It is usually the case that mortgage lenders wait for some time after suffering a shortfall before pursuing the borrower to repay the shortfall debt.  The House of Lords decided when a lender’s time would run out in the case of West Bromwich Building Society –v- Wilkinson [2005] UKHL 44, in which RK acted for the lender.


Mr. and Mrs. Wilkinson (the “Borrowers”) bought a property with the assistance of a mortgage from West Bromwich Building Society (“WBBS”).  The Borrowers defaulted and on 25 July 1989 WBBS obtained a court order for possession.  Due to the declining property market, it took the lender until 1990 to sell the property, leaving a shortfall.

In November 2002, WBBS served the Borrowers with a claim for the shortfall. The Borrowers objected to the claim. The debate centred around whether the claim was statue barred.  The Borrowers argued that the limitation period had expired relying on S20(1) Limitation Act 1980. It  relates to money secured by a mortgage or other charge on property.  Under that statute, time to pursue the debt expires 12 years ‘from the date on which the right to receive the money accrued’.  The Borrowers argued that the start date was the date they had defaulted under the mortgage by not making their monthly repayments.

WBBS argued that S20(1) did not apply as, at the date the claim for the shortfall commenced, the debt was not secured by a mortgage any longer and had become an unsecured money claim.  They argued that S8 Limitation Act 1980 was the correct provision to rely on.  It allows a limitation period of 12 years ‘from the date on which the cause of action accrued’.  They argued the cause of action only accrued at the point the property was sold and the shortfall debt crystallised.

House of Lords decision

WBBS appealed to the House of Lords who had to consider whether:

1)     S20(1) applied in a case where an advance was originally secured by a mortgage but the security had been realised or released before proceedings were commenced; and

2)     On construction of the mortgage deed, whether upon default, WBBS had a “cause of action” or a “right to receive the money”.

The House of Lords decided that S20(1) did apply and that the monies had become receivable when the even of default had occurred under the mortgage.  This meant that the 12 year period started prior to the crystallisation of the shortfall on repossession sale.  The 12 year period starts to run when an event of default occurs under the mortgage.


Mortgage lenders are experiencing significant defaults under their mortgages and are, in many instances, showing forbearance to their borrowers by making arrangements to allow them to pay off their arrears rather than repossess the property and sell. However, these agreements do not stop the 12 year clock running on the lender’s right to pursue the borrower for any shortfall on their account.  Lenders should not forget the date of default, as this is when the 12 year period for pursuing a shortfall starts to run.

For further information, please contact Georgina Squire or the partner with whom you usually deal.