Many companies and individuals have become familiar with the rules on the statute of limitations for monetary claims, but fewer are aware of the rules on the statute of limitations for garnishments. The Statute of Limitations is, as the name suggests, a law that regulates when a creditor can forfeit his claim against a debtor, simply because too much time has passed since the claim was established.
There are different limitation periods depending on the nature of the claim, but this article will focus on a somewhat special area, namely when the claim has been secured by a lien on the debtor's real estate.
The limitation period for claims determined by endorsement by the bailiff is found in Section 5(1)(3) of the Limitation Act.
The limitation period is 10 years when a lien has been taken on, for example, a debtor's property.
What is particularly concerning about this problem is that most people consider a garnishment as a definitive security for the claim. However, this is both right and wrong, as was revealed in a case that Paragrafadvokatnerne has been working on for the past 2 years.
The paragrafadvokaterne have represented a private individual who, more than 10 years ago, had no less than 14 seizures made on his property, distributed among the same number of creditors.
What these creditors had in common was that none of them had attempted to collect their receivables during the 10 years, presumably because they did not have faith that the debtor could pay. They therefore relied on the attachment of the debtor's property as a permanent security for the claim if the debtor should one day come into financial need.
It is correctly assumed that a lien on real property does not become statute-barred once it has been registered by the bailiff. On the other hand, there is the concept of accessory statute-barred, which is derived from section 25(1) of the Limitation Act.
1. The provision only covers garnishments and mortgages on debtors' property, with certain exceptions in paragraph 2 of the provision, which are not discussed in more detail here. This article and case only concern garnishments on real property.
Section 25(1) of the Limitation Act reads as follows: When a claim becomes statute-barred, the right to satisfaction of the claim through a mortgage or attachment of the debtor's property also lapses.
This means that if the underlying claim is time-barred, the right to satisfaction lapses at the same time as the limitation period begins. In addition, the rule on attachment is completely without exception, which was asserted in the case discussed here.
The paragraf lawyers wrote on behalf of the debtor to all 14 liens, demanding that their liens be cancelled from the debtor's property, as the underlying claim was time-barred.
Most garnishees did not believe that garnishments could be time-barred, which, as mentioned, is also correct - but when the underlying claim has not been "kept alive" along the way, the garnishment lapses and the debtor is entitled to have the garnishment deleted from his property.
After lengthy correspondence and argument, however, it was possible to get all liens to cancel their respective liens on the property, because no one could document that they had interrupted the statute of limitations on the claim in the last 10 years.
The article is addressed to both debtors and creditors.
Debtors should investigate whether any attachment that is more than 10 years old has been attempted to be recovered from the creditor in the last 10 years. If this is not the case, the debtor may be entitled to have the attachment cancelled and the claim declared time-barred.
Creditors who has made an attachment on a debtor's property should ensure that ongoing attempts are made to recover the claim, so that the limitation period is interrupted and a new period of 10 years runs from there. Creditors can, among other things, interrupt the limitation period by taking legal action to recover the claim or obtaining the debtor's written acknowledgement of his obligation.
If you have any questions about the article or about the statute of limitations on garnishments in general, you can contact Camilla Dam Rasmussen at cdr@paragrafadvokaterne.dk or phone 82828242.
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