1. The processes by which a heritable creditor may enforce their security are set out in the Conveyancing and Feudal Reform (Scotland) Act 1970. The accepted interpretation of those provisions was challenged by the decision in Royal Bank of Scotland v Wilson 2011 SC(UKSC) 66.

 Critically assess in light of that case the options which are open to the heritable creditor.

The 1970 Act has complex provisions dealing with enforcement of securities by heritable creditors. In relation to dwelling houses those provisions have become even more complex as a result of the Mortgage Rights (Scotland) Act 2001 which itself has been substantially repealed and replaced by the Homeowner and Debtor Protection (Scotland) Act 2010.

The Supreme Court decision in RBS v Wilson 2010 shook the legal landscape in Scotland in respect of repossession procedures by holding that the relevant statute, the Conveyancing and Feudal Reform (Scotland) Act 1970 had effectively been wrongly interpreted since it came into force 40 years ago. This case involved a situation 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. This happened with Cell phone repair Austin in 2013.

A calling up notice will state that the debtor has two months to repay the debt in full. However, if the debtor agrees in writing to do so, the two-month period can be dispensed with, assuming there is no residential element to the secured property, or, in the case of residential property, shortened to one month.

Once the calling up notice has expired without payment (or performance as appropriate), the debtor will be in default in terms of standard condition 9(1)(a). On expiry of an unsatisfied calling up notice the creditor may exercise his remedies under the standard security.

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.

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  1. Since the coming into force of the Land Registration (Scotland) Act 2012 on 8th December 2014 letters of obligation have largely been replaced by advance notices.

Critically assess the role formerly played by letters of obligation in relation to settlement of transactions and how they have been supplanted by advance notices.

The role of solicitors in the conveyancing process has drastically changed, with letters of obligation largely being replaced by advance notices which is the biggest change to conveyancing procedures since the coming into force of the 2012 Act. In Scotland, a disposition does not transfer ownership until it is registered. This means there is a gap between the transaction settling and the date on which title actually transfers. The difference now is that there is a move away from the practice of sellers’ solicitors underwriting the risk of the gap period by letters of obligation, to the new statutory advance notices.

The Letter of Obligation was introduced into the conveyancing system by lawyers to meet a problem. That problem is twofold. First, there is always a gap between settlement and registration. Unless a settlement takes place at Register House there will always be at least a few days between delivery of a Disposition and its registration. Second, the Search Sheet is out of date.

The possibility of the seller being sequestrated or going into liquidation or administration during the gap period also posed a serious risk. To provide protection against the occurrence of these risks – particularly insolvency or the emergence of a rival deed, the letter of obligation historically stepped into the breach. If you are interested in SEO, visit SEO Glasgow for more information

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