The courts have dealt in recent years with a large volume of cases brought by banks, and so-called vulture funds, where these lenders typically seek to recover either mortgage arrears or the property itself.
The Statute of Limitations states that any such action must be taken within 12 years from the date when the right of action accrues to the plaintiff and, if any later than that, their action will fail. Any acknowledgment of the debt or part payment by the borrower resets all these time limits back in the bank’s favour.
A much more rigid timeframe set out in the Civil Liability Act, 1961, allows a creditor only two years to initiate proceedings against a deceased person from the date of his / her death.
A recent Court of Appeal decision helps to clarify when a mortgage debt actually becomes due as this will start the time period running under the Statute of Limitations.
Most banks or lenders will not issue any proceedings for recovery of a mortgage debt or the property itself until the monies become due. But when exactly do the monies become due? Even if a borrower misses or defaults on a few payments, which does not mean all the monies then become due. There must be a full demand by the bank for payment before all sums become due and must be repaid by the borrower. In general, without a letter of demand for repayment by the bank, the lender will be prevented from taking any action any further.
Somewhat bizarrely, in the case under appeal, the bank’s mortgage deed stated that the death of the borrower was an act of default but, despite this clause, the deed also went on to say that on the occurrence of this event of default, the bank was entitled to make a demand for repayment of all outstanding monies and that, on the issuing of such demand, the monies then became due and payable to the bank.
In that particular case, the bank had not demanded the sums due either during the deceased’s lifetime or up to three years after his death, but when they did finally issue a letter of demand several years later, the monies then became due and payable. The court therefore held that the bank’s claim was not statute barred as they had issued a demand, although belatedly, and time and the Statute of Limitations only began to run from the date of issue of the demand when the monies became due.
As this Appeal Court case has not been appealed further to the Supreme Court, it can safely be regarded as current law regarding the Statute of Limitations and mortgage actions to include actions taken against deceased borrowers.
It appears the courts will only allow mortgage possession cases where the bank has issued a full demand to the borrower so rendering the monies due and owing and this starts time running against the bank.
The case also clarifies the position as to deceased borrowers and their estates. If the banks have not issued any demand before the borrower’s death, this will not prevent them from issuing a demand later and suing the estate for monies owed.
Bank of Ireland V Janet Matthews [2021] IECA 176
A.C. FORDE & CO. LLP
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