Recovering on Real Estate Loan or Negotiable Instruments: The Four and Six Year Statute of Limitations

To recover on a real estate lien note, action must be taken within four years after maturity date of the note, obligation or installment. A sale of real property under a power of sale in a mortgage or deed of trust must be made not later than four years after the day the cause of action accrues. Tex. Civ. Prac. & Rem.Code Ann. § 16.035(b) (West 2002). If the four-year period expires then the real-property lien and the power of sale to enforce the lien will become void, meaning that the lien cannot be enforced. Holy Cross Church of God in Christ v. Wolf 44 S.W.3d 562, 567 (Tex. 2001).

Some notes secured by real estate, such as a reverse mortgage that has no requirement for payment during the life of the borrower, could be payable at a certain time in the future. In that case then the debt must be enforced within four years. If not timely enforced the the lender loses its ability to recover from its security. This occurred in the case of Fin. Freedom Sr. Funding Corp. v. Horrocks, 294 S.W.3d 749, 755 (Tex. App.—Houston [14th Dist.] 2009, no pet.) where the note was due in 2003 when the wife of the decedent who took out the reverse mortgage died. Since the claim was not timely pursued in the probate court then the lien could not be enforced.

If recovery is sought on a negotiable instrument then it can be enforced within six years. Tex. Bus. & Com Code Ann. § 3.118 (West 2002) (statute of limitations to sue on negotiable instruments is six years); Bank of Am., N.A. v. Alta Logistics, Inc., 05-13-01633-CV, 2015 WL 505373, at *2 (Tex. App.—Dallas Feb. 6, 2015, no. pet. h.).

Be careful if the note is accelerated. When that occurs then the cause of action accrues when the holder actually exercises the option to accelerate. Khan v. GBAK Props., Inc., 371 S.W.3d 347, 353 (Tex.App.–Houston [1st Dist.] 2012, no pet.). Hardy v. Wells Fargo Bank, N.A., 01-12-00945-CV, 2014 WL 7473762, at *3 (Tex. App.—Houston [1st Dist.] Dec. 30, 2014, no pet.)