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Limitation period strikes down mortgage

British Columbia's limitation period was shortened in 2013 from six years to two, which means that, as a general rule, the right to sue someone is lost two years after the claim first arose. This shortened deadline continues to catch creditors unawares.

In 0969708 B.C. Ltd. v. Leatherman, the court considered a mortgage loan which provided for payment of interest annually, with the principal repayable on demand. No interest payments were made. Some three years after funds were advanced, the lender called the loan and demanded payment of both the principal and interest. The limitation period on the principal had not begun to run, because under another recent change in the law, the limitation "clock" on demand loans does not begin until demand is made. But what about the interest, some of which had been overdue for more than two years?

The B.C. Court of Appeal held that the claim for interest arose more than two years earlier, and was now statue-barred. Worse, the Court also held that, because of the default in payment of interest, the mortgage itself had become enforceable more than two years earlier. As a result, the lender lost the right to enforce their claim against the property, whether for principal or interest.

(All is not necessarily lost for the lender in Leatherman. The Court sent the case back to the trial judge, as there was an undecided question of whether or not the borrower had confirmed the mortgage debt along the way, which would have the effect of postponing the running of any limitation period.)

B.C's shortened limitation period is a minefield for the unwary. Anyone with a claim or potential claim should seek experienced advice sooner rather than later, to ensure that their rights are not lost merely because of the passage of a (short) period of time.

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