Standard Securities

22.2 Settling practice where the agent answers ‘yes’ to the second question

If the agent answers ‘yes’ to the question, the norm is that the registration officer can settle the case without examining or requisitioning evidence relating to the exercise of the power of sale. The officer only has to ensure that the selling creditor has a recorded/registered standard security over the subjects.

There are two qualifications to this rule.

• If more than one standard security over the subjects exists at the time of sale, the registration officer should refer the case for written instructions on the handling of the other standard security(ies). Section 22.5 below (Effects of power of sale on other securities over the subjects) provides further guidance for referral officers, or
• Elsewhere in the application there is an indication that the statutory procedures may not have been complied with (e.g. warrandice being qualified in the disposition, or additional information in a covering letter or on the application form). This has become more common since the decision in the RBS v Wilson case (in very brief summary the court held that the necessary calling-up notice had not been served on all relevant parties prior to raising a court action under S.24 of the 1970 act). If this occurs the application should be considered in the same way as if the question had been answered "no".

22.3 Settling practice where the agent answers ‘no’ to the second question

The following note was published on the RoS website on 29 November 2010:

"Background note on the RoS position following the judgement on Royal Bank of Scotland plc v John Patrick McCormack Wilson Supreme Court Ruling

A number of practitioners have contacted RoS seeking clarity on the position of the Keeper and pending applications following the Supreme Court judgment on the case of the Royal Bank of Scotland plc v John Patrick McCormack Wilson. We understand that the Law Society of Scotland is currently considering the matter. The Keeper is, of course, unable to provide legal advice to solicitors and practitioners on the effect of judicial decisions. The onus remains with solicitors to determine the effect, if any, of the judgment on the particular transaction they are involved in. If the solicitor is content that the statutory procedures have been complied with, then an affirmative response to the power of sale compliance question in the relevant Land Registration application form should be provided.

If the solicitor feels unable to supply an affirmative response, then, as in any other case where no affirmative response can be given, the Keeper will feel bound to exclude indemnity. This does not necessarily mean that the title is challengeable, although it does open up the potential for the register to be rectified if the Disposition granted by the creditor was subsequently reduced.

Similarly, in such a case, if there are securities and/or diligences which rank pari passu with or postponed to the security on which the power of sale has been exercised, these will be shown in the title sheet. The Keeper will exclude indemnity in respect that she cannot guarantee in these circumstances whether the registration of the Disposition has the effect of disburdening the subjects of such securities or diligences."

Accordingly if the agent answers "no" to the second part of the question on the application form no further enquiry is required registration will proceed subject to an exclusion of indemnity in the proprietorship section and disclosing any outstanding securities or diligences.

Section 22.12 provides some practical examples of how different scenarios will be reflected in the title sheet.

22.4 Qualification of warrandice in disposition

If the relevant question on the application form has been answered "yes" but warrandice is qualified in the deed, the submitting agent should be advised that the Keeper will proceed with registration but disclose any outstanding securities and diligences and also exclude indemnity as required. There is no reason for the Keeper to indemnify a title when the purchaser has accepted a disposition in which the granter is unwilling to warrant the validity of the exercise of the statutory procedures

In these circumstances, the purchasing agents should be advised that the Keeper intends to exclude indemnity and to disclose in the title sheet any postponed securities (i.e. in practical terms the application will be processed as if a negative answer had been given to the compliance question).  However, if the agents are convinced that the statutory procedures have been properly complied with, they should be given 60 days in which to remedy the situation by having the deed amended or re-engrossed to delete the exception from warrandice; it goes without saying that any amendment will require authentication by the granter of the deed.

If warrandice is qualified and the question on the application form was answered "no" then no further enquiry should be raised with the submitting agent.

22.5 Effects of power of sale on other securities over the subjects

Where a creditor has exercised his right to sell the security subjects, the disposition must show that it is in implement of the sale. Registration of the disposition automatically disburdens the subjects of the creditor's standard security and all other heritable securities and diligences that rank pari passu with, or postponed to, that standard security, provided that all of the statutory procedures have been complied with. Again settlers should rely on the agent's certification.  Where there are any statutory charges registered after the standard security under which the power of sale procedures are being exercised consideration must be given as to whether they have any protected prior ranking; the application should be referred for further guidance as necessary.

22.6 (Text omitted - see subsections) 

22.6.1 Statutory procedures complied with

If the security subjects are unregistered, the disposition (under power of sale) will induce a first registration. The registration officer can safely omit the creditor's standard security and any pari passu or postponed securities subsisting in the Sasine Register from the charges section of the title sheet.

