As many defaulting borrowers have learned to their dismay, the nightmare of negative equity does not necessarily end with repossession and sale: they can still be pursued for the balance of any unpaid principal and interest.
By section 20 of the Limitation Act 1980, which is specifically directed to the recovery of sums “secured by a mortgage or other charge”, the mortgagee has 12 years in which to sue for the principal and six years to recover interest. The two questions before the Court of Appeal in Bristol & West plc v Bartlett [2002] 33 EG 97 (CS) were whether: (i) as argued by some of the borrowers, the claim for outstanding capital was for a simple debt governed by the six-year period laid down by section 5 of the Act; or (ii) as argued by some of the lenders, the claim for interest was a claim on a “specialty” and accordingly subject to the 12-year period laid down by section 8. Both arguments rested on the submission that the sale had, by removing the secured property, taken the claims outside section 20.
The court rejected the latter submission, thus leaving section 20 as the governing provision even where the property had been sold. For further analysis, particularly as regards arrears of interest, see
Following swiftly on the heels of Bristol and West v Bartlett, the Court of Appeal has held that the ruling in that case applies even where the relevant mortgage contains no express covenant to repay the principal sum: see Scottish Equitable plc v Thompson [2003] 07 EG 137 (CS).
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As many defaulting borrowers have learned to their dismay, the nightmare of negative equity does not necessarily end with repossession and sale: they can still be pursued for the balance of any unpaid principal and interest.
By section 20 of the Limitation Act 1980, which is specifically directed to the recovery of sums “secured by a mortgage or other charge”, the mortgagee has 12 years in which to sue for the principal and six years to recover interest. The two questions before the Court of Appeal in Bristol & West plc v Bartlett [2002] 33 EG 97 (CS) were whether: (i) as argued by some of the borrowers, the claim for outstanding capital was for a simple debt governed by the six-year period laid down by section 5 of the Act; or (ii) as argued by some of the lenders, the claim for interest was a claim on a “specialty” and accordingly subject to the 12-year period laid down by section 8. Both arguments rested on the submission that the sale had, by removing the secured property, taken the claims outside section 20.
The court rejected the latter submission, thus leaving section 20 as the governing provision even where the property had been sold. For further analysis, particularly as regards arrears of interest, see Sell now, claim later Estates Gazette 2 November 2002, p167.
Following swiftly on the heels of Bristol and West v Bartlett, the Court of Appeal has held that the ruling in that case applies even where the relevant mortgage contains no express covenant to repay the principal sum: see Scottish Equitable plc v Thompson [2003] 07 EG 137 (CS).
