There are significant differences in the procedures available to lenders north and south of the border when it comes to enforcing fixed charges or standard securities over real/heritable property. In this blog, we will compare the process in England & Wales ("E&W") of appointing a fixed charge or "LPA" receiver with the Scottish calling-up procedure

England & Wales: LPA receivers

Appointing a fixed charge or "LPA" receiver will be familiar to many as the most common method of enforcing a mortgage (or legal charge) over property in E&W. The process is typically straightforward:

  • There is an event (most commonly a payment default) which renders the charge enforceable and the lender issues a demand letter;
  • On failure to satisfy the demand, the lender executes a deed of appointment under the terms of the charge, which will list the proposed receiver or joint receivers; and
  • The receiver then signs an acceptance and the appointment becomes effective.

The whole process can be completed in a matter of days and once appointed, the receivers will typically have wide ranging powers which will be specified in the mortgage document. These will include the power to take possession of, to sell the property and usually a general power to carry out any action necessary or conducive to getting in possession of and preserving the property.

The receivers owe duties to the lender that appoints them but they act as agents of the debtor and so it's the debtor that is ultimately responsible for their acts. Therefore, lenders that appoint receivers have a degree of control over their management of the property but are shielded from a lot of the risks and responsibilities that go along with that.

For more details about how a receiver can be appointed by the charge holder whilst also acting as agent of the debtor, please see our blog on the topic here.

Scotland: calling-up

The process in Scotland requires the lender to issue a calling up notice before it can exercise its remedies under a standard security. The calling-up notice must be served on the debtor and any other parties entitled to receive service of the notice. The calling-up notice gives the debtor two months to repay the debt. Once a calling-up notice has expired without payment, the debtor will be in default and unless the property is being used for a residential purpose, the lender can exercise any of its remedies under the standard security, including the power of sale.

It is important to note that if the lender fails to comply with the strict requirements of the legislation when serving the calling-up notice it will be invalid and this has given rise to numerous court cases.

This contrasts in several key aspects with receivership in E&W, in particular:

  • There is no ability for a receiver to be appointed with responsibility to manage the process and assume a level of risk. It is the lender that exercises its rights under the standard security and who ultimately sells the property;
  • Unless the debtor consents to shorten it, there is a minimum 2-month period for the calling up notice to expire and the process can often take significantly longer than this depending on the circumstances;
  • Unless the lender enters into possession of the property (which lenders are generally reluctant to do), its powers to manage and sell the property are far more restrictive than those available to an E&W receiver.

Although the longer notice periods mean that calling up arguably offers greater protection to debtors, calling-up is undoubtedly a more cumbersome process for lenders than an E&W receivership. In our experience, lenders will often look for alternative means of recovering secured debts with calling up being the last resort.

Scottish lenders can make the calling-up process easier to manage by appointing an agent to act on their behalf at any stage. This can enable an almost quasi-LPA receivership when dealing with the marketing and sale of a property.

Any person appointed as agent by a lender though is only acting as an agent. The lender remains responsible for their actions; and the agent only has the powers of the lender which, as above, are far more restrictive than an LPA receivers'.

The Scottish Law Commission has looked at the concept of fixed charge receivership in a recent Discussion Paper on Heritable Securities and considered whether a form of fixed charge receivership should be introduced in Scotland. Please see our blog on the topic here.

If you are a receiver or lender seeking to deal with property in Scotland or E&W or a borrower subject to enforcement action, or you have any concerns or questions about these matters and how they may impact you or your business, please do not hesitate to get in touch with your usual Brodies' contact.


Andrew Scott

Senior Associate

Jamie Nellany

Senior Associate

Lucie Barnes