The year 1878 brought the first UK weekly weather forecasts and the relatively unknown Bills of Sale Act 1878, which governs the way that individuals can use goods that they already own as security for loans and other obligations.
Whilst weather forecasting has seen some dramatic technological advances over the last 139 years, bills of sale are still governed by the same archaic law, subject to a few changes made in 1882. However, a system of high pressure has been developing and thankfully, moves are afoot to give this Victorian legislation what many feel, is a much needed revamp.
So what are the problems with the current system and what's in store under the proposed new one?
The existing bills of sale of regime has been criticised for being unnecessarily complex and costly and some of the perceived problems are:
- Vehicles may be seized by lenders without a court order (even where the risk of a lender not being repaid in full is minimal);
- Buyers may not be aware of existing logbook loans and may receive a nasty shock if they find out that they have purchased a vehicle subject to an existing logbook loan;
- The registration requirements for bills of sale at the High Court can be cumbersome and disproportionate in cost to the value of the underlying asset;
- Bills of sale that are provided as security can only be used to secure fixed sum loans (rather than variable rate/revolving credit type facilities) which restricts the ability to lend and borrow; and
- The current legislation is difficult to understand and uses wording that is no longer appropriate for use in the 21st century.
What's in store?
The Law Commission has recently been consulting interested parties on the draft provisions of a new 'Goods Mortgages Bill' (Bill), which it is hoped, will address the current problems and lift unnecessary restrictions on secured lending against goods to more sophisticated borrowers.
Key features under the proposed new regime
So, what does the proposed Bill say? Our table below highlights some of the key questions and answers.
Click here to view table.
Some final thoughts
Whilst further clarity is needed around several areas such as registration and consent to enter premises when taking possession of goods, the Bill contains some very welcome developments in relation to this area of law.
The Law Commission raised 25 questions on the Bill in its recent industry consultation, so we expect that there may be some further changes to the proposals mentioned above.
We await the results of that consultation and any new proposals with interest.