In the case of a dealing with whole, the entry relating to the selling creditor's standard security and all entries relating to pari passu or postponed securities will be removed from the title sheet as if they have been formally discharged.

In the case of a transfer of part, the part in question will be removed from the parent title sheet. It will no longer form part of the title over which the selling creditor's standard security and any pari passu and postponed securities are secured.

NB Registration officers should note that rights of prior creditors are not affected by the sale. Their securities remain extant and enforceable until they are redeemed and discharged. To reflect this position, any undischarged prior securities will be:

• • entered in the charges section of the title sheet on a first registration;

• • left untouched in the case of a dealing with whole; and

• • left untouched in the parent title sheet, in the case of a transfer of part, and entered in the charges section of the ‘new’ title sheet.

An inhibition strikes at voluntary actions by the debtor. The exercising of power of sale procedures by another creditor is not a voluntary action and therefore the inhibition does not strike directly at that transfer, however if the inhibition was registered prior to the standard security under which the power of sale is proceeding then the granting of the security may have been in breach of the inhibition.  Where the security is registered such an inhibition should already have been disclosed on the title sheet, however this will not be the case when the security was recorded in Sasines; in either instance the case should be referred to a senior caseworker for guidance.  An inhibition registered after the standard security under which the power of sale is proceeding should not be disclosed on the title sheet.

22.6.2 Statutory procedures not complied with

Where the agent has answered "no" to the second question regarding power of sale on the application form, or there are other indicators that the procedures have not been complied with then, in addition to disclosing the rights of any prior creditors, registration officers should also disclose in the charges section any securities that rank pari passu with or postponed to the standard security on which the power of sale has been exercised.  It is also possible that there will be adverse entries in the Register of inhibitions and consideration must be given as to whether these should be disclosed in the title sheet.

While an entry remains in the title sheet for any standard security that ranked pari passu with or postponed to the standard security under which the power of sale was exercised, an exclusion of indemnity in the following form should be added to the entry.

Note: The above standard security ranks pari passu with or postponed to the standard security by D [debtor] to C [creditor] registered [date] referred to in Note [xx] in the Proprietorship Section. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising from rectification of the register to delete the above standard security or from the subjects in this title being declared or found not to have been disburdened of the above standard security in terms of section 26(1) of the Conveyancing and Feudal Reform (Scotland) Act 1970.

An inhibition strikes at voluntary actions by the debtor. The exercising of power of sale procedures by another creditor is not a voluntary action and therefore the inhibition does not strike directly at that transfer, however if the inhibition was registered prior to the standard security under which the power of sale is proceeding then the granting of the security may have been in breach of the inhibition.  Where the security is registered such an inhibition should already have been disclosed on the title sheet, however this will not be the case when the security was recorded in Sasines; in either instance the case should be referred to a senior caseworker for guidance.  An inhibition registered after the standard security under which the power of sale is proceeding should not be disclosed on the title sheet.

If any other type of entry is disclosed in the search of the register of inhibitions the application should be referred to a senior caseworker, who will discuss the matter with legal Services as required. 

If there is subsequently an attempt to implement power of sale procedures by a creditor under one of the retained standard securities the application should be referred to a senior caseworker.

Guidance on the new entries in the proprietorship and charges section of the title sheet are given in section 22.9, and some practical examples are included in section 22.12.

Any request to remove exclusions of indemnity relating to failure to comply with statutory power of sale procedures should be referred to a senior caseworker who will consult further with Legal services.

22.7 Assignation of the selling creditor's standard security in fortification of title

Though it is uncommon, registration officers may come across a disposition under power of sale that contains an assignation of the selling creditor's standard security in fortification of title. Registration officers should not enter details of the assignation in the title sheet. Registration without exclusion of indemnity makes the grantee's title unchallengeable, so the fortification serves no useful purpose.

Power of Sale

22.8 Dispositions under power of sale, other than in deeds inducing registration

Registration officers will sometimes find dispositions under power of sale that form part of the prescriptive progress of titles in first registrations. The 'power of sale question' in application forms is only for deeds inducing registration, so clearly it does not relate to dispositions under power of sale in other situations.

