According to the CA, the answer is ‘yes’. This was confirmed in a recent case where NatWest had made a mortgage loan on a house. The borrowers defaulted, and the bank made formal demands, with the borrowers making some payments. One of the borrowers became bankrupt, and although correspondence took place, no further payments were made and the bank did not issue proceedings. After 12 years, the trustee in bankruptcy was able to get a declaration that the bank’s mortgage was no longer valid, because adverse possession applied. The logic behind this was that the borrowers were in adverse possession once they had made the last payment to the bank. NatWest had failed for more than 12 years to protect its security (ie take steps to enforce it, or to get some payment from the borrowers). They had not impliedly granted the borrowers permission to stay in the property, and the reality – in the CA’s view – was that the borrowers had been in adverse possession.

The moral for banks is, of course, not to allow proceedings to be delayed for so long. They should in any event protect their position by trying to get some part payment (since time then starts anew). To an extent, they can also help protect their position by ensuring that mortgage documentation makes it clear that the right to possession depends upon their default (to avoid any argument that the 12-year period starts from the date the mortgage is granted); at the same time, if a borrower is in default, it may be worth the lender giving the borrower express permission to remain in the property (since that might be of some evidential help in deciding if it is ‘adverse possession’). National Westminster v Ashe [2008] EWCA Civ 55. Source: www.practicallaw.com (subscription service).