CeMAP MRT2 Arrears, Shortfalls & Lender Remedies question: Eight years after repossession

CeMAP MRT2Arrears, Shortfalls & Lender Remedies

Eight years after repossession, Tim’s former lender (which told him in writing within a year of the sale that it would pursue the shortfall) sues for £20,000 of capital and £3,000 of interest arrears. Under Limitation Act 1980 s20, what can it still recover?

A Both, because the claim is within 12 years
B Neither, because both are more than 6 years old
C The capital only, as the interest is time-barred after 6 years
D The interest only, as the capital is time-barred after 6 years

Show the answer and explanation

Answer: C. The capital only, as the interest is time-barred after 6 years

Limitation Act 1980 s20(1) allows 12 years to recover a principal sum secured by a mortgage, while s20(5) limits recovery of arrears of interest to 6 years from when it became due. After eight years the £20,000 capital is recoverable but the £3,000 interest is time-barred. MCOB 13.6.4R separately required notice of intent to recover within 6 years of the sale, which was given.

Common mistake

Applying the 12-year capital period to interest arrears as well.

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