However, the principle outlined in Introduction (22.1) still applies; the applicant’s agents are responsible for advising the Keeper (in answer to question 14 on Form 1) of any relevant information which is not apparent from the other answers and documents. If the evidence relating to a prior power of sale is not submitted, but question 14 is answered in the negative, registration officers should assume the solicitor is satisfied that there is no defect in the exercise of the power of sale procedures. The registration officer should rely on the solicitor’s certification and should not requisition the evidence.

Registration officers should, however, be aware that the current edition of the Registration of Title Practice Book states that solicitors should submit all the documentary evidence relating to a prior power of sale, explaining in their answer to question 13 if any evidence is no longer available. If the solicitor has submitted the evidence and answered ‘yes’ to question 13, or stated the evidence is not available but in answering the subsequent question have not indicated there are any facts material to the right of the applicant then there is no requirement to examine the power of sale documents for the prior sale. If the solicitor has indicated there was any form of problem with the earlier power of sale procedures then the registration officer should follow the procedure in paragraph 22.3 - Settling practice where the agent answers ‘no’ to the second question (22.3).

In terms of S.26(1) of the 1970 Act it is only on a disposition in virtue of power of sale being recorded that it has the effect of disburdening the subjects of the standard security and any pari passu or postponed ranking securities or diligences.  Accordingly, in the event of such a disposition being submitted as a link in title it would not have the effect of clearing the register of either the creditor's own security or any pari passu or postponed securities or diligences; the submitting agent should be advised of this and afforded the opportunity to submit an application to register the deed, in line with normal requisition and standover procedures.  The title sheet will require to be updated to the date of this registration.

If they comply with this request then any securities that ranked parri passu or postponed to the creditor's security can be omitted from the title sheet.  Any securities or diligences that ranked prior to the standard security under which the power of sale procedure is being exercised will require to be discharged as normal; otherwise they should be disclosed on the title sheet as appropriate.

If the agent refuses to register the deed then all existing securities will be disclosed on the title sheet.  Further, confirmation should be sought that the statutory procedures had been complied with; if this is not provided then indemnity should be excluded in the B section in the following style.

The title of the proprietor of the subjects in this Title is founded on a Disposition by a A to B registered [date] subsequent to a Disposition by C [creditor] to A in implement of the power of sale under a standard security by D [debtor] to the said C registered [date]. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising as a result of the said Disposition by C to A being reduced or declared or found to be void because of any defect or failing in the exercise of the statutory procedures necessary for the proper exercise of the power of sale.’

22.9 Exclusion of indemnity

22.9.1 Proprietorship section

An exclusion of indemnity relating to doubts about, or defects in, power of sale procedure should be entered as a note in the following form, or close to it, after the entry of the proprietor(s) in the proprietorship section of the title sheet:

'The title of the proprietor of the subjects in this Title is founded on a Disposition by C [creditor] to A registered [date] in implement of the power of sale under a standard security by D [debtor] to the said C registered [date]. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising as a result of the said Disposition being reduced or declared or found to be void because of any defect or failing in the exercise of the statutory procedures necessary for the proper exercise of the power of sale.’

In the event of either the whole, or part, of the subjects being re-sold then the exclusion of indemnity should continue to be disclosed until such time as appropriate evidence is provided to enable it to be removed (e.g. the operation of positive prescription).

22.9.2 Charges Section and Charge Certificate

In situations where the statutory power of sale procedures have not been complied with consideration must be given to the standing of any outstanding standard security.

A standard security that ranked prior to the one under which the power of sale procedures are being exercised will remain in the title sheet until discharged.  Any security that ranked pari passu with or postponed to the security under which the procedures are being exercised would have automatically fallen had the procedures been correctly implemented and accordingly been removed from the title sheet.  If it is not clear that the procedures have been complied with then the entries should remain, however it is appropriate that the Keeper be protected from any claim that may arise as a consequence of the creditor exercising the power of sale not having complied with their statutory requirements, accordingly an exclusion of indemnity should be added to each pari passu or postponed ranking security remaining in the charges section in the following terms:

Note: The above standard security ranks pari passu with or postponed to the standard security by D [debtor] to C [creditor] registered [date] referred to in Note [xx] in the Proprietorship Section. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising from rectification of the register to delete the above standard security or from the subjects in this title being declared or found not to have been disburdened of the above standard security in terms of section 26(1) of the Conveyancing and Feudal Reform (Scotland) Act 1970.

If the new proprietor is granting a standard security then in addition to disclosing any securities remaining on the register in the schedule of prior and pari passu ranking charges in the charge certificate an exclusion of indemnity relating to the possible reduction of the disposition on which their title is founded should be included in the charge certificate; the exclusion is in the same form as that for the proprietorship section, i.e.

