The Law of Tender in Mortgage Repayment: Insights from Houssein v London Credit Ltd
In property finance, borrowers facing default often race to secure alternative financing to pay off an aggressive lender. A common misconception is that a firm offer to refinance, or an official communication of readiness to redeem the loan, is enough to halt the accrual of high interest rates.
The Court of Appeal’s judgment in Houssein and others v London Credit Ltd [2026] EWCA Civ 830 provides a definitive, modern restatement of the law of tender. The Court clarified that a mere offer to refinance does not constitute a valid tender of payment and will not stop contractual interest from running.
The Dispute and Background
The case arose from a £1.881 million bridging loan facility advanced by London Credit Limited (LCL) to CEK Investments Ltd, a company owned by Mr and Mrs Houssein. The loan carried a standard interest rate of 1% per month. Upon an event of default, the contractual terms triggered a compounded default interest rate of 4% per month (approximately 60% per annum).
Following an alleged breach of a non-occupation covenant, LCL demanded immediate repayment and enforced the default interest rate. As the dispute escalated, the borrowers attempted to secure refinancing through alternative lenders to redeem the debt. They argued that their repeated, formal offers to refinance, which LCL allegedly frustrated or refused, should invoke equity to stop interest from accruing.
What Constitutes a “Valid Tender”?
The Court of Appeal rejected the borrowers’ arguments, outlining strict parameters for what qualifies as a valid legal tender to stop contractual interest:
- Unconditional Availability: Funds must be set aside entirely unconditionally and be immediately available to the lender.
- Real Opportunity to Receive: The lender must be presented with an actual, immediate opportunity to take the money and discharge the security.
- Continuous Readiness: The borrower must remain constantly ready, willing, and able to complete the repayment from those ring-fenced funds.
The Court ruled that expressing a willingness or intent to redeem is legally insufficient. Because the borrowers’ refinancing proposals were conditional on a new lender releasing funds, which would not happen until LCL released its security, the funds were not “immediately available”.
Key Takeaways for Borrowers and Lenders
| Functie | Mere Offer to Refinance | Valid Legal Tender |
| Status of Funds | Conditional | Unconditionally set aside |
| Availability | Dependent on simultaneous release of security | Immediately accessible by the lender |
| Impact on Interest | Interest continues to accrue at the contractual rate | Interest stops running if the lender improperly refuses |
For Borrowers:
- An intent to repay does not pause debt escalation.
- Refinancing mechanisms must produce cleared, accessible capital to stop default clauses.
- Conditional term sheets from prospective lenders are unlikely to satisfy the defence of tender.
For Lenders:
- Lenders will likely be entitled to reject conditional financing offers without losing the right to ongoing interest.
Neem contact met ons op – David Burns, senior partner procesvoering
Senior Litigation Partner David Burns has extensive experience dealing with disputes relating to bridging loans. For enquiries on this topic, please contact David Burns via email d.burns@rfblegal.co.uk or direct dial 0207 467 5751.
David Burns
Senior procespartner
