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Statute of Limitations for Mortgages Referencing Maturity Date of Underlying Debt

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| Legal Advisory

In 2011, we issued an advisory regarding the importance of recording mortgage extensions in Massachusetts where the mortgage references the maturity date. Pursuant to the Obsolete Mortgage statute (Massachusetts General Laws c. 260, § 33), a lender may not foreclose on a mortgage in Massachusetts "after the expiration of, in the case of a mortgage in which no term of the mortgage is stated, 35 years from the recording of the mortgage or, in the case of a mortgage in which the term or maturity date of the mortgage is stated, 5 years from the expiration of the term or from the maturity date, unless an extension of the mortgage, or an acknowledgment or affidavit that the mortgage is not satisfied, is recorded before the expiration of such period." In a recent case, Massachusetts' highest court, the Massachusetts Supreme Judicial Court (SJC), issued a decision further highlighting the importance of this statute.

In Deutsche Bank National Trust Co. v. Fitchburg Capital, LLC, No. 11756, slip op. (Mass. April 15, 2015), the SJC considered whether mortgages that do not state a specific maturity date, but reference the term or maturity date of the underlying debt, are subject to the Obsolete Mortgage statute. The SJC held that references in mortgages to the dates and terms of the underlying debt make the mortgages subject to the 5-year, and not the 35-year, statute of limitations set forth in the Obsolete Mortgage statute.

In this case, a lender purported to foreclose in 2012 on two mortgages from 1999 and 2002 for which the underlying debts were due in 2000 and 2003, respectively. Although neither mortgage stated a specific maturity date, each mortgage referenced the term of its underlying debt. The SJC held that, "because the scope of a mortgage is necessarily tied to the reach of the underlying obligation, considering the term or maturity date of the underlying obligation to be the term or maturity date of the mortgage comports with the common-law understanding of the words "mortgage' and 'note.'" The SJC also held that a dragnet clause in one of the mortgages (whereby the mortgage also secured "all other debts, covenants and agreements of or by the Mortgagor to or for the benefit of the Mortgagee now existing or hereafter accruing while this mortgage is still undischarged of record") was insufficient in this instance to save the mortgage from becoming obsolete since no additional debts were incurred subsequent to the original loan. The SJC acknowledged, however, that there might be some circumstances in which a dragnet clause could extend the term or maturity date of a mortgage.

This case is another important reminder that Massachusetts mortgages should omit references to the maturity date of the loans being secured. If, however, a lender includes a reference to a maturity date in its mortgage, the lender should record any necessary extension of the mortgage, or an acknowledgment or affidavit that the mortgage is not satisfied, before the expiration of the date 5 years from the maturity date.

This advisory was prepared by Beth H. Mitchell in the Commercial Finance practice group at Nutter McClennen & Fish LLP. For more information, please contact Beth or your Nutter attorney at 617.439.2000.

This advisory is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

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