Since 2010 the Government has introduced a number of measures to encourage small businesses and entrepreneurship with a view to boosting the UK economy and the number of people in employment.
When the Small Business Enterprise and Employment Act 2015 was introduced the Government described it as a 'wide ranging Act which paves the way for businesses to get improved access to finance, creates fairer provision for tied pub tenants and puts an end to zero hours exclusivity clauses. With more than 5 million businesses in the UK, the Act will open up new opportunities for small firms to innovate, grow and create jobs'.
It is a harsh commercial reality however that anyone wishing to set up a business will often require financing from a bank and in this case, the bank will usually want to take a mortgage over the assets of the borrower. Often the only asset which the borrower can offer as security for the loan is the matrimonial home.
A problem arises because, typically, a husband and wife own their matrimonial home together and the husband is required by his bank to offer the home as collateral for his business loan. If the business is unsuccessful and the bank tries to re-possess the matrimonial home this could leave the wife (and children if any) without a home and the law recognises that the wife may have felt that she had little choice but to agree to mortgage her home in these circumstances.
The courts considered cases on this subject back in 2001 and laid down a number of requirements to try to protect all parties in particular insisting that the wife in these circumstances is given full details of the financial transaction and has to take her own independent legal advice (as opposed to relying on the advice received by her husband).
In a recent case the circumstances were slightly different in that a mother agreed to mortgage her home as security for her son's business debts but the principles are largely the same. In this case the bank's attempt to re-possess the property was unsuccessful because the bank could not demonstrate that they had taken sufficient steps to notify the mother both of the seriousness of the transaction and had failed to inform her of the need to obtain her own, independent legal advice.
If you receive a letter from a solicitor or lender acting for your spouse requesting your signature to any documentation it is very important for you to ensure that you obtain your own legal advice. To discuss these issues contact us.