With effect from 30 September 2010, the Home Owner and Debtor Protection (Scotland) Act 2010 ("the 2010 Act") introduced further procedural restrictions on lenders making repossession applications over residential properties in Scotland.

The 2010 Act follows the introduction of the "pre-action protocol" in England and Wales which encourages lenders to take steps to reach agreement with borrowers there who are struggling to meet debt repayments, without having recourse to court. Lenders and borrowers alike, as well as their respective advisers, should be aware of the effects of the new provisions in Scotland.

Key Features

Although it has always been the law that the owner of residential property in Scotland may not be evicted without a court order, the 2010 Act provides that a lender may not be granted an eviction order unless the lender has complied with the "pre-action requirements" specified in the 2010 Act. Essentially, the lender must:

  • take all reasonable steps to avoid repossession;
  • use reasonable endeavours to reach agreement with the borrower in respect of clearing arrears;
  • provide the borrower with information on sources of advice and assistance in relation to the management of debt;
  • not make a repossession application if a borrower is taking steps which are likely to result in the arrears being settled within a reasonable time.

Even if the residential property in question is empty, the lender is not entitled to sell the property under the lender's statutory powers unless either (a) the borrower (and, if applicable, the borrower's spouse or civil partner) formally relinquishes his or her rights to occupy the property, or (b) the lender obtains an eviction order from the court.

Any application to court must also be notified to "entitled persons", including, amongst others, the borrower's spouse or civil partner, as well as someone living with the borrower in a relationship having the characteristics of a civil partnership. The new rules provide that the borrower's right to make representations to court with regard to an application extend to such entitled persons.

Borrowers now have the right to be represented in court by an approved lay representative, as well as a (limited) right of recall of a decree (i.e. judgment) for repossession already granted.

Lenders with problem borrowers will need to be familiar with these changes, in particular the pre-action requirements, to ensure that enforcement action is valid.