Fund gets possession of property under loan taken out 8 years before owner’s death

A financial fund is entitled to possession of a property in Limerick city under a "lifetime" mortgage obtained by a man eight years before his death, the High Court has ruled.

WF Shap (Ireland) DAC took possession proceedings against the administrator ad litem of the estate of Laurence Johnson concerning the property at Assumpta Park, Limerick.

Mr Johnson had taken out a "lifetime" or "reverse" mortgage in 2007 with Senior Finance Ltd as a condition for getting a loan of €52,700. Such mortgages were designed to allow elderly homeowners to borrow against the value of their home, with the intention the principal monies will be paid out of their estate following their death.

Under the arrangement, Mr Johnson was not required to make any repayments of principal or interest but the monies were to become payable if certain specified events happened, including his death. He died intestate in 2015.

The fund, which acquired the relevant loan in 2016, sought possession of the property in May 2018. The core issue in the High Court case was whether the possession application was brought within time and whether a two-year or 12-year time limit applied.

In a judgment this week, Mr Justice Garret Simons said a mortgagee's right to possession does not arise automatically on death and a demand for repayment of the principal monies must be made thereafter.

A letter of demand in proper form was sent to the administrator ad litem in February 2018 seeking payment of a sum of €101,599, he said. That demand remains unsatisfied.

Another High Court judge had in March 2019 discharged an order made by the Master of the High Court that the case was statute barred, with the effect it came before Mr Justice Simons for hearing.

The judge said an action to recover possession of mortgaged lands is generally subject to a limitation period of 12 years under the Statute of Limitations Act 1957 but special rules, set out under the Civil Liability Act, apply to limitation periods in respect of claims against the estate of a deceased person.

‘Subsisting’

Proceedings in respect of causes of action which were “subsisting” on the death of a person must generally be brought within two years of their death, he said.

Mr Johnson died in December 2015 and the proceedings were instituted in May 2018, some two and a half years later, he said.

However, the cause of action did not accrue until a demand for repayment of the principal monies was made. No demand was made before the date of Mr Johnson’s death and therefore there was no “subsisting” action, at the date of his death, to recover the lands.

This meant the possession proceedings were not subject to the two year limitation period, were instead subject to a 12 year limitation period and, according were instituted “well within time”. He was thus satisfied the conditions for making an order for possession had been fulfilled, he concluded.