Test case on North East Property Buyers sale and leaseback schemes begins

A test case concerning sale and leaseback schemes operated by North East Property Buyers Ltd (NEPB) has opened at the High Court. HH Judge Behrens, sitting as a Deputy High Court Judge at Leeds, is presiding over a three-day trial of preliminary issues in respect of nine test cases from Newcastle County Court. One of those issues is whether sale and leaseback arrangements between nine tenants, who had previously owned their homes, and NEPB bind the mortgage lenders to NEPB as “overriding interests” under the Land Registration Act 2002. NEPB either purchased the properties at a discount or required a substantial amount to be deducted and paid to them from the proceeds of sale. The tenants claim that NEPB had promised that they could stay for as long as they wanted or for life and that most of the tenants were unaware that the purchases were being funded by mortgages. NEPB has since defaulted on the mortgages and the lenders are seeking possession against the tenants. It is believed that a significant number of cases have been stayed pending the outcome of the test case. NEPB is being investigated by Northumbria police as part of a suspected mortgage fraud in the North East. So far, more than 20 people have been arrested and interviewed – the police hope to be in a position to bring charges by May 2011.