37.1 Background

Until the advent of the Conveyancing and Feudal Reform (Scotland) Act 1970, one of the most common methods of giving security for a loan was to grant an ex facie absolute disposition. Where the debtor was the tenant in a long lease, he could grant an ex facie absolute assignation of the lease. While the grantee’s (or creditor’s) title was on the face of it unqualified, in practice the granter (or debtor) retained the right to have the subjects disponed back to him on repayment of the loan, in terms of either a back letter from the creditor or a minute of agreement signed by both the debtor and the creditor. This right was known as the reversionary right.

Since 29 November 1970, it has not been competent to secure a debt (by way of a heritable security) by means of an ex facie absolute disposition. However, ex facie absolute titles that were created prior to this date remain valid until discharged. Where a creditor under an existing ex facie absolute disposition assigns his interest therein for value (and where the security subjects have not already been registered), the transaction will induce a first registration. In the property section, the nature of the interest will be entered as ‘Proprietor’. In the proprietorship section, the new creditor will be entered as the registered proprietor and, in order to show the security nature of the title, the following note must be added (prior to any Matrimonial Homes note): -

• Note: The title of the said …. [new creditor], although ex facie absolute, is disclosed by the Disposition [DIR] in his/her/their favour, registered …., to be truly in security of an advance to … [debtor, and designation]

On repayment of the loan, the creditor restores the debtor’s title. This is achieved by either a reconveyance (disposition) or a discharge (in terms of section 40 of the Conveyancing and Feudal Reform (Scotland) Act 1970) acknowledging payment of the original debt. If the intention is to vest the property in a different individual from the original debtor, or to create a special destination, a reconveyance should be used.

Where the creditor’s title is registered, the reconveyance or discharge will be given effect to by an application on Form 2. The debtor’s or disponee’s name will be entered as registered proprietor, and the note referred to above will be deleted.

37.2 Assignation of reversionary interest

Where a proprietor had disponed his property to a creditor by way of an ex facie absolute conveyance, but wished to obtain a further loan using the same property as security, this could be done by disponing the property to the second creditor and assigning the reversionary right (or interest) in it.

As with an ex facie absolute disposition, an assignation of a reversionary right may no longer be granted to create a new security. It is, however, competent to assign in a standard security the reversionary right under an existing ex facie absolute disposition. Any such case should be referred to a senior caseworker. The debtor may also assign the reversionary right in subjects under an existing ex facie absolute conveyance by way of a disposition, e.g. a disposition by a husband to his wife.