'The title of the proprietor of the subjects in this Title is founded on a Disposition by C [creditor] to A registered [date] in implement of the power of sale under a standard security by D [debtor] to the said C registered [date]. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising as a result of the said Disposition being reduced or declared or found to be void because of any defect or failing in the exercise of the statutory procedures necessary for the proper exercise of the power of sale.

Where there are standard securities by the former proprietor that ranked pari passu with or postponed to the security under which the power of sale procedures are being exercised then, in addition to disclosing these securities in a schedule and the foresaid exclusion relating to title an exclusion of indemnity is also required in the new charge certificate in the following style:

The standard security [securities] in the Schedule annexed rank(s) pari passu with or postponed to the standard security by D [debtor] to C [creditor] registered [date] referred to in Note [xx] in this Charge Certificate. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising from rectification of the register to delete the said standard security/securities inthe said Schedule or from the above subjects being declared or found not to have been disburdened of the said standard security/securitiesin the said Schedule in terms of section 26(1) of the Conveyancing and Feudal Reform (Scotland) Act 1970.

This exclusion of indemnity is not required where the outstanding security ranked prior to the one under which the power of sale procedures are being exercised.

22.10 Bonds and dispositions in security

Section 69 of the of the Abolition of Feudal Tenure etc. (Scotland) Act 2000 provided that the provisions of sections 14 to 30 of the 1970 Act would apply as regards any heritable security granted prior to 29 Nov. 1970.  Accordingly the foregoing provisions relating to a standard security also apply in the event of a power of sale being exercised by a creditor holding under a bond and disposition in security.

22.11 Mortgage Rights (Scotland) Act 2001(the "2001 Act")

The Home Owner and Debtor Protection (Scotland) Act 2010 repealed sections 1 to 3 and sub sections 4(4) to (5A) of the 2001 Act so that it will no longer be possible for debtors to seek a court order suspending the exercise of the creditor's power of sale which orders were previously registered in the Register of Inhibitions. Section 4 sub sections (1) to (3) of the 2001 Act and the amendments made to the 1970 Act being sections 19A, 21(2A) and 24(3) and (4) remain in force.

22.12 Practical examples where statutory procedures have not been complied with

22.12.1 One outstanding standard security - creditor exercising power of sale under that security; purchaser has no new security

Proprietorship section - an exclusion of indemnity in the following form should be entered:

The title of the proprietor of the subjects in this title is founded on a Disposition by C [creditor] to A registered [date] in implement of the power of sale under a standard security by D [debtor] to the said C registered [date]. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising as a result of the said Disposition being reduced or declared or found to be void because of any defect or failing in the exercise of the statutory procedures necessary for the proper exercise of the power of sale.

The security is not shown in the charges section.

22.12.2 Two outstanding standard securities - creditor under prior ranking security exercising power of sale; purchaser has no new security.

Proprietorship section - an exclusion of indemnity in the following form should be entered:

The title of the proprietor of the subjects in this title is founded on a Disposition by C [creditor] to A registered [date] in implement of the power of sale under a standard security by D [debtor] to the said C registered [date]. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising as a result of the said Disposition being reduced or declared or found to be void because of any defect or failing in the exercise of the statutory procedures necessary for the proper exercise of the power of sale.

Charges section - The standard security in favour of the creditor exercising the power of sale is not disclosed; the postponed standard security by the debtor is retained and the following note added to that entry (but not in charge certificate):

Note: The above standard security ranks pari passu with or postponed to the standard security by D [debtor] to C [creditor] registered [date] referred to in Note [xx] in the Proprietorship Section. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising from rectification of the register to delete the above standard security or from the subjects in this title being declared or found not to have been disburdened of the above standard security in terms of section 26(1) of the Conveyancing and Feudal Reform (Scotland) Act 1970.

22.12.3 One outstanding standard security - creditor exercising power of sale under that security; purchaser grants new security.

Proprietorship section - an exclusion of indemnity in the following form should be entered:

The title of the proprietor of the subjects in this title is founded on a Disposition by C [creditor] to A registered [date] in implement of the power of sale under a standard security by D [debtor] to the said C registered [date]. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising as a result of the said Disposition being reduced or declared or found to be void because of any defect or failing in the exercise of the statutory procedures necessary for the proper exercise of the power of sale.

Charges section -

• • Entry required for purchasers standard security;
  • There are no prior ranking standard securities
  • Proprietorship section exclusion of indemnity added to charge certificate (not C section). 

