Mortgage Shortfall Debt: How Long Can a Lender Chase You

When a property is repossessed and sold for less than the outstanding mortgage balance, the difference is known as a mortgage shortfall debt. The former borrower may remain liable for this shortfall, and the lender may pursue recovery for a defined period set by statute. The length of time a lender has to take court action depends on the type of debt (capital or interest), the legal jurisdiction within the UK, and whether certain actions — such as making a payment or acknowledging the debt in writing — have taken place.

This article explains the statutory limitation and prescription periods that apply to mortgage shortfall debts in England, Wales, Northern Ireland, and Scotland. It covers the relevant legislation, the regulatory framework set by the Financial Conduct Authority (FCA), and the key events that can affect how long a lender has to pursue recovery. It does not cover what any individual should do about a shortfall debt.

The time a lender has to bring court proceedings to recover a mortgage shortfall depends on whether the claim relates to the capital (principal) owed or to interest, and on which part of the UK the mortgage is governed by.

• In England, Wales, and Northern Ireland, the limitation period is 12 years for capital and 6 years for interest, running from the date the right to receive the money accrued. These periods are set by the Limitation Act 1980 (and the equivalent Limitation (Northern Ireland) Order 1989).
• In Scotland, the position on interest is clearer than on capital. Interest shortfalls are subject to a 5-year prescription period. For capital shortfalls, there are conflicting legal views on whether the applicable period is 5 years or 20 years. This uncertainty is acknowledged by debt advice organisations and has not been definitively resolved.

Separately, FCA rules require regulated mortgage lenders to notify borrowers of their intention to recover a shortfall within 6 years of the date of sale (or 5 years if the mortgage is subject to Scottish law). This is a regulatory obligation, not a statutory limitation period, and the two serve different functions.

Certain actions — particularly making a payment towards the debt or acknowledging it in writing — can restart the limitation or prescription clock. A court judgment obtained before the limitation period expires removes the time limit for the underlying debt, though separate rules govern enforcement of older judgments.

Mortgage shortfall debt operates at the intersection of two frameworks: statutory limitation (or prescription in Scotland), which governs how long a creditor has to bring a legal claim, and FCA regulation, which governs how regulated lenders must treat borrowers during the shortfall recovery process.

Statutory limitation and prescription

When a lender sells a repossessed property and a shortfall remains, the borrower's obligation to repay that shortfall is a debt. Like other debts, it is subject to time limits on legal recovery.

• In England, Wales, and Northern Ireland, these are "limitation periods" set by the Limitation Act 1980 and the Limitation (Northern Ireland) Order 1989.
• In Scotland, the equivalent concept is "prescription," governed by the Prescription and Limitation (Scotland) Act 1973.

The law distinguishes between the capital element (the principal sum secured by the mortgage) and the interest element. Each has its own time limit, and each runs from its own starting point. The capital limitation period begins when the lender's right to receive the money accrued — in most cases, this is linked to the terms of the individual mortgage deed. The interest limitation period begins when each interest payment becomes due, meaning different portions of interest may become time-barred at different points.

FCA regulatory framework

The FCA's Mortgages and Home Finance: Conduct of Business sourcebook (MCOB), specifically MCOB 13.6, sets out rules for how regulated lenders must handle mortgage shortfalls. These rules require timely notification to borrowers and impose separate deadlines for communicating the intention to recover. These regulatory obligations exist alongside — but are distinct from — the statutory limitation periods.

Interaction between the two

A lender's failure to comply with FCA notification rules is a regulatory breach, but the relationship between such a breach and the statutory limitation period is not clearly defined in primary sources. These are treated as separate matters: one is a question of regulatory compliance, the other is a question of when the right to bring court proceedings expires.

Limitation periods: England, Wales, and Northern Ireland

The Limitation Act 1980 sets two distinct periods for mortgage shortfall debts.

• Section 20(1) provides that no action to recover any principal sum secured by a mortgage may be brought after 12 years from the date on which the right to receive the money accrued.
• Section 20(5) provides that no action to recover arrears of interest payable in respect of a sum secured by a mortgage may be brought after 6 years from the date on which the interest became due.

