A couple’s claim that their mortgage lender negligently misrepresented the value of their property have had their case thrown out as they brought the case too late.
In the tort of negligence, claimants have six years from the date of loss to make a claim. There is a separate time limit if an issue is not immediately known, in which case the claimant has three years after they become aware of their potential claim (subject to a fifteen year longstop). If a claim is brought after these two time limits, and if any other periods do not apply (such as in contract) then the case will be time-barred under the Limitation Act 1980.
In October 2007 Mr Howard and Ms Pate wanted to buy a farmhouse in need of significant renovation for £310,000. They applied for a mortgage of £248,999. At first the lender would not value the property as they said it was unfit for habitation.
However, after the borrowers complained, the lender changed its mind and offered a fixed term repayment mortgage. In an email that the borrowers did not see, the mortgage manager had made an untrue statement that Mr Howard was a ‘qualified structural engineer, specialising in electrics’.
When the fixed term came to an end in 2012, the bank revalued the property at £250,000 and decided this was insufficient value to make another mortgage offer. At the same time, they asked Mr Howard to confirm that he was a structural engineer – which he naturally denied.
As a result of the lower valuation, Mr Howard and Ms Pate were concerned that they had fallen into negative equity and stopped making payments on the mortgage.
Arrears built up and in April 2013 the bank started legal proceedings to repossess the property. Mr Howard and Ms Pate’s defence included a detailed argument that the lender had negligently misrepresented the value of the property when they first took out the mortgage. They claimed that had they known the true value of the property at the time, they would not have accepted the loan.
The repossession went ahead and in April 2014 the farmhouse was sold for £150,000, leaving the couple with an outstanding mortgage debt of £120,000.
In June 2019 the borrowers brought a claim against the bank for misrepresentation arguing it had negligently overvalued the property. The bank responded that the case was out of time as the borrowers were aware in April 2013 that they had suffered a loss.
Mr Howard and Ms Pate claimed that the date of the damage was in fact April 2014 when the property was sold – and that they only had knowledge of the loss in 2017 when they received further information that the bank had previously concealed from them. As a result, they argued that their claim was being made withing three years of having knowledge of the loss.
The judge ruled in favour of the bank. He said that the couple had suffered the loss when they bought the property in 2007 and had a broad knowledge of their loss in April 2013 when they made a misrepresentation defence. He ruled that the claim was out of time.
“Professional indemnity insurers and property professionals will be pleased with this outcome,” said James Burgoyne, Director – Claims & Technical, Brunel Professions. “It reinforces basic principles of limitation and that the courts will prevent people from bringing negligence claims many years after the event.”