22.12.4 Two outstanding standard securities - creditor under prior ranking security exercising power of sale; purchaser grants new security.

Proprietorship section - an exclusion of indemnity in the following form should be entered:

The title of the proprietor of the subjects in this title is founded on a Disposition by C [creditor] to A registered [date] in implement of the power of sale under a standard security by D [debtor] to the said C registered [date]. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising as a result of the said Disposition being reduced or declared or found to be void because of any defect or failing in the exercise of the statutory procedures necessary for the proper exercise of the power of sale.

Charges section -

The standard security in favour of the creditor exercising the power of sale is not disclosed; the postponed standard security by the debtor is retained and the following note added to that entry (but not in charge certificate):

Note: The above standard security ranks pari passu with or postponed to the standard security by D [debtor] to C [creditor] registered [date] referred to in Note [xx] in the Proprietorship Section. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising from rectification of the register to delete the above standard security or from the subjects in this title being declared or found not to have been disburdened of the above standard security in terms of section 26(1) of the Conveyancing and Feudal Reform (Scotland) Act 1970.

• • Entry required for purchasers standard security;
  • The pre-existing standard security should be shown as prior ranking;
  • Proprietorship section exclusion of indemnity added to charge certificate (not C section).  
  • Charge certificate should also have the following note added:

The standard security in the Schedule annexed ranks pari passu with or postponed to the standard security by D [debtor] to C [creditor] registered [date] referred to in Note [xx] in this Charge Certificate. Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising from rectification of the register to delete the said standard security/securities in the said Schedule or from the above subjects being declared or found not to have been disburdened of the said standard security/securities in the said Schedule in terms of section 26(1) of the Conveyancing and Feudal Reform (Scotland) Act 1970.

22.12.5 Two outstanding standard securities - creditor under postponed ranking security exercising power of sale

The prior ranking standard security will continue to be shown in the title sheet until discharged and should be disclosed as such in the charge certificate if a security is being granted by the new proprietor.

If the statutory calling-up procedures have not been complied with then an exclusion of indemnity will be required in the proprietorship section and also in the charge certificate for any new security being registered.

22.12.6 More than two outstanding standard securities by debtor

If there were more than two outstanding securities then the procedures in the foregoing paragraphs should be applied as appropriate depending on which creditor is exercising their right under power of sale procedures.

22.13 Information on statutory power of sale procedures

The Keeper will rely on the answers given to the questions regarding compliance with statutory power of sale procedures on the application form.  The following paragraphs are included for information purposes only.

22.13.1 Calling-up notice and notice of default

When a debtor is in default, the 1970 Act allows the creditor options on how to proceed, depending on the circumstances. The calling-up notice and notice of default represent two of these options. They involve different procedures. A notable point of difference is that the calling-up notice requires 2 months' notice, but the notice of default only 1 month's. However, very broadly speaking, the similarities between the procedures outweigh the differences, from the settling viewpoint.

The calling-up notice and the notice of default are not mutually exclusive. There will be situations in which both options are available to the creditor. In some cases a notice of each type will be served on the debtor.

If the notice is a calling-up notice, it should conform with the statutory format of Form A of Schedule 6 to the 1970 Act as amended by the 2010 Act. The form is as follows:

‘To A.B. (address)

TAKE NOTICE that C.D. (designation) requires payment of the principal sum of £….. with interest thereon at the rate of .................. per centum per annum from the .................. day of ........................ (adding if necessary, subject to such adjustment of the principal sum and the amount of interest as may subsequently be determined) secured by a standard security by you  (or by E.F.) over (insert address) (“the property”) in favour of C.D. (or of G.H. to which C.D. has now right) recorded in the Division of the General Register of Sasines for the County of.(insert county)................. on ...(insert date)............. ( or as the case may be , registered in the Land Register for Scotland on ...(insert date)............. ……. under title number (insert title number)……)And that failing full payment of the said sum and interest thereon (adding if necessary, subject to any adjustment as aforesaid), and expenses within two months after the date of service of this demand

• • IF THE PROPERTY IS A RESIDENTIAL PROPERTY, C.D. may apply to the sheriff court for warrant to exercise the remedies available to a creditor on default including the rights to enter into possession of and sell the property
  • IF THE PROPERTY IS A NON-RESIDENTIAL PROPERTY, it may be sold without the need for a court warrant.

Dated this day of……………………………………………………………..

