Can loan security (land charge, mortgage, guarantee) still be used if the claim has expired?

1. Introduction

The Law of Obligations Modernization Act, which came into force on January 1, 2002, significantly shortened the statute of limitations for loan claims. This change means that in banking practice it is always necessary to deal with the question of the statute of limitations. The question therefore arises as to whether securities can still be utilized if the underlying claim has already expired.

2. The regulation of Section 216 Paragraph 1 BGB

The answer to the question of whether loan security may or can still be used when a security claim has expired can be found in Section 216 of the German Civil Code (BGB):

There it says:

“The statute of limitations on a claim for which there is a mortgage, a ship mortgage or a lien does not prevent the creditor from seeking satisfaction from the encumbered item.“

Collateral therefore remains in place and may be used even if the secured claim has already expired. The statute of limitations merely represents a permanent right to refuse performance, but does not extinguish the lender’s claims (§214 Paragraph 1 BGB).

However, this does not apply to time-barred interest claims. Once the statute of limitations expires, these can no longer be enforced via credit protection. Here the debtor and borrower can raise the objection that the statute of limitations has expired.

3. The regulation of Section 216 Paragraph 2 BGB

Furthermore, §216 paragraph 2 BGB applies to abstract acknowledgments of debt in land charge deeds.

In concrete terms, this means: The personal title may be used even if the secured loan claim has already expired.

However, it should be noted that §216 BGB does not apply to guarantees; A special regulation according to §768 BGB applies here: the guarantor can assert the same defenses as the main debtor. The guarantor can therefore rely on the defense that the principal debt is time-barred, which means that the surety is also affected by this defense.

4. Conclusion

In principle, credit security can be claimed and enforced even for claims that are time-barred. With the exception of the guarantee.

However, there are options for objections regarding interest and costs.

Special features may also arise from the credit security agreement or the security agreement.

If a claim is made against you by a credit institution or creditor, it is advisable to consult a qualified lawyer to avoid legal disadvantages.

This article does not represent specific and individual legal advice, but rather only provides a rough initial overview of the very complex legal matter described. You can only obtain legal certainty for your specific case constellation through coordinated examination and advice from an expert lawyer.

I would be happy to assist you as a lawyer and specialist lawyer for a legal assessment and assessment of your case and to accompany and support you with financial transactions or the assertion of liability claims and compensation for damages from financial transactions and investments as well as with banking law issues regarding loan collateral and loan agreements. Please feel free to contact me by phone or write to me.

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