On 22nd April 2009, some significant changes to debt recovery legislation are due to come into force, affecting the procedures relating to inhibitions in Scotland. The provisions are a further step in the implementation of changes which are designed to make the debt recovery process more 'user friendly'. Part 5 of the Bankruptcy and Diligence etc (Scotland) Act 2007 brings about the following changes/clarifications:
- After 22nd April, the Court of Session will no longer have the sole responsibility for granting inhibitions and Letters of Inhibition will no longer be required. It will be competent for a Sheriff to grant inhibitions on execution via extract judgment.
- The only way to register an inhibition will be by registering the schedule of inhibition and certificate of execution of inhibition in the form required by the new laws.
- Inhibitions will take effect from the date of registration of the schedule and certificate. This will be the case unless a separate notice of inhibition is registered in the Register of Inhibitions and thereafter a schedule of inhibition is served on the debtor and the inhibition is registered before the expiry of 21 days from the date of the registration of the notice. In this event the inhibition will have effect from the day on which the inhibition is served.
- Inhibitions will expire after five years, or will cease to have effect when the amount sought is paid in full. However, payment of the debt alone will not be sufficient to extinguish the inhibition. Expenses of the inhibition, including those expenses relating to discharge, will require to be borne by the debtor. (Notably, this section is not applicable to inhibition on the dependence).
- The legislation has clarified that all heritable property in Scotland is capable of being inhibited. It is specified that property is deemed to pass on the day on which the deed constituting the transfer is delivered. Therefore, an inhibition against a purchaser will affect the property purchased from that date onwards.
- As regards leases which are created over inhibited property, the provisions state that these will be reducible provided they have less than five years to run.
- The rule that an inhibition confers a preference in any sequestration, insolvency proceedings or other process where there is ranking is abolished.