ROI - Definitions

Inhibition

Inhibition has been defined as a “preventive diligence whereby a debtor is prohibited from burdening, alienating directly or indirectly, or otherwise affecting his lands or other heritable property to the prejudice of the creditor inhibiting”. It is purely personal in character and affects only the party actually inhibited. Inhibition in no way has the effect of transferring the property to the inhibiting creditor.

The effect of inhibition is threefold:

The debtor may not voluntarily sell or otherwise alienate his heritage. Any deed contravening this is voidable (not void) at the instance of the inhibitor.
The debtor may not voluntarily grant any heritable security (contraventions are voidable as, above).
It also means that if, after the date of the inhibition, the debtor borrows further sums from anyone, then that new creditor cannot be paid off out of the proceeds of the heritage unless and until the inhibitor has been paid.

In the case of (1) and (2) “voluntarily” is important. If the debtor completes missives to sell before the inhibition takes effect, then the sale is not struck at since the sale is not voluntary but as a result of the prior contractual obligation arising from the missives.

Useful links

Register of Inhibitions

Register of Inhibitions User Guides

Register of Inhibitions - Reference Materials

Insolvency - Personal and Corporate (2012 Act Manual)

Adjudication

Adjudication is the form of diligence whereby specified heritable estate of the debtor may be transferred to his creditor, who then holds a judicial security over it.

A decree of adjudication has to be registered in the Sasine Register or Land Register. The adjudger can not sell the property, but can remove the debtor and lease the property to obtain rent. If the debt is unpaid after 10 years (“the legal”) the adjudger can raise an action of “declarator of expiry of the legal” and acquire ownership. This is rare, however.

It should be noted that inhibition and adjudication are 2 separate diligences, not two parts of the same procedure. Thus it is competent to adjudge a property without having first inhibited the debtor.

Adjudication is still competent but is seldom used, perhaps because it is unfamiliar to many legal practitioners. Adjudication, however, remains a powerful “seize” diligence.

Sequestration

Adjudication is much less frequently used nowadays due to the provision of bankruptcy statutes. The main statutes are:

The Bankruptcy (Scotland) Act 1985 s.37 (8) (following the Bankruptcy (Scotland) Act 1913 which it repealed) makes sequestration equivalent to a decree of Adjudication. The 1985 Act further provides further provides for the recording of interlocutors dismissing the petition for sequestration, recalling it or discharging the debtor.
Since 1985 sequestration procedures have been amended by further legislation contained in the Insolvency Act 1986 and
The Bankruptcy (Scotland) Act 1993 followed by provisions within
The Bankruptcy and Diligence etc. (Scotland) Act 2007 part 1 and
the Bankruptcy (Scotland) Regulations 2008 and
The Bankruptcy (Scotland) Act 2016.

See Statutes which Affect the Register of Inhibitions for details of all statutes which relate to the Register of Inhibitions.