redeemed. Those claims are based on there being an unfair relationship between the borrower and lender. There are a range of possible outcomes, ranging from the SAM being rendered unenforceable to the terms of the SAM being amended to make it fair. We’re acting for a group of SAM customers who are making claims against Barclays on that basis.

What will it cost to make a claim?

Court proceedings are very expensive, however, it’s possible to arrange funding and insurance so that others take the financial risk for you. We are offering a ‘no win, no fee’ arrangement to our clients and our aim is to make taking action possible for everyone, including those who don’t want to pay legal fees upfront or risk being out of pocket.

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