(To be signed by the creditor, or by his agent, who will add his designation and the words Agent of the said C.D.)

In the case of a standard security for a non-monetary obligation this Form shall be adapted accordingly.’

IT IS STRONGLY RECOMMENDED THAT YOU SEEK ADVICE:

You can get advice about this Notice and what it means for you from a solicitor, Citizens Advice Bureau or other advice agency or, in the case of a residential property, a lay representative.  A Citizens Advice Bureau or other advice agency may also be able to give you advice about how to manage debt.  Take this Notice with you when seeking advice. You may be eligible for legal aid depending on your circumstances. You can get information about legal aid from a solicitor.

A solicitor or lay representative may represent you in any court proceedings in relation to an application by C.D for possession and sale of your home.  You can find out more about lay representatives from the housing department of your local authority or from a Citizens Advice Bureau or other advice agency.

YOUR RIGHTS IN RELATION TO RESIDENTIAL PROPERTY ARE PROTECTED BY LAW:

In the case of a residential property, C.D. must comply with statutory pre-action requirements before being allowed to apply to the court.  These requirements include providing you with specified information and contacting you to discuss alternatives to repossession.   C.D. may also be prevented from applying to the court if you have made an application to a payment protection policy or mortgage support scheme.  It is important to discuss with your solicitor or advisor any doubts you have about whether C.D. has complied with these requirements.

YOU MAY WISH TO VOLUNTARILY SURRENDER YOUR HOME:

In the case of a residential property it is open to you, in certain circumstances, to voluntarily surrender the property to C.D. if all entitled residents in it consent.  If you wish to consider voluntary surrender you should discuss with your solicitor or advisor whether this option is right for you.  You should not proceed with voluntary surrender unless you understand the consequences of doing so.

(In the case of a standard security for a non-monetary obligation this Form shall be adapted accordingly.)

If the notice is a notice of default, it should conform with the statutory format of Form B of Schedule 6 to the 1970 Act as amended by the 2010 Act. The form is as follows:

‘To A.B. (address)

TAKE NOTICE that C.D. (designation), the creditor in a standard security by you (or by E.F.) over (insert address) (“the property”) in favour of C.D. (or of G.H. to which C.D. has now right) recorded in the Division of the General Register of Sasines for the County of.(insert county)................. on ...(insert date)............. ( or as the case may be , registered in the Land Register for Scotland on ...(insert date)............. ……. under title number (insert title number)……)  requires fulfilment of the obligation(s) specified in the Schedule hereto in respect of which there is default; And that failing such fulfilment within one month after the date of service of this notice—

• • IF THE PROPERTY IS A RESIDENTIAL PROPERTY, C.D. may apply to the sheriff court for warrant to exercise the remedies available to a creditor on default including the rights to enter into possession of and sell the property
  • IF THE PROPERTY IS A NON-RESIDENTIAL PROPERTY, it may be sold without the need for a court warrant.

Dated this day of……………………………………………………………..

(To be signed by the creditor, or by his agent, who will add his designation and the words Agent of the said C.D.)

Schedule of Obligation(s) in respect of which there is default.

To (specify in detail the obligation(s) in respect of which there is default).’

IT IS STRONGLY RECOMMENDED THAT YOU SEEK ADVICE:
You can get advice about this Notice and what it means for you from a solicitor, Citizens Advice Bureau or other advice agency or, in the case of a residential property, a lay representative.  A Citizens Advice Bureau or other advice agency may also be able to give you advice about how to manage debt.  Take this Notice with you when seeking advice. You may be eligible for legal aid depending on your circumstances. You can get information about legal aid from a solicitor.

A solicitor or a lay representative may represent you in any court proceedings in relation to an application by C.D for possession and sale of your home.  You can find out more about lay representatives from the housing department of your local authority or from a Citizens Advice Bureau or other advice agency.

YOUR RIGHTS IN RELATION TO RESIDENTIAL PROPERTY ARE PROTECTED BY LAW:

In the case of residential property, C.D. must comply with statutory pre-action requirements before being allowed to apply to the court.  These requirements include providing you with specified information and contacting you to discuss alternatives to repossession.   C.D. may also be prevented from applying to the court if you have made an application to a payment protection policy or mortgage support scheme.  It is important to discuss with your solicitor or advisor any doubts you have about whether C.D. has complied with these requirements.

