Results published following RBS v Wilson consultation

8 September 2011

Responses have been published following consultation by the Scottish Government on the consequences of the RBS v Wilson case. The case, decided upon by the Supreme Court in London, changed the law on repossessing property in Scotland; a 'calling up notice' must now be served on the debtors, and a period of two months has to expire before a lender can repossess the property, under the Conveyancing and Feudal Reform (Scotland) Act 1970. Prior to this, it was common practice for banks not to issue this notice as a precursor to court action under the act. The judgement left the Scottish conveyancing profession in disarray, with many transactions involving the purchase of repossessed property put on hold as the method that had been used to repossess the property was potentially unsafe.
The consultation process sought the views of various stakeholders and a small selection of respondents, including lawyers, public sector organisations and lenders (who made up the majority of respondents) made their views known. Their feedback raised a variety of concerns. The general majority believed that the ruling had potentially negative long-term implications, and that Scottish Government should legislate to negate the effects of the judgement. However, the Law Society of Scotland said this should not be piecemeal legislation but part of a wider review of the law of repossessions in Scotland. Lenders stated that the two month delay before repossession could mean additional costs that would in turn be passed onto the debtor. However, the Legal Services Agency and Optima Legal said this time delay may result in an increase in negotiated settlements, and also satisfy Office of Fair Trading requirements of Treating Customers Fairly.
The Registers of Scotland highlighted that the onus would be on the solicitor acting in a conveyance to ensure the requirements had been met, and in the event this was not certain, indemnity (a form of insurance for a purchaser that they will take good title to the property) would continue to be excluded as for any property where there is a question over title. This could result in a situation where if it was found that the correct procedure had not been followed by the lender, the debtor could have their ownership title restored and a subsequent purchaser would have no protection. It was suggested this could be addressed by obtaining a title indemnity insurance policy.
A further concern was how the ruling sat with the requirements of the Home Owner and Debtor Protection (Scotland) act 2010, with some respondents commenting that the requirement that arises from the ruling does not match what the legislation, or subordinate legislation in the 2010 act requires, causing further confusion for borrowers.
At a grassroots level, it would appear from the responses that the judgement has caused concern and potential confusion for those advising debtors on their position, in particular not-for-profit advice centres. It was also stated that it may make borrowing more difficult in Scotland, which in turn would have a negative effect on the housing market – at a time the economy can ill afford it. Despite calls from some sections of the industry, the Scottish Government has stated it does not currently intend to legislate in this area.

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