Need help quoting Acts for 6 year rule please.

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I am being chased for a shortall debt by nationwide for 10,000. I have done all the data protection stuff as advised on this site and have been provided with all the documents by Nationwide. I handed the keys in for my flat in september 94. I entered into correspondence with them for 3 months following that. I had lost my job but was still able to recieve mail from that address because a friend still worked there. The last correspondence I recieved was in december 94. My friend then also left that job. In the documents that I was sent following the SARN was a letter dated february 95 stating that the flat had been sold for 10,000 less than I bought it for. This was also the last letter that they sent out until June 2001 when a debt recovery firm contacted me on behalf of Nationwide. They are stating that as I entered into correspondence following repossesion for 3 months that contact has been within the voluntary 6 year period and that once contact has been made they have 12 years to recover the shortfall (section 20 of the limitation act 1980). My argument is to be that over 6 years has passed since their last letter in feb 95 (which I never received) and the letter from the debt recovery firm in june 2001. I have been at my current address for over 6 years. Does anyone have any advice for me? I would like to quote relevant Acts in my next letter (Human Rights etc) so would appreciate anyones views on this. I have yet to return the I&E forms but can they legally make me do this?

-- (dav64@yahoo.com), October 27, 2001

Answers

You need to look at the Council of Mortgage Lenders website (cml.org.uk I think) to get the lowdown on the 6 year "rule". There's a lot of stuff to read through on their Code, but my understanding is that yes, the 6 years is just to do with the first contact they make with you after the sale. Thereafter they have 12 years. Legally, of course, it's still 12 years whether they contact you or not - it's only a voluntary code, not a rule. The fact that most lenders make sure contact is within 6 years suggests to me at least not that they're lovely helpful people who want to make your life easier, but just that this whole area is not yet very much tested in law, and they don't want to risk losing the chance to chase you. I'll be more than delighted if anyone can add a more optimistic answer, but I won't hold my breath.

-- Melody (mbc109@york.ac.uk), October 29, 2001.

Hmmm...if you look at the Limitation Act 1980, it does indeed say "No action shall be brought...after the expiration of 12 years from the date on which the right to receive the money accrued." But where does the idea that the right accrues on 'first contact' come from? Surely their right to receive the money is earlier than that...they certainly wouldn't refuse if you offered a cheque for any shortfall immediately after the sale - like, in the auction room??? Can anyone throw any light on this?

Subsection (5) of Section 20 of the Act also seems to say that any right lenders might have to claim mortgage arrears and interest on those arrears expires 6 years after they fall due. So you are no longer liable for any part of their original claim that was caused by arrears. Again - can anyone confirm this?

-- Melody again (mbc109@york.ac.uk), October 29, 2001.


"No action shall be brought...after the expiration of 12 years from the date on which the right to receive the money accrued." I think Melody is right and my argument goes back to a barristers opinion in the Daily Mail years ago. I would interpret "right to receive" as meaning "upon default", a phrase we all have in our mortgage t&c. If we default as borrowers, it states in most, if not all mortgage t&c's that the "whole" amount becomes "due and payable" or words to that effect. 12 years [where specialty debt applies] must run from the point at which the mortgage is actually in default (or if there are arrears which cannot be paid under a separate agreement, which should technically be enacted by codicil) or, where default has not been acknowledged by the lender, where the notice of repossession is served (which is acknowledgement in and of itself)

"Subsection (5) of Section 20 of the Act also seems to say that any right lenders might have to claim mortgage arrears and interest on those arrears expires 6 years after they fall due. So you are no longer liable for any part of their original claim that was caused by arrears."

I have a theory - which goes back to the specialty vs simple argument. Arrears/bad debts are treated differently in financial accounts are they not? They are provided for under a different accounting principle....so...is it possible that interest on arrears and the arrears themselves, where separately identified, change status? Hmm. Any thoughts? Apologies for the direct quotes Melody - quickest way with countless sprogs at my feet!

-- Too scared to say (iwasduped@yahoo.com), October 29, 2001.


I think you're spot on! My MIG claim form specifically requires the lender to state a) when the mortgagor went into arrears, and b) when the mortgagor went into 2 + arrears leading to sustained default. Anyone else got any thoughts on this?

Does anyone have a copy of that daily mail article?

-- (_Believer14@excite.co.uk), October 29, 2001.


I agree with what's been said here, except the actual shortfall surely cannot date from any other date than the sale. Before the sale it doesn't exist/is unknown, but, as said earlier, the moment the sale's been made, presumably the lender would be more than happy to accept a cheque to cover shortfall?

-- Melody (mbc109@york.ac.uk), October 30, 2001.


I have evidence that my lender claimed 3 months after voluntary repossession on the shortfall / MIG policy that was in force. The sale followed 6 months later? is this legal??

-- (NOMORTGAGEDEEDS!@aol.com), October 30, 2001.

Yes it's legal - as mortgagees in possession they are free to claim on an insurance policy which covers them for losses or potential losses against the security (i.e. the property). In plain English they have the property and what they do with it after default is (they think) up to them, subject to the best possible sale value being obtained. They're not quite playing ball I'd say, because it implies that they assumed it would realise a shortfall (shock horror, no underselling there then) and that you were in the can for the debt.

-- Too scared to say (iwasduped@yahoo.com), October 30, 2001.

Melody, I wonder what they would do then, if the property was never sold? Happens with ex-council houses a lot (no disrespect intended to anyone btw). Thinking along those lines...sustained default mentioned in another post above is a well known concept. If the Lender can claim on a MIG after sustained default is proven...then the "right to receive" point has to be there. Which means that the balance not covered by the MIG, if proven to be due in a court of law, can only be chased for 12 years from the date of sustained default, regardless f when the property was actually sold. In most cases that is well before the sale date (in my case over a year before). If that Lender is abiding by the voluntary code...then in all good faith the six years must start from the date of sustained default too. Which, I think, helps the original poster on this thread. Good thinking you two, I needed to stir up the grey matter this afternoon.

-- Too scared to say (iwasduped@yahoo.com), October 30, 2001.

dav64,

To go back to your orgininal post, the lender can pretty much do what it likes in its interpretation of the voluntary 6 year code precisely because it is voluntary. You could waste a lot of time and energy, and end up sounding argumentative, by trying to get nationswide to change its mind. (And IMHO I don't think you would succeed.)

The actual interpretation of law is a different ball game altogether. I can pass on some details of various relevant case law and Acts etc, but - just to play devil's advicate for a second - do you really think that quoting these at Nationwide will help you? What would you hope to achieve by doing this? If it were me I would prefer to ask Nationwide (repeatedly if necessary) to prove its right to make the claim against me. Save the legal stuff for later, if you need it. Experience shows that lenders do not normally back off because an ex- borrower quotes a piece of law at them (unfortunately).

However, there is some circumstantial evidence that lenders don't want the Limitation Act tested in the higher courts (as indicated in the very interesting posts above).

I'll post the case law and Acts separately below. And see the rest of the material on this web site under 'Repossession'.

-- E Scott (eleanor.scott@btinternet.com), November 21, 2001.


Human Right Act:

"ARTICLE 6 RIGHT TO A FAIR TRIAL 1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. "

For case law (re. Limitation Act) please see my answer to post titled '12 years could be forever..' below.

-- E Scott (eleanor.scott@btinternet.com), November 21, 2001.



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