In this third article in the series on due diligence in relation to loan portfolio acquisitions, we look at the issues around transferring litigation in the different UK jurisdictions and current litigation trends for purchasers to be aware of.

Litigation transfers

The need to enable the transfer of ongoing litigation following a portfolio acquisition is firmly established. However, it is important to flag the potential issues that can arise on a portfolio containing litigation in the different UK jurisdictions.

It is well known that in England and Wales lenders can apply to court for a Global Substitution Order (GSO), which essentially allows the bulk transfer of inflight litigation from the outgoing lender to the incoming lender in one fell swoop. This enables the seller and purchaser to benefit from economies of scale, with huge cost and time savings.

There is still a substantial amount of work that should be done at the due diligence stage to ensure that this process runs smoothly. It is also key to ensure that the Land Registry form TR4 is correct and executed properly, and that the mortgage sale agreement (MSA) clearly assigns the right to continue and bring civil proceedings.

The situation can become more complicated where the portfolio contains ongoing litigation in multiple jurisdictions. For example, there is no equivalent of a GSO in Northern Ireland or Scotland, although it is worth noting that we did successfully obtain an order for a bulk transfer of litigation in Northern Ireland in one case. Generally, in those jurisdictions, applications to substitute the claimant need to be made on a case by case basis, which typically makes the process much more costly and time consuming.  

Purchasers should therefore consider at an early stage on any potential portfolio acquisition whether there is any ongoing litigation and the best method of transferring it. The parties should agree who will do what and who will bear the costs, and ensure that this is clearly detailed in the MSA.

Litigation trends

It is always worth purchasers being aware of current litigation trends, as these can influence the drafting of the MSA and the scope of due diligence that is carried out.

Recently we have seen a significant rise in claims being brought as a result of “secret commissions”, where it is alleged that lenders have paid commissions to brokers that have not been properly disclosed to customers. 

We have also seen a steady stream of professional negligence claims made by purchasers of portfolios against valuers and other professionals where, for example, the property does not sell for the anticipated value and the purchaser is left with a shortfall. From a purchaser’s perspective, it is important that the MSA properly assigns the right to bring such claims and that it contains appropriate obligations on the outgoing lender to cooperate, for example, in providing witness evidence and any disclosure exercise. 

Although firms are likely to welcome the fact that, based on current proposals, there will be no private right of action for breach of any part of the new consumer duty when it is introduced in 2023, this is likely to be a new lens through which the Financial Ombudsman Service will adjudicate on complaints.


Due diligence is key to ensuring the smooth and efficient transfer of any ongoing litigation and involves more than just ensuring the transfer itself is done correctly. It is also essential to consider any jurisdictional issues and that a full cost analysis of any litigation transfer is undertaken at an early stage. This work must then feed into the MSA, which should properly reflect the allocation of responsibility and costs for dealing with the litigation transfer.

In addition to ongoing litigation, purchasers should also consider whether there are any potential future claims associated with the portfolio that might arise, having one eye on current trends. Again, it is important that the allocation of responsibility for claims and complaints is clearly agreed and documented in the MSA.

Read the guide to buying mortgage portfolios part 1 and part 2. 

This article was first published by Mortgage Finance Gazette

Tom Ward (legal director) and Harriet Talbot-Potts (solicitor) at UK law firm TLT .

Date published

02 February 2022


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