A decision from the Scottish appeal court has held that early
termination of a term loan agreement creates loss and the point
from which the five year prescriptive period can run, even if the
loss cannot be quantified at the time of termination.
The background
Mr K had two terms loans and one revolving credit agreement with
RBS. On 8 February 2010, RBS wrote to Mr K advising that due
to a breakdown in the banking relationship the 3 loan agreements
were to be terminated in 2 days' time. On 12 February
2010, the Bank granted an extension of 60 days for repayment of the
outstanding sums - £532,077.88. As security for the 3
loans, Mr K had granted the bank standard security over 9
buy-to-let properties. Mr K tried refinancing, and tried to
sell the properties to 3rd parties but his efforts were
unsuccessful. Ultimately, his wife bought all 9 properties from him
at 75% of their market value. The shortfall to the bank was
almost £160,000.
