The High Court has thrown another obstacle in the banks’ attempts to repossess properties, ruling that a letter from a subprime lender to a delinquent borrower did not constitute a demand for repayment.

Ms Justice Mary Laffoy yesterday dismissed a claim by GE Capital Woodchester Home Loans to repossess a house in Claregalway, Co Galway, from John and Dympna Reade over arrears of €53,000 that had accrued on their mortgage.

She said in her judgment that the bank did not have legal grounds to repossess the property as a letter to the Reades in February 2010 did not amount to a demand for the repayment of the full sum outstanding.

The letter noted the level of arrears that had built up on the loan and said that, as a result of the default on the mortgage, the full amount of €270,915 has “now fallen due and owing”.

The judge said the lender wrongly assumed that the entire loan balance outstanding had fallen due and owing under the terms of the loan contract between lender and borrower.

“That was not the case,” she said. “A demand was necessary to call in the entire principal and interest outstanding.”

The judge said the bank had “put the cart before the horse”.

A default such as the failure to make a mortgage repayment had to take place and the bank then had to demand the repayment of all money due on the loan account before it could seek to repossess, she said.

GE Capital had argued that similar letters of demand have “passed muster” before judges sitting in the High Court list which hears possession cases.

Repossessions have fallen this year after Ms Justice Elizabeth Dunne spotted a flaw in the legislation covering repossessions. She ruled in July 2011 that lenders could not apply to repossess registered properties where repayment was demanded after December 1st, 2009.