Back to previous
Newer version available

There is a newer version of this publication available:
Debt Advice Handbook 14th edition

5. Time limits
Court action to recover debts must be taken within certain time limits. These are mainly contained in the Limitation Act 1980, although some debts have their own time limit – eg, council tax. These time limits are known as ‘limitation periods’.
Most limitation periods run from the date the ‘cause of action accrued’.1Reeves v Butcher [1891] 2 QB 509. See C Wilkinson, ‘Consultancy Corner: default dates for debt limitation purposes’, Adviser 173
The date the cause of action accrued is ignored. For example, if a client defaulted on 30 November 2000, a six-year limitation period would have ended on 30 November 2006.
Note: if a debt (eg, an overdraft) is repayable ‘on demand’, until the demand is made there is no cause of action and the time limit does not begin to run.2Goldsmith v Chittell (Adviser 179 abstracts)
If the only thing preventing a creditor from taking court action is the need to comply with a procedural requirement, the time limit accrues regardless.3Swansea County Council v Glass [1992] 2 All ER 680 However, a default notice – which is needed before a creditor under a regulated credit agreement can take certain specified steps (see here) – is not regarded as a procedural requirement. The service and expiry of a default notice (where required) which has not been remedied by the client is, therefore, necessary to begin the limitation period in such cases. This, in theory, allows the creditor to defer the start of the limitation period indefinitely, allowing court proceedings to be started a significant time after the date the client last made a payment under the agreement – ie, the date of actual default.4Doyle v PRA Group [2019] EWCA Civ 12 (Adviser 188 abstracts). See also R Rosenberg, ‘Legal Round-up’, Quarterly Account 52, IMA and C Bott, ‘Limitations after Doyle’, Quarterly Account 54, IMA Note: service of a default notice is not required to recover sums which have already accrued due under a consumer credit agreement – eg, a claim for arrears only when the limitation period would run from the date the missed payment(s) should have been made under the terms of the agreement.
Common limitation periods
Unsecured regulated credit agreement: six years from the date of expiry of a default notice (where required) which has not been remedied. See below for cases where, under the terms of the agreement, a further notice is required to terminate the agreement before the creditor can take action to recover the outstanding balance.
Other unsecured borrowing: six years from default unless repayable ’on demand’ when the time period does not start until the date of the demand or unless, under the terms of the agreement, termination of the agreement by the creditor is a pre-condition of court action to recover the outstanding balance. In this case, the period starts from when the agreement is terminated.5For example, as in BMW Financial Services v Hart [2012] EWCA Civ 1959 (Arian 43, caselaw update)
Interest: six years from default in payment. Each amount of interest charged to an account has its own six-year limitation period. Once the capital is statute barred, so is any claim for interest, even if that interest was added to the account less than six years ago.
Fuel debt: six years from the date of the bill.
Telephone charges: six years from the date of the bill.
Water charges: six years from the date of the bill.
Council tax: six years from the date of the bill (demand notice).
Rent arrears: six years from the date the rent became due. Each amount of rent due has its own six-year limitation period.
Possession of land: 12 years from default in payment.
Mortgage shortfall: six years for arrears of interest from the date the interest became due; 12 years for the outstanding capital from the date the right to receive the money accrued (usually after default in payment of one or more contractual instalments). See here.
Once the relevant limitation period has expired, a debt is said to be statute-barred’.6For a discussion of tactics when dealing with statute-barred debts, see C Wilkinson, ‘Consultancy Corner’, Adviser 109, including a suggested response letter to a demand for payment. The effect of a debt being statute barred is that it prevents court action. However, the debt still legally exists and can be recovered by any other lawful method.7But note FCA Handbook, CONC 7.15.4 and 7.15.8, which restrict a creditor’s right to attempt recovery of statute-barred debts. This means that statute-barred benefits and tax credit overpayments can be recovered – eg, by deductions from benefit because that does not involve court proceedings. However, the Consumer Credit Sourcebook states that a creditor must not attempt to recover a statute-barred debt if it has not been in contact with the client during the limitation period nor after the client has stated that s/he will not be paying the debt because it is statute barred. Pursuing a complaint could be considered in appropriate cases.8CONC 7.15.4R and 7.15.8R
Limitation periods are only relevant to when the creditor must take the initial court proceedings. The time limit ceases to run once court proceedings are issued. If the creditor obtains a judgment, the limitation period does not apply to the enforcement of that judgment.
A limitation period that has already started can be repeatedly restarted by an ‘acknowledgement’ or ‘part payment’.
If a client receives a claim form for a debt which is statute-barred or partly statute-barred (eg, in the case of rent or interest), and s/he wishes to avoid a judgment being made against her/him, s/he must defend the claim on the ground that the debt is statute-barred.9CPR PD 16, para 13.1 Once s/he has done so, the onus switches to the creditor to prove that the claim is not statute-barred. Where relevant, you should advise clients who are considering raising limitation defences in relation to regulated credit agreements who cannot recall if, and/or when, they received a default notice and/or are unable to provide you with a copy, but have received a ‘letter before claim’, to query when the default notice was served when responding to the ‘letter of claim’ and also ask for a copy.
A bankruptcy order or a debt relief order do not prevent the limitation period from running (in the event that the debt remains recoverable after the client’s discharge or at the end of the moratorium period) but the limitation period is suspended for the duration of an individual voluntary arrangement so that, if this fails, creditors whose debts might otherwise have become statute-barred may still be able to take court action to recover them.10O’Brien v Osborne [1852] 10 Hare 92
 
