Response to time clock starts from?

Bristol & West Plc v Bartlett Paragon Finance Plc v Banks Halifax Plc v Grant The issues surrounding negative equity in the property market have recently been addressed by the Court of Appeal in the above cases. Lenders had pursued claims for shortfalls (the amount remaining due to the lender after the proceeds of sale of the mortgaged property had been received) on the basis that the applicable limitation period was the 12 year period specified either by section 20 of the Limitation Act (“the Act”), because the money was secured by a mortgage, or by section 8 of the Act, because the money was secured by a document under seal. In 1997 the Court of Appeal raised doubts about the applicable limitation period when Auld LJ stated in Hopkinson v Tupper that it was “seriously arguable” that a shortfall claim was a claim under a simple contract. If that were correct, shortfall claims would be subject to a 6-year limitation period pursuant to section 5 of the Act. Osborne Clarke acted for Bristol & West Plc one of 3 lenders who sought clarification of the issue. It had been alleged that Bristol & West Plc could not recover the shortfall following the sale of Mr and Mrs Bartlett's house having commenced proceedings less than 12 but more than 6 years after the date of sale of the property. The Court Appeal has now decided that: (a) A lender has 12 years after the cause of action accrues to recover amounts outstanding in respect of capital; (b) The cause of action will normally accrue when the entire mortgage debt becomes due (usually on the monthly instalment payment being missed for 3 consecutive months OR as specified in the mortgage deed); (c) A lender has 6 years after the cause of action accrues to recover interest due before sale, although the question of interest accruing after the sale of the property remains open; (d) An express covenant relating to a mortgage shortfall debt does not give the lender a new cause of action following the sale of the property; (e) A lender should be able to show how the net proceeds of sale were applied to the mortgage account to avoid complex questions of appropriation of interest or capital.

Hope this explains the situation.

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