By: Tracy M. Evans, Esq., Associate, Saxon, Gilmore, Carraway & Gibbons, P.A.
A common defense in mortgage foreclosure actions is that the statute of limitations has run. In Florida, mortgage foreclosure actions are subject to a five year statute of limitations pursuant to Fla. Stat. § 95.11(2)(c). The statute of limitations begins running from the date that the cause of action accrues, which is typically the date of the borrower’s default under the note or mortgage terms. One of the most common types of defaults is a borrower’s failure to pay monthly installment payments when due. Each monthly installment payment missed by a borrower is a separate default under the note and mortgage and constitutes a separate cause of action. Each of these causes of action has a separate five year statute of limitations period during which the lender may sue.
A common misconception among borrowers, attorneys, and judges alike is that the statute of limitations bars the recovery of any installment that became due more than five years prior to the filing of the action. This misconception can lead to the court’s improper reduction of the final judgment and undermines the lender’s substantive rights.
The statute of limitations for a mortgage foreclosure is procedural in nature and runs against the individual installment payments due under a note and mortgage. The statute of limitations prevents a lender from filing a lawsuit that is based upon nonpayment of an installment that is over five years past due, but it does not relieve a borrower’s legal obligation to pay the total amount due under the note and mortgage. Uniform mortgage documents for both residential and commercial mortgages typically contain a separate covenant by the borrower to repay a total specified sum, not just a promise to pay individual monthly payments. The promise to pay the entire debt continues through the maturity date of the note.
For example, on September 1, 2005, a borrower executes and delivers a standard uniform note in the amount of $100,000, secured by a uniform real property mortgage. Pursuant to the terms of the note, the borrower promises to make monthly payments of $1,000, due the first day of every month over a period of 20 years, with the entire balance of the note due on September 1, 2025. The borrower fails to make the installment payment due September 1, 2008, and all subsequent payments. If the lender files a mortgage foreclosure action on September 1, 2014, the lender would not be able to bring the action based on any of the defaults that occurred from September 1, 2008 through September 1, 2009, because the five year statute of limitations for each of these monthly installment payments has expired. The lender could, however, assert a cause of action based on the October 1, 2009, default in payment, and seek a judgment in the entire amount due under the note and mortgage based on the borrower’s separate promise to pay the $100,000. The installment payments that became due between September 1, 2008 and September 1, 2009, make up a part of the $100,000, so they are not subtracted from the judgment just because the statute of limitations to bring an action based on these individual defaults has expired.
Lenders and their attorneys need to understand how the statute of limitations operates regarding monthly installment payments due under a note to ensure that the statute of limitations is applied correctly to preserve a lender’s rights. It is essential to review the terms of the note and mortgage at issue, especially when non-uniform documents are used because the specific terms of the subject note and mortgage will always control.
Our firm regularly represents creditors in heavily contested residential and commercial foreclosure actions. The cases we handle often involve a multitude of affirmative defenses and counterclaims, including issues related to the statute of limitations. Our extensive foreclosure experience enables us to recognize and expedite the litigation of issues like the statute of limitations, which often delay foreclosure cases.
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