YOU MAY WISH TO VOLUNTARILY SURRENDER YOUR HOME:

In the case of a residential property it is open to you, in certain circumstances, to voluntarily surrender the property to C.D. if all entitled residents in it consent.  If you wish to consider voluntary surrender you should discuss with your solicitor or advisor whether this option is right for you.  You should not proceed with voluntary surrender unless you understand the consequences of doing so.

Minor deviations from the statutory wording which make no material difference to the substance of the calling-up notice or notice of default would not be critical; however, major defects can nullify the notice and the whole procedure following on from the notice. Examples of major defects are the omission of significant text such as ‘Take notice that C.D. requires payment…’, or an error in the name of the debtor, or failure to date or sign the notice.

22.13.2 Objections to notices of default

A person on whom a notice of default has been served can object to it if he or she is aggrieved by any requirement in it. The court may set aside the notice of default, in whole or in part, or vary or uphold it. If the court has intervened in this way, the registration officer must examine the court order, identify the action taken by the court, and check that the creditor has complied in full.

A calling-up notice is not open to objection.

22.13.3 The period of notice

A person on whom a calling-up notice or notice of default has been served can choose to dispense with or shorten the period of the notice. The person does so by writing or endorsing a minute on the notice or a copy of it.

Where someone has dispensed with or shortened the period of notice, the minute should conform with the statutory format of Form C of Schedule 6 to the 1970 Act. In particular, the minute must be signed and dated. The form is as follows:

‘I, A.B., above named, hereby acknowledge receipt of the foregoing Notice of (Calling-up), (Default) of which the foregoing is a copy of the notice and I agree to the period of the notice being dispensed with (or shortened to )

Dated this day of……………………………………………………………..

(To be signed by the person on whom notice is served, or by his agent, who will add his designation and the words Agent of the said A.B.)’

There are, however, 4 important qualifications to this:

1. 1. The agreement to dispense with or shorten the period by one recipient of a calling-up notice will not bind any other persons on whom the notice has been served. If the notice has been served on more than one person, the consent of all should be obtained to any restriction of the period;
   2. The consent of creditors who hold securities which rank pari passu with, or postponed to, the security held by the creditor who served the notice is required to an agreement to dispense with or shorten the period of notice;
   3. If the Standard Security is over a matrimonial home, as defined in the Matrimonial Homes (Family Protection) (Scotland) Act 1981 as amended by the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, the spouse on whom the notice has been served may not dispense with, or shorten, the period without the consent in writing of the other spouse; and
   4. If the property is used to any extent for residential purposes, the 2010 Act provides that the period of notice may be shortened only with the consent in writing of any entitled resident in terms of the new section 24C (1) paragraphs (d) (e) or (f) of the 1970 Act and where the debtor is not the proprietor , the debtor and if the security is over a matrimonial or family home in terms of section 23A(3) of the 1970 Act, the debtor's spouse or civil partner

Frequently in cases where one person has reduced or dispensed with the period of notice, without the necessary consent of another person, the original period specified in the notice will have elapsed before the property was first advertised for sale and accordingly no problems arise.

If, on the other hand, the creditor did not obtain a necessary consent and advertised the property before the end of the original period of notice, then the whole power of sale procedure is at serious risk of challenge by the person(s) whose consent was needed.

22.13.4 Life of notices

A calling-up notice ceases to have effect (for the purpose of the power of sale) 5 years after (a) the date of the notice, if there has been no offer or exposure to sale of the security subjects (or a part of them), or (b) the date of the last offer or exposure.

A notice of default will cease to be authority for the power of sale on the expiration of 5 years from the date of the notice, even if the debtor has failed to comply with the requirements in it.

22.13.5 Service of notices

Evidence of the service of a calling-up notice or notice of default can be either:

• • an acknowledgement of receipt by the person on whom service was made, per Form C of Schedule 6 to the 1970 Act; or
  • a certificate by the person making the service as per Form D of Schedule 6 to the 1970 Act.

In the case of an acknowledgement it should conform with the statutory format of Form C of Schedule 6 to the 1970 Act. In particular, the acknowledgement must be signed and dated. The form is as follows:

‘I, A.B., above named, hereby acknowledge receipt of the foregoing Notice of (Calling-up), (Default) of which the foregoing is a copy of the notice.

Dated this day of……………………………………………………………..

(To be signed by the person on whom notice is served, or by his agent, who will add his designation and the words Agent of the said A.B.)’

