Prior to 2010 the process of Calling Up a Standard Security in Scotland, under the Conveyancing and Feudal Reform (Scotland) Act 1970, had been relatively straight forward and settled. In 2010 that all changed - - lenders have been on a roller-coaster ride for the past ten-years and now operate in a very different landscape: service methods, pre-action requirements as well as other changes have overhauled what had been a reasonably settled area of the law.

2010 The Catalysts for Change:

Without being too Danny Dyer about it all, it all kicked off in 2010 with the Home Owner & Debtor Protection (Scotland) Act 2010 that introduced pre-action requirements i.e. the steps lenders had to take before they could progress an action for recovery of possession of any security subjects used to any extent for residential purposes. 

Less than two months after the introduction of pre-action requirements the UK Supreme Court proceeded to overturned 40 years of established practice in the case Royal Bank of Scotland plc v Wilson [2010] UKSC 50. The Supreme Court confirmed an action for recovery of possession by a lender following a monetary default under a mortgage, or loan, would be incompetent unless a Calling Up Notice had been properly served under the 1970 Act. The established practice up until that point had been to use certificates of default.

Service of Calling Up Notices:

Things only got more interesting with Santander UK plc v Gallagher 2011 SLT (St ct) 203 in which it was held a Calling Up Notice could not be properly served by letter box service, via Sheriff Officers. Instead, the Court held that lenders must adhere strictly to the options for service as set out in the 1970 Act. This put a stop to what was common practice, at the time, for a Calling Up Notice to be served by Sheriff Officers if initial postal attempts were returned.

There was then a short period were lenders were given a conflicting view from the Courts. Matters were settled by the Sheriff Appeal Court decision of the Royal Bank of Scotland plc v Ross Jamieson [2019] SAC (civ) 29, which confirmed Gallagher and hammered home the point that lenders must strictly adhere to the service requirements set out in the 1970 Act.

Now, as much as I enjoy a "technical" win the Jamieson case does cause a bit of difficulty, as it left lenders with many unanswered questions about the practicalities of service. For example, what happens if a Calling Up Notice is not physically returned by the Royal Mail but the borrower has moved or passed away, would a subsequent Summary Application to recover the secured subjects still be valid? This may feel esoteric, but given the formal approach taken by the court in Jamieson we know that practicalities matter.

Residential Purposes:

In between all the drama around service, the courts sought to remove uncertainty surrounding the circumstances in which a lender must adopt the pre-action requirements before recovering possession of secured subjects. This culminated in the decision of the Royal Bank of Scotland plc v Johar Mirza [2017] SAC (civ) 13, which finally provided an explanation as to what "residential purposes" meant in relation to the 1970 Act. What it boiled down to is that unless the borrower resides in the security subjects they will generally not be subject to the pre-action protections introduced under the Home Owner & Debtor Protection (Scotland) Act 2010.

The Future:

Recognising the upheaval, and uncertainty caused, to lenders and agents the Scottish Law Commission began looking at Standard Securities and their enforcement in 2018, culminating in a discussion paper being published in June 2019 (number 168). A further discussion paper is expected imminently, the ultimate aim being the production of a bill to overhaul the aged and creaking 1970 Act in around 2022 or 2023.

In terms of our insight, what I expect is the bill will make a bright line distinction between residential and commercial Standard Securities and may seek to simplify or remove the myriad of Statutory Forms associated with Calling Up and enforcing a Standard Security in Scotland. In the meantime, lenders and agents will continue to grapple with a plethora of Statutory Forms and processes in which – as we know from Jamieson - one error can void the entire process. With the rollercoaster decade at an end it seems we may need to hang on just a little longer before we can step off the exciting ride that has been the ever-changing world of enforcing heritable securities in Scotland….