Probate delayed, bank concerned two years statute of limitiations about to expire.

Brendan Burgess

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A friend of mine is the Executor of his father's estate.

The father died in September 2014.

He has not taken out probate yet.

There is an investment property worth €300k with a mortgage of €100k.

The bank is saying that they must take action within 2 years of the death i.e. September 2016. If they don't, their loan becomes void. So they are threatening to appoint a Receiver.

I know that there is a statute of limitations which says that a creditor must make a claim within 2 years of death. But I presume that does not mean that a Receiver must be appointed?

All the paperwork has been submitted to the Probate Office but he is in the queue for the interview.

Needless to say, I have told him to get legal advice on the issue.

Brendan
 
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If the bank makes a demand for payment does this not extend the Statute of Limitations period?
 
The Banks are a bit trigger happy when it comes to appointing a Receiver - but it might just suit them better than waiting for the Probate to issue .

Brendan, you don't say if your friend is businesslike or has been discharging the mortgage but it may be that he has not been overly concerned about dealing with this matter and that may be a part of the Bank's attitude.

I've never come across a case like this but it may be that unless the Bank take certain steps that, even though their charge will attach to the property that if no effort is made to sell it and discharge the mortgage that the Bank would be prevented by the Limitation period from issuing proceedings to recover the debt/possession.

A demand for payment does not extend the Limitation period - a formal acknowledgement by the debtor of the debt does that.

mf
 
Thanks mf

The bank says that they can't do anything as there is no Executor appointed.

you don't say if your friend is businesslike or has been discharging the mortgage
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He told me that the bank won't accept any money as the mortgage holder is dead. That surprised me. The rent is being paid. Not sure to whom though.


mf1 said:
A demand for payment does not extend the Limitation period - a formal acknowledgement by the debtor of the debt does that.
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So their thinking probably is:
If an executor does not acknowledge the debt within 2 years, we are in trouble.
So we will appoint a Receiver.

That seems fair enough.

My friend can't acknowledge the debt now as he has no official position. But if Probate is granted within the two years, he can then acknowledge the debt and maybe the bank will be happy.

Brendan
 
Good point.

He has told me that as Probate has not been granted, he has no official status. I don't know if that is true or not.

Brendan
 
The simple to your question is, No they do not have to appoint a Receiver.

The bank will want to protect it's claim however and a demand for payment does not extend the statute of limitation. In order to do this they will issue legal proceedings against the estate before the 2nd anniversary of the deceased's death. The Bank then has a further year to serve proceedings on the executor.

In this case, as probate has not been extracted the bank cannot currently issue proceedings so it will most likely now apply to the courts to appoint an 'administrator ad litem' to extract probate/grant of administration. Once appointed, an administrator ad litem can usually 'skip the queue' to an extent and extract the grant within a few days. The bank will then be in a position to issue proceedings against the Estate. (As far as I know they cannot appoint a Receiver until these steps are completed anyway).

Technically, a Bank can still rely on the mortgage charge after the two years and it is only it's ability to pursue a judgment that is statute barred. However, a Bank will usually take the above steps to protect their position particularly if the mortgage charge is not yet in place.

I'm not sure why the bank would not accept repayments to the loan though.

Very often in these cases, the bank will hold for a while after proceedings issue to see if the executor progresses matters. If they believe that the executor is dragging his/her heels or not being cooperative then they will probably proceed to appoint a receiver.
 
James F. said:
(As far as I know they cannot appoint a Receiver until these steps are completed anyway).
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The banks are very experienced dealing with such cases. If they have a charge they can appoint a Receiver any time. If the property has equity then the bank should be paid in full. However, if there is a shortfall then they might fall foul of the 2 year rule.

The bank would only need to go down the administrator ad litem route if they wanted to serve proceedings against the estate.

We have seen recent cases where the vulture funds have been caught out by the two year rule, due to the length of time that it takes them to "get their feet under the table" and realise that they need to serve demands etc.

Jim Stafford
 
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