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Alex J.
Alex J., Solicitor
Category: Law
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Experience:  Solicitors 2 years plus PQE
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My son was lent £10,000 by his now x partners father (Mr A)

Customer Question

My son was lent £10,000 by his now x partner's father (Mr A) towards purchasing/renovation of a property on the understanding that the money would be paid back whenever the property was sold. However, due to the relationship breaking down, he has received a solicitors letter stating Mr A wants his money back now, and will take him to court if it is not returned immediately. My son is happy to pay back the loan, but cannot do so until all renovation work is complete and the house is sold.
This money was originally lent in good faith and there is no paperwork. He has been given 28 days to repay, otherwise they say they will take him to court.
He is beside himself with worry what should he do?
Submitted: 2 years ago.
Category: Law
Expert:  Alex J. replied 2 years ago.

Alex J. :

Hi,

Thank you for your question and welcome.

Fortunately the law is on your side in this circumstance, there is a reason why people are not allowed to go around lending anyone money because it is a regulated industry.

There are three positions to consider here:
1. There is a contractual arrangement in place. He is not liable for repayment until the property is sold - this maybe difficult to prove without an email or evidence of some discussion;
2. There is an equitable defence to the creditors claim under the concept of promissory estoppel. The famous case for this is High Trees House, the point is your son has accept a promise of this loan and forebearance and acted on this to start house renovations and if the money were to be repaird now it would be to his detriment. Therefore he could argue in court the creditor should be estopped form claiming repayment;
3. Quite simply the creditor is a private individual and he is not allowed under the Consumer Credit Act to go around lending people money unless the money is lent on non commercial terms and is secured by way of a charge over land.

What I suggest you do is write back as follows:
(i). Write back to the letter and say that you have a contractual loan in replace and you deny it is due for repayment now.
(ii). Say you fully intend to honor your obligations but only on the terms agreed.
(iii). Say that the threats of court action and demands for repayment have no basis and you deem them harassment under S.40 of the Administration of Justice Act 1970 and if he continues to make threats you will consider reporting the matter to the police.
(iv). You are happy to discuss a sensible repayment plan on the terms agreed but will vigorously defence any claim for repayment now.

I would then seriously consider seeing if you can borrow the money from another source and escaping this arrangement. He has a property to offer as security which could potentially be an attractive loan for a family member or a bank.

Whether the creditor starts proceedings or not is his own prerogative therefore if he does start a court claim you will have to get a solicitor to defend it.

I look forward to hearing from you.

Kind regards

AJ

JACUSTOMER-v5vfpsia- :

Thank you for your reply it has been a great help. When I respond to Mr A should I put without predjudice at the end of the letter?

Expert:  Alex J. replied 2 years ago.
Hi,

Thank you

The letter should only me marked "Without Prejudice" where you are making an offer to settle the issue.

I would consider sending two letters:
1. The first letter an absolute denial that the money is at this moment due and owing;
2. A second letter offer to come to some repayment arrangement - this one should be marked "without prejudice".

Without Prejudice is used to make admissions with a view to settling claim, without the fear that the correspondence will be placed before a judge and prejudice your defence or claim.

I wish you the best of luck and please do not hesitate to contact me if you have any follow up points.

Kind regards

AJ

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