Drafting a letter of instruction for a mortgage capacity report

Why it matters more here than you would expect

Borrowing capacity is not one number. It is a function of assumptions — about care arrangements, maintenance, term, retirement age, deposit and property. Change an assumption and the figure changes, sometimes by a great deal. The letter of instruction is where those assumptions get fixed, and if it does not fix them, the reporter has to choose, and the answer becomes contestable for a reason that had nothing to do with the analysis.

Bear in mind, too, that instructions to an expert are not privileged. The letter is likely to be seen. Write it as a document you are content for the other side and the court to read.

A model structure

1. Parties, capacity and reference

Who you act for; whether the instruction is joint and if so with which firm; your reference and the other firm’s; the case name and, if proceedings are issued, the court and case number.

2. Background, kept short

Six to ten lines. Length of marriage or cohabitation, ages, children and their ages, employment status of each party, the former matrimonial home and the broad capital position, and the stage the proceedings have reached. The reporter does not need the history of the marriage. They do need to know why the question is being asked.

3. The questions

Ask them numbered and in terms. A serviceable default set for a single-party report:

1. What level of mortgage borrowing could [party] in principle raise, based on the evidence provided and the affordability models operated across the residential lending market?
2. What term is available, having regard to [party]’s age and stated intended retirement age, and is term rather than income the binding constraint?
3. How is [party]’s variable income — [bonus / commission / overtime / self-employed profit] — treated, and how materially do lenders differ on it?
4. What is the effect on that figure of the maintenance [being paid / being received], on the basis set out below?
5. Taking the capacity figure together with a deposit of £[x], what purchase price would be supported, and how does that compare with the cost of suitable housing in [area]?
6. To what extent do lenders differ in their conclusions, and what characteristic of [party]’s position drives the difference?
7. What evidence, if provided, would materially change your opinion?

Question 7 is the one nobody asks and everybody should. It converts a static report into something you can act on.

4. The assumptions to apply

State them, and where a fact is in dispute say so and give the reporter the alternatives to run as scenarios rather than asking them to choose. At minimum, cover:

• the care arrangement and the number of dependants to be counted;
• maintenance — payer, recipient, amount, whether ordered or agreed, and the term remaining;
• the deposit or equity to be assumed;
• the intended property type, tenure and area;
• the intended retirement age, and whether it is evidenced or asserted;
• whether any existing mortgage is to be assumed redeemed, retained or transferred.

5. Alternatives to be modelled

Where a fact is genuinely in dispute, list the alternatives explicitly and number them. “Please also consider the position if the children were to live primarily with the respondent” is something a reporter can act on; “please consider alternative arrangements” is not. Being specific saves argument, and it lets the scope and the fee be settled before the work starts rather than after.

6. Documents enclosed

Itemised, dated, and paginated if you can. If something is missing, say so and say when it is expected, rather than leaving the reporter to discover the gap.

7. Status, timetable and fee

Whether the report is being obtained as indicative material for the First Appointment or as expert evidence for which permission has been given; the date by which it is required and what hearing that relates to; the agreed fixed fee and who is paying it; and, on a joint instruction, how the fee is apportioned.

8. On a joint instruction

Add three lines that avoid most of the later friction:

• that the draft is to be issued to both firms simultaneously, and that neither firm will communicate with the reporter about the substance otherwise than in writing copied to the other;
• that factual corrections may be made by either firm, and that any disagreement about a factual matter is to be recorded in the report rather than resolved by the reporter;
• how written questions on the report will be handled and who bears the cost.

9. Where permission has been given

Where the report is to be expert evidence, the letter should require compliance with Practice Direction 25B and ask expressly for the range of opinion, the conflict declaration, the statement of the duty to the court, and the statement of truth. Asking for them puts it beyond argument.

Three things to leave out

• Any indication of the answer you want. It will not change the opinion, and it will be read by the other side.
• Questions outside the discipline. Property valuation, pension sharing and tax treatment need their own expert; a capacity reporter should decline them, and the good ones do.
• The entire file. Send what bears on capacity. A reporter working through 400 pages of correspondence is billing you for reading, and is more likely to miss the payslip.

This is a practical note, not legal advice, and not a substitute for your firm’s own precedent. If you would like our standard instruction template as a starting point, ask us for it.