Articles

Reduced Limitation Periods Have Significant Consequences for Mortgagees

Thursday, September 07, 2017
Previously, under the Limitation Act 1950 ("the 1950 Act") claims to recover money owing under a deed or mortgage, had to be brought within twelve years of the money falling due for repayment.  However under the Limitation Act 2010 ("the 2010 Act"), this has been reduced to a limitation period of six years.  

The deadline for making such a claim may already be upon some mortgagees.  Take note of the important dates and exceptions outlined below.  

Recovery of Principal Sum
Claimants seeking to recover the principal sum secured by a mortgage or other charge, will have either a six or twelve year limitation period within which to bring an action for the sum.  This is dependent upon when the relevant deed or mortgage states that repayment of the principal sum is due.

If repayment of the principal is due on or after 1 January 2011 (the date the 2010 Act came into force), then the six year limitation period applies. The deadline for principal repayment is the "start date" of the limitation period, which is also defined in the 2010 Act as the "primary period".

Where the deed or mortgage in question specifies a date for repayment of the principal sum as prior to 1 January 2011,  then the limitation period is twelve years, in accordance with the 1950 Act.

Recovery of Interest
Claims for the recovery of arrears of interest payable in respect of any sum of money secured by a mortgage, are prohibited or statute barred, after six years.  This six year period, or "primary period" runs from the date on which the interest became due as is imposed under the 1950 and 2010 Acts.

Acknowledgments of Debt and Part Payments
If it can be proven that an acknowledgment of debt or part payment has been made after the primary period has started, then Section 47 of the 2010 Act will apply.  This section provides for an exception to the usual limitation period.

If a creditor (including a mortgagee as the case may be) can prove such an acknowledgment or part payment has been made, they have a fresh claim for recovery.  The limitation period for this fresh claim starts on the day after the acknowledgment or part payment was made.  In the case of both being made, the limitation period will begin on whichever of the two was made most recently.

What constitutes an "acknowledgment of debt"?  Firstly, the acknowledgment must have been made to the claimant.  Secondly, it must be in writing.  Thirdly, the acknowledgment must be in relation to a liability to the claimant or a right or title that the claimant holds.  

Payments or part payments of interest are treated as acknowledgments for the purpose of Section 47 and can therefore trigger a "fresh claim" as discussed above.  If an acknowledgment or a part payment was made before 1 January 2011, the twelve year limitation period applies, from the day after the date on which it was made.

The 2010 Act contains other statutory exemptions to when the limitation period commences.  These include where the mortgagee for instance, is a minor; incapacitated; intellectually disabled or has a mental disorder.  

It is important to note that if a defendant successfully argues that the claimant is time-barred by establishing a limitation defence, although the relief sought by a mortgagee would not be granted, the mortgagee's right, interest or title will not be extinguished.  Because of this, the dates on which any written acknowledgments of debt; payments of interest and part payments of the principal sum are made, are crucial.

If you have any questions or concerns about this topic please contact Peter Fuscic on (09) 306 6746 (pfuscic@mcveaghfleming.co.nz) or Erica Burke on (09) 306 6725 (eburke@mcveaghfleming.co.nz) from our Auckland City Office.

© McVeagh Fleming 2017

This article is published for general information purposes only.  Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice.  If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice. 

Recent Posts


Tags

Erceg v Erceg Interest Partner of resident Will Verbal abuse Insurance WINZ SN v MN [2017] NZCA 289 Testamentary freedom Health and Safety Reform Bill Relationship Property Charity Ship's Mortgage Economic disadvantage Trusts Bill Undue influence Family Trusts Limitation Act 1950 Lump sum Eviction Interpretation Act 1999 Section 29 Validity of Wills Blackwell v Hollings Mortgagee Mortgagor Fair share Tenant Immigration New Zealand Interpretation Act 1999 Residential Grey Power Maritime Lien Gifting Employment Legislation update Administrators duty Limitation defence Shareholders' Agreement Break up Landlord Will that do Constructive trusts Testamentary Promises Company Law Re Estate of Campbell Re Estate of Feron Litigation Resident Visa Six years Rest Home Subsidies Abuse Property Wills Act 2007 Section 11 Wills Personal Resident ''Best Endeavours'' Living standards Asset Protection Financial Markets Conduct Act 2013 (FMCA) Body Corporate Frustration Section 182 Family Proceedings Act 1980 Consumer credit contracts Family Protection Act 1955 Changes Financial services Section 15A Business Zero Hour Contracts Contract and Commercial Law Act 2017 Auckland Office Limitation Act 2010 Marriage Personal Properties and Securities Act 1999 Trusts Unfair contract terms Physical abuse SMC Character requirements Recovery of money Wills Act 2007 Privacy Act 1993 Wills Act 2007 Section 14 Civil union Ship Psychological abuse Ministry Wills Act 2007 Section 8 Creating Trusts Duress Deceased's wishes Repayment Property (Relationships) Act 1976 De facto Ship Registration Document Disclosure Murrell v Hamilton Estate Administration Expression of interest Fair Trading Act 1986 Broadbent v Ministry of Social Development Acknowledgment Trust Confidentiality Terms of Trade Interpretation of documents Gifts Lease Titles Loss of income Violence Visa application Tenants Offending Commercial Wilson v Donnellan Commercial Property Amundson v Raos Twelve years Reckless Trading Division of Functions Principal Vessel survey Domestic Violence Act 1995 Hawkes Bay Trustee Company Limited v Judd Income Due Diligence Mortgage Section 15 Intellectual Property White v White Subsidies Elder Law Trustee Duties Protector Vessel surveyor Charity begins at home Valid wills Lease KiwiSaver Tamarapa v Byerley Anti-money laundering (AML) Trust Check Up Financial services provider (FSP) Testamentary capacity Trust busting Ilott v Mitson 2017 UKSC 17 Clayton case Companies Act 1993 Directors' Duties Domestic violence Claims against estates Temper Charities Acknowledgment of Debt Commercial Law Executors duty Testamentary writing Maritime Law Lankow v Rose Contract Law Partnership based work visa Skilled migrant Part payment Financial products Sale of Goods Financial Advisers Act 2008 Immigration Beneficiary Rights Skilled migrant points Seperation Vessel Sale and Purchase Work and Income Case Study Limitation period Albany Office Credit Contracts and Consumer Finance Act 2003 (CCCFA) Invalid wills Protection Order Compensation Pattern of offending Ministry of Social Development

Archive