Wednesday 24 November 2010

GLC predicts major shockwaves for Scottish repossession law following RBS v. Wilson and others

A judgment of the UK Supreme Court today looks set to have profound implications for the law and practice of repossessions in Scotland. According to GLC's Principal Solicitor, Mike Dailly, the case of RBS plc v Wilson and others "may be to Scottish repossession proceedings what Cadder has been to criminal proceedings in Scotland". 

The UK Supreme Court upheld the appeal of two sets of Scottish homeowners in the case of Royal Bank of Scotland plc v. Wilson and others [2010] UKSC 50, where a lender's certificate of default did not amount to a 'requisition' for the purposes of section 5 of the Heritable Securities (Scotland) Act 1894, and where the court held that in the circumstances of the case, a 'calling-up notice' should have been served. 

 The standard practice of most lenders in Scotland in reposession proceedings has been to raise a writ founding upon a 'default' in terms of standard condition 9(1)(b) (of sch 3 of the 1970 Act) and seek recovery in terms of section 24 of the Conveyancing and Fedual Reform (Scotland) Act 1970.  In essence, lenders would not bother with a default or calling-up notice and would simply raise repossession proceeding based upon the mortgage arrears (lodging a 'certificate of default' setting out the amount of arrears). 

And that was that for many years in Scotland - defenders could use the Mortgage Rights Act (Scotland) 2001 and now the Home Owners & Debtor Protection (Scotland) Act 2010 to obtain a chance to pay, re-mortgage or restructure, sell, or apply to the Mortgage to Rent Scheme.  But no-one challenged the orthodoxy of the lender's right to use standard condition 9(1)(b) for a repossession based upon mortgage arrears; until now.

The UK Supreme Court's ruling makes it clear that standard condition 9(1)(b) cannot be used for a failure to comply with mortgage payments, and instead a calling-up notice is necessary in an arrears case. At para 74 Lord Hope says "As standard condition 9(1)(b) refers to a failure to comply with any other requirement arising out of the security, this section must be taken to refer to defaults other than in respect of the debt secured by the standard security. Content for its application is to be found in the requirements that are set out in standard condition 1 (maintenance and repair), standard condition 2 (completion of buildings), standard condition 3 (observance of conditions in title) and standard condition 5 (insurance) and any other similar conditions that may have been included by way of variation to maintain the value of the security subjects".

GLC's Principal Solicitor said: "The fact the UK Supreme Court has stated that standard condition 9(1)(b) cannot be used for a failure to pay ones mortgage, and that in such cases a calling-up notice and standard condition 9(1)(a) should be used instead, will send shock waves to lenders and their solicitors in Scotland.  More than that it could mean thousands of cases might have been raised incompetently, with defenders entitled to seek dismissal with expenses in principle.  GLC would recommend that all homeowners in Scotland currently subject to repossession proceedings seek advice from a law centre solicitor or local firm of solicitors in light of this decision".
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14 comments:

  1. This could open the flood gates for thousands of wrongful reposessions. No longer will the mortgage provider be able to bull doze their way through the repossession process!

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  2. quick question, reading the judgement in question. I am guessing this should not affect a property already repossesed ( July 2009), vacant, owned by the bank and currently for sale/under offer.
    The reason i am asking this is that a solicitor i am dealing with today has just informed me about this judgement and how it may affect a property i am in the process of concluding the purchase on.

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  3. I am in the same position as Anonymous - my mortgage had already arrived in my lawyers bank account when on Friday I was told the sale was suspended. To make matters worse - i have been told that I will still be liable for the legal fees regardless for the outcome.
    Does anyone have any indication how long it will take for the Keepers of the Register to make a decision. Should I be concerned?

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  4. My Wife and I are in the same position. We are about to conclude on a property repossessed in March 2010. We have been notified that the property owner (bank) is now waiting to see the effect of the ruling before allowing us to proceed. Are we liable for costs here? As the property has already been repossessed will this be able to effect the sale long term?

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  5. I have paid my deposit and concluded missives over a week ago. We were meant to pick up the keys on Friday and have not been allowed.
    Surely I have some rights considering missives are concluded??????

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  6. If missives are already concluded and deposit has already been received by sellers solicitor how can they legally not release the keys? I have heard that all reposession court cases concluded before 30th September 2010 do not have to comply to the new legislation therefore solicitors have no reason to be holding keys. I think its disgusting that they could potentially be leaving families on the streets as some buyers may have sold their current homes!
    I hope there will be an answer to this very soon and that people will get the keys to a house they legally own and are paying for!!!

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  7. Could not agree more with Anonymous at 12.02 30/11 - there is no potentially about it!My house is sold and I find myself having to pay for storage costs and rely on the godwill of my family.How this can be allowed to happen to innocent people beggars belief.

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  8. Regarding the positions of people above I have spoken to the Scottish Goverment who have advised myself that these house purchases should be able to be concluded.There legal team has looked at the statement made on Monday from the keepers of the register and have said there will be no action taken.This is because they believe that any house that had been granted a court decree will be allowed to continue with the sale.

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  9. The problem here is this court decision is coming on the back of repossession procedures which were introduced on the 30th of September. The new repossession procedures do not affect cases that were initiated prior to the 30th of September, however, the court decision could have wider implications and could affect repossession cases prior to the 30th September.

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  10. And how does it affect repossessions in England and Wales?

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  11. Is this going to be retrospective? I ask having gone through the procedure of having to remortgage in order to satisfy arrears. It cost me a fortune but saved the day for my elderly father who would have been homeless.

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  12. Can this be used by homeowners in England (i know it's based on Scottish law)?

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  13. Is there any update on this?
    I am in the middle of buying a house and have been told by my solicitor that this is a problem

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  14. Can anyone advise if their repossession sales went ahead. In the process of buying and offered a title indemnity policy (but in banks name). Solicitor advised that title would always be defective. Is this able to be remedied?

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