In the case of a certificate by the server, the registration officer should check that it conforms with the statutory format of Form D of Schedule 6 to the 1970 Act. In particular, the certificate must be signed and, if the notice was served by post, a postal receipt should be provided. The form is as follows:

‘Notice of (Calling-up), (Default), of which the foregoing is a copy, was posted (or otherwise, as the case may be) to A.B. on the ……………………..day of …………………..

(To be signed by the creditor, or by his agent, who will add his designation and the words Agent of the said A.B. and if posted the postal receipt to be provided.)’

22.13.6 Persons by whom a notice is served

In the usual case, the creditor, or an agent acting for the creditor, serves the calling-up notice or notice of default. However, circumstances can arise in which the creditor's capacity or freedom of action is constrained by other factors. Some special cases are listed below:

Failure to observe proper practice is a major defect which probably nullifies the power of sale procedure or at least opens it to challenge.

22.13.7 Persons on whom a notice is served

The general rule is that notice is given to the person(s) appearing on record as proprietor. If the creditor knows that the person appearing on the record is not the real owner of the subjects, notice should also be given to the true proprietor.

If there is an ex facie absolute disponee, service on that party is necessary since they will appear on the record as proprietor, but in addition service should be made on the true owner.

In relation to notices of default, if the debtor is not the proprietor, notice should be served on both the debtor and the proprietor.

Some other special cases are listed below:

Failure to observe proper practice is a major defect which probably nullifies the power of sale procedure or at least opens it to challenge.

22.11 Advertising for sale

NB: The numbering error reflects an error in the original document. 

The creditor is under a duty to advertise the sale, but that is qualified by another duty to take all reasonable steps to ensure that the price is the best that can be reasonably obtained. That implies that the advertisement must be reasonably adequate, both as to the period of it and to the newspapers or other publications in which it appears. Regard is had to the nature and location of the property and the market for it.

Acceptable forms of advertising would include:

1. advertising in the local papers
2. advertising in a solicitor's property centre; and/or
3. advertising in the office of an estate agent.

Failure by the creditor to advertise the property in a reasonably adequate way is a serious breach of duty and opens the power of sale to challenge.

22.13.8 Effects of power of sale on other securities over the subjects

Where a creditor has exercised his right to sell the security subjects, the disposition must show that it is in implement of the sale. Registration of the disposition automatically disburdens the subjects of the creditor's standard security and all other heritable securities and diligences that rank pari passu with, or postponed to, that standard security, provided that all of the statutory procedures have been complied with.

22.13.9 Court decrees under section 24 of the 1970 Act as amended by the 2010 Act

In circumstances where the debtor is in default in terms of standard condition 9(1)(b) or 9(1)(c) of the standard conditions set out in Schedule 3 of the 1970 Act - which is to say, where there is a default other than a default in respect of which a calling-up notice is the only possible procedure - the creditor may apply to the Sheriff Court for a warrant to exercise any of the rights available to them upon failure to comply with a calling-up notice (Section 24 of the 1970 Act). These rights include the right of sale. If the default arises because the debtor is insolvent (Standard Condition 9(1)(c)), a section 24 application to the court is necessary before any of the rights arising on default may be exercised. What constitutes insolvency for this purpose is defined in detail in Standard Condition 9(2). If the subjects are used to any extent for residential purposes, the creditor has to make a summary application to the Sheriff court in terms of the new section 24 of the 1970 Act as amended by the 2010 Act, whereby the creditor must also comply with the additional pre action requirements referred to above in paragraph 22.3.

Registration officers should not accept court decrees uncritically, as problems can arise with them. In particular, it is fairly common for title numbers and the recording/registration dates of standard securities to be given incorrectly in decrees. Such errors should be regarded as major defects and indemnity will normally be excluded in consequence. Equally, registration officers should be aware that such decrees are often issued in absentia; and are therefore potentially capable of being challenged for up to 20 years., Where the decree in absentia relates to the remedies on default contained within section 24 of the 1970 Act, the Keeper envisages little risk of challenge of the decree and accordingly registration can proceed with no exclusion of indemnity.

However, in instances where the decree in absentia relates to matters other than the remedies on default contained in section 24 of the 1970 Act there may be a higher risk of challenge.

Creditors often take a 'belt and braces' approach and, as well as serving a calling-up notice or a notice of default (or both), they apply to the court for a decree. In such instances the correct procedures for both procedures should be complied with.

It should also be noted that where the subjects are used to any extent for residential purposes and decree has been granted, section 6 of the 2010 Act provides for a right to seek recall of a decree for repossession but this is limited to just one application where the person seeking recall has made no previous representations to court.