Mortgage Shortfall Limitation -12 years or 6 years ?greenspun.com : LUSENET : Repossession : One Thread
This is some info which has been passed onto me which I think you will all find interesting:
Just a short note to let you know that the Court of Appeal handed down a reserved judgment in Bristol & West v Bartlett (and two other conjoined cases, Paragon v Banks and Halifax v Grant) this morning.
The case involved a determination as to the limitation period facing a lender seeking to recover the shortfall in the mortgage debt after sale of the secured property.
The headline news is that the Court of Appeal has decided that s.20 of the Limitation Act 1980 is intended to provide a complete code for mortgages. Issues as regards the application of ether s.5 or s.8 do not arise. The dicta of Auld LJ in Hopkinson v Tupper are dead and buried.
Therefore, in respect of capital, the bank has 12 years to commence proceedings after the cause of action accrued, usually when the entire mortgage debt became due on the monthly instalment payment being missed for the second or third month. s.20(1) applies.
In respect of interest, it appears that the bank has 6 years from that date to recover interest. s.20(5) applies. However, rather oddly the issue as regards interest accruing after the sale has been specifically left open.
Two other short issues are dealt with An express mortgage shortfall covenant does not give rise to a fresh cause of action accruing on the sale of the property. In order to avoid any issues as to appropriation towards either interest or capital, the lender should adduce evidence of how the net proceeds of sale were applied to the mortgage account.
-- M Amos (email@example.com), August 02, 2002
Do I understand your posting to mean that the Court of Appeal has found specifically that monies paid to lenders from insurers as a result of MIG policy claims are classed as part of the mortgage debt and therefore recoverable up to 12 years either by subrogated or direct action?
-- Gordon Bennet (firstname.lastname@example.org), August 02, 2002.
Surely if MIG payments are, as lenders continually point out, a private matter between themselves and the insurers, the entire debt regardless of any MIG issue is pursuable for 12 years from the default date. However, any element relating to interest on arrears is, as the Limitation Act s20 makes clear, limited to 6 years from accrual. The fact that it is now (a little) clearer that it is the date of default on the mortgage contract when the clock starts ticking, NOT the date of repo or sale, should help many people who, like me, tried desperately but unsuccessfully to pay obscene monthly repayments for several years in the early 90s. (Gosh Citibank, you really haven't got very long left to chase me!!)
-- Melody (email@example.com), August 02, 2002.
Brilliant news. Does a "reserved judgement" mean that it is held in abeyance until other matters are heard?
-- Too scared to say (firstname.lastname@example.org), August 02, 2002.
A couple of points
"Reserved judgment" means that the judges need time to think about it and/or write it up. They are not waiting for anything else. In these cases they have issued a one page 'note' of the judgment, with the full version to follow at the judges leisure.
On the point of the 'accrual of the cause of action', yes it is the first default that under the terms of the mortgage allows the lender to take court action (and not the repo or sale of the home), although a cause of action is restarted by any written and signed acknowledgment made by a person or any part payment made by any joint debtor.
Default may have first taken place in, say, 2nd March 1990. Time will have started to run at that date and if no acknowledgment or given or part payment made, the debt will be statute barred if proceedings are not issued by the end of 1st March 2002.
However, if a written acknowledgment was given in, say, Feb 1996, the 12 year period will have started to run again from that date.
One other point, relating to the different periods for the recovery of principal and interesr (12 and 6 years): there is case law that says categorically that once the principal sum is statute barred, so is any interest that relates to it (Elder v Northcot).
Thus, in the first example, where the debt became statute barred on 2nd March 2002, all interest will also be statute barred, even though it accrued within the last 6 years.
-- GuySkipwith (email@example.com), August 03, 2002.
This looks like good news. Your comment regarding a payment by a debtor or joint debtor being an acknowledgement of the debt does not occur in cases where couples are divorced/separated. My fiance's ex- wife (who has now re-married) is paying a small amount every month whereas he has never admitted to the debt and is steadfastly sticking to this. We are even going to push the point that if they continue to confuse him with his ex (i.e. by mistakenly sending through a copy of her I&E form which she filled in after they had separated), that we shall complain to the Financial Ombudsman and Data Protection. However I assume where couples are still together and one or other has paid monies, or acknowledged in writing, the above applies. Thank you for all advice/information given, the assistance of all is invaluable. Chris
-- Chris (firstname.lastname@example.org), August 05, 2002.
Re part payment
I'm afraid that part payment by a seperated/ex partner does start time running afresh for that person and all other joint debtors. This is specifically stated in s31(7) LA '80.
You can check-out LA '80 at www.lawcom.gov.uk/library/lccp151/cp151apa.pdf
Sorry to bring bad news
All the best
All the best
-- Guy skipwith (email@example.com), August 05, 2002.
Thanks for that. My solicitor advised me that due to the fact she has now re-married and he is no longer responsible for her financially this does not apply. Also if he were to make a settlement payment (which he is adversely fighting), as in the case of a friend of mine, they would continue to chase his ex-wife and would not take this as settlement on her part. Therefore we are sticking, and seem to be winning, to the 12 year rule. We can but hope!!
-- Chris (firstname.lastname@example.org), August 06, 2002.