# Joint & Several Liability Implications



## screech (21 Apr 2009)

I am a minority shareholder on a commercial mortgage that is probably going to be defaulted on.

The thing is I can probably afford to discharge my share of the obligation but am fearful about the joint and several liability clause and whether the bank would persue me for the entire amount, which would more than wipe me out.

So far the bank have been speaking exlusively to the majority shareholder  and I have not been included in discussions, being small fry.

I am not sure how to proceed with the bank vis a vis offering to discharge my share as I do not want this situation to affect my credit rating going forward. Currently neither the bank nor the majority shareholders realise I can pay my share off. But I feel I am in a total catch 22.

How aggressive are the banks likely to be in this scenario.
It would be better for me to default on this loan that to be pursued for the entire amount?


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## dewdrop (22 Apr 2009)

Pehaps you would kindly clarify what you mean that "you are a minority shareholder on a commercial mortgage". Who exactly is the borrower. The fact that you are a shareholder in a company does not make you liable for the company"s liabilities unless you joined in the mortgage document or signed a guarantee.


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## screech (22 Apr 2009)

There are a group of borrowers, I have a 4% share of the building.
But I am apparently jointly and severally liable for 100% of the mortgage.
So it seems that "paying my share" is not a solution to this problem and might well make my situation exponentially worse.


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## jhegarty (22 Apr 2009)

Is this a personal loan or through a limited company ?


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## screech (22 Apr 2009)

There is a personal guarantee but the company is a partnership not limited as far as I know?
It's actually not me but someone very close to me, so I don't know the finer details to be honest.
But even you posing these questions is helpful.


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## dewdrop (22 Apr 2009)

Usually a Guarantee is for a specific amount and the person who signs it is liable for the full amount mentioned in the Guarantee once demand has been made for payment


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## jhegarty (22 Apr 2009)

Looks like your friend is libel for the full loan.

But get some profession legal advise pronto.


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## Brendan Burgess (22 Apr 2009)

dewdrop said:


> Usually a Guarantee is for a specific amount and the person who signs it is liable for the full amount mentioned in the Guarantee once demand has been made for payment



I would have thought that joint borrowers, "jointly and severally" guarantee the mortgage. 

Given that the OP uses this expression, I would expect that he is liable for the entire amount. 

The OP needs to get all the borrowers together to discuss this issue. He has a potentially huge liability for possibly a very small return. 

Brendan


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## screech (23 Apr 2009)

Brendan said:


> a potentially huge liability for possibly a very small return.


 
Hit the nail on the head there.
It's unbelieveable really. But they were told, at the time that this clause was the only way to get the mortgage.
Everyone assumed the small fry were most likely to default, and the big fry could deal with it. Never considered the big fry folding option. I've googled joint and several liability and come up with some scary scenarios. Where the parties on one loan were liable for another parties individual loan with the same bank on the basis of the way the J&S liability clause was worded. The victim successfully sued the solicitor who advised him on this contract.


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## mf1 (23 Apr 2009)

"Where the parties on one loan were liable for another parties individual loan with the same bank on the basis of the way the J&S liability clause was worded. The victim successfully sued the solicitor who advised him on this contract."

Be careful with comments like that - it could be construed as implying that borrowers in the (quite different) circumstances you describe could in some way abdicate responsibility for their own actions and hold the advising solicitors responsible. 

mf


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## screech (23 Apr 2009)

mf1 said:


> " Be careful with comments like that - it could be construed as implying that borrowers in the (quite different) circumstances you describe could in some way abdicate responsibility for their own actions and hold the advising solicitors responsible.
> 
> mf


Actually the circumstances are fairly similar to the AIB v. Gold case 2001
outlined in 
One does expect one's advising solicitor to protect one against debts exceeding those one assumes one is undertaking.
But at the end of this case it is clear that Mr Gold successfully took a case against his solicitor on this issue.
Anyhow I think there are other ways around this problem...we'll keep the solicitor option in the back pocket!


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## Bronte (24 Apr 2009)

It seems to me that if they cannot get the money from the large shareholder they will come after you if you are also  liable for the whole loan.  Are you the only one with 4% and the remainder 96% is with one company/person.  It's very strange that you'd have only 4% and take full liability, why be involved at all if you were taking on 100% of the risk.  

If you are also liable you ought to make sure you are in any discussions with the bank.


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## Mommah (24 Apr 2009)

Interesting thread but scaaary!


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## screech (24 Apr 2009)

Bronte said:


> It's very strange that you'd have only 4% and take full liability, why be involved at all if you were taking on 100% of the risk.


 
The successful company required premises and this was the only way to get it.
Because the worst case scenario plan we had in place was that we could pay off our share of the mortgage by liquidating other property.
We naively thought that would be the worst case scenario. We only considered our financial well being and our debts not the worst case scenario for the other partners and how that would affect us. 

This situation is very common with companies buying their own premises.
The banks insist on a personal gaurantee from the partners who naively think their liability extends only to their own share. I believe there are many many people out their who don't realise they are in the same pickle.


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## JohnPQ (13 Aug 2013)

Hello Screech.

I was wondering how this scenario ended up, i.e. how the bank addressed the minority player in the partnership in terms of pursuing the guarantee.

I am in a similar situation (1 of 6 partners) and would be very keen to find out how the bank addressed the joint and several liability. We have two partners who really are the "main" partners and the bank only seems to deal with them. But we are all listed as joint and severally liable.

Thank you,

JP.


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## David_Dublin (5 Sep 2013)

If I was you and I had a spouse, I would be transferring things in my name into the name of my wife.

I'm not a solicitor, and this is not informed, but my gut would be to get anything solely, and perhaps jointly, out of my name as soon as possible, certainly before you heard from the bank.


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