Northern Ireland has equivalent provisions under Articles 36 and 37 of the Limitation (Northern Ireland) Order 1989. Article 36(1) provides 12 years for principal and Article 37(1) provides 6 years for interest, mirroring the wording of the 1980 Act.

Prescription periods: Scotland

Scotland operates a dual prescription system under the Prescription and Limitation (Scotland) Act 1973.

• Section 6 creates a 5-year "negative prescription" that applies to obligations listed in Schedule 1 of the Act. Interest obligations on mortgage debts fall within this 5-year period under Schedule 1, paragraph 1(a)(i).
• For mortgage capital shortfalls, the position is less certain. There are conflicting legal views on whether capital shortfalls fall under the 5-year prescription (via Schedule 1, paragraph 1(g), which covers obligations arising from breach of contract) or the 20-year long-stop prescription under Section 7 (which applies to all obligations not specifically excluded by Schedule 3). National Debtline Scotland explicitly states: "There are different legal views about whether a lender has 5 or 20 years to take court action to recover a mortgage shortfall debt in Scotland."

A significant reform took effect on 28 February 2025 under the Prescription (Scotland) Act 2018. The 20-year prescription period now operates as a true long-stop that cannot be interrupted by acknowledgments or claims, subject to transitional provisions.

When the clock starts

• For capital, the limitation or prescription period begins when the lender becomes entitled to payment of the full amount. According to secondary sources such as Shelter England and National Debtline, under many standard mortgage terms this is often after two to three missed payments, though the precise trigger is contract-dependent and varies between mortgage deeds. Some mortgages are structured as "payable on demand," which may affect when the cause of action accrues.
• For interest, the statutory wording is more precise: the period runs from "the date on which the interest became due." Each individual interest payment has its own separate limitation period.

FCA notification requirements

• Under MCOB 13.6.3R, a regulated mortgage lender must notify the borrower of the existence of a sale shortfall as soon as possible after the sale. This notification must be provided in a durable medium and must include the shortfall amount and whether another party (such as a mortgage indemnity insurer) may pursue recovery.
• Under MCOB 13.6.4R(2), the lender must notify the borrower of its intention to recover the shortfall within five years of the date of sale if the mortgage is subject to Scottish law, or within six years in all other cases.
• MCOB 13.6.5G confirms that a lender is not required to recover a sale shortfall. A lender may choose not to pursue recovery — for example, where the sums involved make action unviable.

Events that restart the clock

• Under Section 29 of the Limitation Act 1980, the limitation period can be restarted by a written acknowledgment of the debt or by a part payment. Section 30(1) requires that any acknowledgment must be in writing and signed by the person making it. Section 29(6) provides that any payment of interest is treated as a payment in respect of the principal debt, meaning a payment towards either element can restart the clock for both.
• In Scotland, Section 6(1)(a) and 6(1)(b) of the 1973 Act provide equivalent mechanisms: a "relevant claim" or a "relevant acknowledgment" can interrupt the 5-year prescription. However, following the 2018 reforms, the 20-year long-stop prescription can no longer be interrupted by acknowledgments or payments.

Court judgments

If a lender obtains a County Court Judgment (CCJ) in England or Wales, or a decree in Scotland, before the limitation or prescription period expires, the time limit for the underlying debt no longer applies. However, in England and Wales, enforcement of a CCJ that is more than six years old requires permission from the court. In Scotland, a decree is enforceable for 20 years.

• Capital and interest have different time limits. A mortgage shortfall is not subject to a single limitation period. The capital and interest elements are treated separately in law, with different periods and different starting points. Many borrowers are unaware of this distinction.
• The 12-year period applies to capital, not to the whole debt. In England, Wales, and Northern Ireland, the frequently cited "12-year rule" applies only to the principal sum. Interest arrears are subject to a shorter 6-year period. However, because lenders typically apply sale proceeds to interest before capital, in many cases only the capital element remains outstanding after a property sale, meaning the 12-year period is the one that matters in practice.
• FCA notification deadlines are not the same as limitation periods. The FCA requires lenders to notify borrowers of their intent to recover within six years (five in Scotland) of the sale. This is a regulatory requirement. It is separate from the statutory limitation period, which is set by legislation. The consequences of breaching the FCA rule and the consequences of the limitation period expiring are different matters.
• Making a payment or acknowledging the debt can reset the clock. Any payment — even a small one — or a written acknowledgment of the debt can restart the entire limitation period. This includes payments of interest, which under the Limitation Act 1980 are treated as payments in respect of the principal debt. Whether a particular communication — such as an email — amounts to a written acknowledgment that is "in writing and signed" may depend on the specific facts, including factors such as the presence of a signature block or typed name.
• Scotland's position on capital is genuinely uncertain. The question of whether mortgage capital shortfalls in Scotland are subject to five-year or twenty-year prescription has not been definitively resolved. Authoritative debt advice organisations acknowledge this uncertainty. This is not a simplification for the purposes of this article; it reflects the current state of the law.

