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There have been dozens of cases involving equity release and similar arrangements that have gone wrong. However, there are not many circumstances in which the courts will overturn an agreement between people where this was made with the benefit of professional advice.
Circumstances in which such arrangements can be overturned include when the contract constitutes an 'unconscionable bargain' or when the contract is entered into as a result of a fraudulent misrepresentation on which one party relied.
A recent case dealt with a woman who bought a property for £77,000 in 2001 and who later got into debt. She entered into an arrangement in 2009 to sell it for £20,000 in order to pay off her debts of approximately £7,500.
She claimed that she had been falsely told that she was entering into an equity release scheme, not a sale, and that the arrangement was an unconscionable bargain by virtue of her having a 'special disadvantage'.
A special disadvantage can cover, for example, poverty or a lack of education. In order to defeat the arrangement on that basis, she needed to show that she did have a special disadvantage, that this had been improperly exploited by the man who sold her the 'scheme' and that the resulting transaction was 'oppressive and overarching' (i.e. grossly unfair).
The defendant argued that because she had consulted a solicitor with regard to the sale of her property, she had acted with the benefit of professional advice and could not claim to have undertaken the arrangement as a result of misrepresentation.
However, the woman had only received advice from the solicitor who completed the conveyance on the sales procedure, not with regard to the agreement. This was not sufficient to persuade the County Court that the arrangement was not unfair.
The moral of the story is clear. To avoid having to resolve unfairness by going to court, it is wise to take expert and specific legal advice before entering into any significant transaction.