1     Reeves v Butcher [1891] 2 QB 509. See C Wilkinson, ‘Consultancy Corner: default dates for debt limitation purposes’, Adviser 173 »
2     Goldsmith v Chittell (Adviser 179 abstracts) »
3     Swansea County Council v Glass [1992] 2 All ER 680 »
4     Doyle v PRA Group [2019] EWCA Civ 12 (Adviser 188 abstracts). See also R Rosenberg, ‘Legal Round-up’, Quarterly Account 52, IMA and C Bott, ‘Limitations after Doyle’, Quarterly Account 54, IMA  »
5     For example, as in BMW Financial Services v Hart [2012] EWCA Civ 1959 (Arian 43, caselaw update) »
6     For a discussion of tactics when dealing with statute-barred debts, see C Wilkinson, ‘Consultancy Corner’, Adviser 109, including a suggested response letter to a demand for payment. »
7     But note FCA Handbook, CONC 7.15.4 and 7.15.8, which restrict a creditor’s right to attempt recovery of statute-barred debts. »
8     CONC 7.15.4R and 7.15.8R »
9     CPR PD 16, para 13.1 »
10     O’Brien v Osborne [1852] 10 Hare 92 »
Acknowledgements
An acknowledgement means that the client has, in effect, admitted liability for what is being claimed. No amount need be specified. An acknowledgement must be in writing and signed by the client (or her/his agent – eg, a debt adviser).
The debt must be acknowledged either to the creditor or its agent. This means the client cannot acknowledge a debt on the telephone and letters from the creditor to the client cannot restart the limitation period. On the other hand, you could inadvertently acknowledge a debt when writing to a creditor on behalf of the client.
An admission of part of a debt together with a denial of liability for the balance is not an acknowledgement of the disputed balance. The phrases ’outstanding amount’ and ’outstanding balance’ have been held to be acknowledgements as has a letter expressing concern about the amount of the claim, but not about the fact of a claim being made.1Bradford and Bingley v Rashid [2006] UKHL 37 (Adviser 117 abstracts); Phillips and Co v Bath Housing Co-operative [2012] EWCA Civ 1591 (Arian 41, caselaw update) An acknowledgement by one co-debtor only restarts the limitation period against that debtor and not any co-debtors. Once a debt becomes statute-barred, the limitation period cannot be restarted by any subsequent acknowledgement.
 
1     Bradford and Bingley v Rashid [2006] UKHL 37 (Adviser 117 abstracts); Phillips and Co v Bath Housing Co-operative [2012] EWCA Civ 1591 (Arian 41, caselaw update) »
Part payments
In order to restart the limitation period, a payment must be made by the client (or a co-debtor) or agent, to the creditor or agent and must be in respect of the particular debt in question. For this purpose, the Department for Work and Pensions is treated as the client’s agent when making payments of mortgage interest to lenders.1Bradford and Bingley v Cutler [2008] EWCA Civ 74 (Adviser 128, money advice abstracts) If part of the debt is disputed and a payment is made, the client must make clear that the payment relates to the undisputed part of the debt and ask the creditor to appropriate the payment to that part of the debt.2Ashcroft v Bradford and Bingley [2010] EWCA Civ 223 (Adviser 140, abstracts)
A payment of interest restarts the limitation period for the capital, but not the interest. In practice, payments are usually allocated first to interest and then to capital. Note: once the capital is statute-barred, so is any claim for interest, even if that interest was added to the account less than six years ago. Similarly, a payment of rent arrears does not restart the limitation period for any other rent outstanding. Writing off part of a debt does not count as a payment. Once a debt has become statute-barred, the limitation period cannot be restarted by any subsequent payment. However, the client cannot recover any payment(s) made, as the effect of a debt being statute-barred is only to prevent court action. The debt still legally exists and can be recovered by any other lawful method.3But note FCA Handbook, CONC 7.15.4 and 7.15.8, which restrict a creditor’s right to attempt recovery of statute-barred debts.
 
1     Bradford and Bingley v Cutler [2008] EWCA Civ 74 (Adviser 128, money advice abstracts) »
2     Ashcroft v Bradford and Bingley [2010] EWCA Civ 223 (Adviser 140, abstracts) »
3     But note FCA Handbook, CONC 7.15.4 and 7.15.8, which restrict a creditor’s right to attempt recovery of statute-barred debts. »