• "Payable on demand" mortgages. Some mortgage deeds state that the debt is payable on demand. Where this is the case, the limitation period may not begin until a formal demand for payment is made, rather than at the point of missed payments or sale. This can significantly affect the calculation of whether a limitation period has expired.
• Joint mortgages and acknowledgment. In England, Wales, and Northern Ireland, the rules on acknowledgment treat payments and written acknowledgments differently in the context of joint borrowers. Under Section 31(7) of the Limitation Act 1980, a payment made by one borrower binds all persons liable for the debt — meaning a payment by one joint borrower restarts the clock for all of them. However, under Section 31(6), a written acknowledgment by one borrower binds only that borrower, not the other joint borrowers. In Scotland, the position on joint debtors and the effect of payment by one party on prescription may depend on the circumstances; no primary source has been identified that provides a definitive general rule on this point.
• The 2025 Scottish reform. Since 28 February 2025, the 20-year long-stop prescription in Scotland cannot be interrupted by acknowledgments or payments, subject to transitional provisions. This is a significant change from the previous position, where the 20-year period could be restarted.
• Lenders are not obliged to pursue recovery. Under MCOB 13.6.5G, a lender may choose not to recover a shortfall. The FCA guidance notes that a lender may decide not to pursue recovery where, for example, the sums involved make action unviable. The existence of a shortfall does not automatically mean a lender will take action.
• Application of sale proceeds. Standard industry practice, according to secondary sources, is for lenders to apply the proceeds of a property sale to interest first and then to capital. Where the sale covers all outstanding interest, only the capital element of the shortfall remains. This means the applicable limitation period is the longer 12-year period (in England, Wales, and Northern Ireland) rather than the 6-year interest period.

A mortgage shortfall debt does not last indefinitely. Statutory limitation and prescription periods set outer boundaries on how long a lender has to bring court proceedings for recovery. The length of that window depends on the jurisdiction, the type of debt, and whether any clock-resetting events have occurred.

In England, Wales, and Northern Ireland, where the shortfall consists only of capital — which is common after sale proceeds are applied to interest — the lender has 12 years from the date the right to receive the money accrued to issue court proceedings. If interest also remains outstanding, that element is subject to a shorter 6-year period.

In Scotland, interest shortfalls are subject to 5-year prescription. The position on capital is less certain, with the applicable period potentially being either 5 or 20 years depending on which legal interpretation prevails. This may require specialist legal advice to assess in individual cases, as National Debtline Scotland has noted.

The FCA's separate notification requirements mean that regulated lenders must inform borrowers of their intention to recover within defined timeframes — six years from sale in most of the UK, five years in Scotland. This regulatory obligation operates alongside the statutory time limits.

Any written acknowledgment of the debt, or any payment towards it — however small — can restart the limitation period in England, Wales, and Northern Ireland. In Scotland, the 5-year prescription can similarly be interrupted, but following the 2025 reforms, the 20-year long-stop cannot.

Once a court judgment is obtained within the limitation period, the underlying time limit ceases to apply, though further rules govern the enforcement of older judgments.

• England/Wales/NI: Lender has 12 years for capital, 6 years for interest.
• FCA Rule: Regulated lenders must notify of intent to recover within 6 years of sale (5 in Scotland).
• Scotland: 5 years for interest. Capital is uncertain (5 or 20 years).
• Clock Restart: Any payment or written acknowledgment resets the full 12/6 year clock.
• Joint Debts: Payment by one person resets the clock for everyone. Written acknowledgment only affects the writer.
• Sale Proceeds: Usually pay off interest first, leaving capital debt (subject to the longer 12-year rule).