MORTGAGE RIGHTS (SCOTLAND) ACT 2001

For the first time in Scotland, property homeowners will have a legal remedy where they face repossession. This will obviously have important and significant restrictions on lending institutions calling up their securities.

Previously this would commonly be achieved by simply serving a calling up notice or default notice on the persons named in the security. The new legislation now requires additional information to be provided on these notices, clearly detailing to the individual the rights they now have to object and suspend any enforcement action by making representations to the Court. It now provides an opportunity for the occupier to repay mortgage arrears and retain possession of the house.

In accordance with the new changes, an additional notice is now required to be addressed to "the occupier" of the property, as well as any person named in the security. This is to afford protection to any spouse or cohabitee who may not be named in the security and who is entitled to make an application to the court to challenge the repossession. It will also provide a warning to any tenant of the property of the proposed proceedings, although they are not entitled to make any representations or objections.

The decision by the court for granting any suspension order of the proceedings is entirely at the discretion of the sheriff. The test is whether the court 'considers it reasonable in all the circumstances' to grant an order. The court must have regard to the nature of and reasons for the default; the debtors ability to fulfil, within a reasonable period, the obligations under the mortgage; any action the creditor has taken to assist the debtor to fulfil those obligations, and the ability of the debtor to secure alternative accommodation.

If the court grants a suspension order this can suspend the creditor's enforcement rights to such an extent, for such a period and subject to such conditions as the court thinks fit. The result being that the creditor can take no further action during this period. If the debtor should again default, the creditor may apply to the court asking the suspension order to be revoked.

The net result of this legislation is further protection to the debtor and further delay and possible expense to the creditor in enforcing their rights under the security.