Ashrafi v Belmont Green Finance: beneficial ownership cannot override mortgage security obtained through apparent authority

The High Court has dismissed an appeal by beneficial property owners seeking to prevent possession, confirming that where owners authorise another to obtain mortgage finance whilst representing themselves as owner, they cannot later claim an overriding interest that defeats the lender's security.

Mr and Mrs Ashrafi owned the beneficial interest in a property at Lyndhurst Gardens, Barking, but were unable to obtain mortgage finance in their own names. They instructed Mrs Ashrafi's brother, Mr Shabir, to raise funds on their behalf. Mr Shabir obtained a buy-to-let mortgage from Belmont Green Finance in March 2019, representing himself as the legal and beneficial owner.

The arrangement violated the mortgage terms, which prohibited occupation by family members. The Ashrafis nonetheless occupied the property throughout. When arrears accumulated and the Bank sought possession in April 2024, the Ashrafis challenged the order, arguing they held an overriding interest that bound the Bank.

Earlier proceedings before Recorder Jones had established the Ashrafis held 100% beneficial ownership, with Mr Shabir as bare trustee, and that the Ashrafis were obliged to indemnify Mr Shabir under the mortgage. The Recorder granted them time until April 2023 to obtain their own mortgage, but they were unsuccessful.

The overriding interest question

The central issue on appeal concerned whether the Ashrafis, as beneficial owners in actual occupation, held an overriding interest under paragraph 2 of Schedule 3 to the Land Registration Act 2002 that took priority over the Bank's mortgage.

Mr Justice Adam Johnson applied the principle from Wishart v Credit & Mercantile Plc [2015] EWCA Civ 655, emphasising that an occupier must demonstrate relevant rights capable of binding the mortgagee. The Brocklesby principle, derived from Brocklesby v Temperance Permanent BS [1895] AC 173, operates to prevent such rights arising where the owner furnishes an agent with the means to represent themselves as owner and fails to communicate limitations on their authority to third parties dealing with that agent.

The Court held the Ashrafis had knowingly placed Mr Shabir in a position to represent himself as owner and left him to arrange financing without communicating any restrictions to the Bank. Whether they knew the precise representations made, or approved of a buy-to-let mortgage specifically, was irrelevant. They were accordingly precluded from asserting a beneficial interest with priority over the Bank's security.

Additional grounds dismissed

The Court rejected arguments that the Bank's security merged with its money judgement against Mr Shabir, noting that Cheltenham & Gloucester Building Society v Guttridge (1993) 25 HLR 434 confirms a mortgagee may exercise all remedies concurrently.

On whether the Ashrafis qualified as "mortgagors" under section 36 of the Administration of Justice Act 1970, the Court held they derived no relevant "title" from Mr Shabir. Having no right to ownership or possession they could assert against the Bank, they fell outside the statutory definition and could not invoke the Court's discretionary powers to adjourn or suspend possession.

Finally, allegations of unconscionable conduct by the Bank—including its refusal to accept payments directly from the Ashrafis and the transition to variable interest rates—were dismissed. The Bank was entitled to enforce its contractual terms and had no obligation to enter direct dealings with non-customers.

The appeal was dismissed, with the possession order standing.

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