Debt Advice Handbook Scotland - 1st editionChapter 8: Housing debt3. Mortgage arrears The repossession process
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The repossession process
We use the term ‘repossession’ as it is used in common language. Although, strictly it is a ‘calling up of the standard security’.
Pre-action requirements
In particular, lenders must provide borrowers with clear information about:1s24A CFR(S)A 1970
    •the terms of the standard security;
    •the amount due, including arrears and charges;
    •the details of any other debts due to the lender;
    •make reasonable efforts to agree a repayment plan although if this is defaulted on, they can recommence repossession proceedings.
The creditor must signpost to debt advice and encourage the client to contact the local authority in whose area the security subjects are situated.2s24A CFR(S)A 1970
The creditor cannot make an application if the client is taking steps which are likely to result in:3s24A(4) CFR(S)A 1970
    •the payment of the arrears within a reasonable timescale; and
    •any other obligation under the terms of the loan.
Lenders must provide evidence that they have complied with the pre-action requirements by completing Form 11C when they make an application to the court.
Once the pre-action requirements (and other necessary procedures) are complete, the creditor can proceed with court action.
If they have not, the application could be refused, and the lender must start again. This only delays the action.
Lenders must have regard of the Scottish government’s guidance on repossession.4Scottish government, Home Owner and Debtor Protection (Scotland) Act 2010: Guidance on Pre-Action Requirements for Creditors, August 2010, available at gov.scot/publications/home-owner-debtor-protection-scotland-act-2010-guidance-pre-action-requirements-creditors/
 
1     s24A CFR(S)A 1970 »
2     s24A CFR(S)A 1970 »
3     s24A(4) CFR(S)A 1970 »
4     Scottish government, Home Owner and Debtor Protection (Scotland) Act 2010: Guidance on Pre-Action Requirements for Creditors, August 2010, available at gov.scot/publications/home-owner-debtor-protection-scotland-act-2010-guidance-pre-action-requirements-creditors/ »
Arrears letters
The first contact a client usually has is an arrears letter from the lender. If the client does not address the arrears by contacting the lender, the lender escalates the process.
Default notice
A ‘notice of default’ in Form B may be served on the client notifying them of the lender’s intention to raise court action if the default is not dealt with. This must be addressed within one month.1Sch 6 Form B CFR(S)A 1970
 
1     Sch 6 Form B CFR(S)A 1970 »
Calling up notice and section 11 notice
Lenders must use Form A to begin proceedings. This gives the client two months to pay the full amount owed under the standard security.1s19 and Sch 6 CFR(S)A 1970
The calling-up notice must be served by recorded delivery or delivered in person. At the same time, the lender must serve a notice to the local authority that proceedings are beginning – this is known as a ’section 11 notice’. If this has not been served, the client can ask the court to refuse the application.2s11 Homelessness etc. (Scotland) Act 2003
 
1     s19 and Sch 6 CFR(S)A 1970 »
2     s11 Homelessness etc. (Scotland) Act 2003 »
Section 24 application and initial writ
An application to the court is made under section 24 of the Act and is by an initial writ.1s24 CFR(S)A 1970
The sheriff may continue the case or not grant the application unless it is ’reasonable in the circumstances of the case’ to do so and several factors have to be taken into account.2s24(7) CFR(S)A 1970
 
1     s24 CFR(S)A 1970 »
2     s24(7) CFR(S)A 1970 »
Entitled residents
When making an application for repossession, the lender must also inform any ‘entitled residents’ of the proceedings.
Entitled residents can also make applications to the court to continue the action.1s24B CFR(S)A 1970
If no such information was provided, they can have the proceedings halted.
Who is an entitled resident? 2s24(c) CFR(S)A 1970
An entitled resident is a person whose sole or main residence is the security subjects (in whole or in part) and who is:
(a) The proprietor of the security subjects (where the proprietor is not the client in the standard security).
(b) The non-entitled spouse of the client or the proprietor of security subjects which are (in whole or in part) a matrimonial home.
(c) The non-entitled civil partner of the client or the proprietor of security subjects which are (in whole or in part) a family home.
(d) A person living together with the client or the proprietor as husband and wife.
(e) A person living together with the client or the proprietor in a relationship which has the characteristics of the relationship between civil partners.
(f) A person who lived together with the client or the proprietor in a relationship described in paragraph (d) or (e) if–
(i) The security subjects (in whole or in part) are not the sole or main residence of the client or the proprietor.
(ii) The person lived together with the client or the proprietor throughout the period of six months ending with the date on which the security subjects ceased to be the sole or main residence of the client or the proprietor; and
(iii) The security subjects (in whole or in part) are the sole or main residence of a child aged under 16 who is a child of both parties in that relationship.
 
1     s24B CFR(S)A 1970 »
2     s24(c) CFR(S)A 1970 »
Court hearing
All cases dealing with repossessing property must be heard in court.1The Home Owner and Debtor Protection (Scotland) Act 2010 Actions for recovery of heritable property are heard in the sheriff court using summary application at ordinary cause level. It is started by using an initial writ.
The sheriff can make any decision they see fit, but they must be sure that the lender has complied with the pre-action requirements and that it is reasonable (the ‘reasonableness test’).2s24 (5)(b) CFR(S)A 1970
The sheriff should consider:3s24(7) CFR(S)A 1970
    •reasons for the default;
    •the likelihood of the client fulfilling their obligations under the security within a reasonable time;
    •any action taken by the lender to allow the client to fulfil those obligations;
    •whether the client is taking part in the DAS;
    •whether the client and other residents can source alternative accommodation on repossession.
Advisers could argue in court that where the client enters into the Debt Arrangement Scheme (DAS), repossession should not be granted while the scheme is in operation. This is at the discretion of the sheriff.
 
Court options
In court, the sheriff can make the following decisions.
    •Dismiss the case - the sheriff throws the case out of court because the lender has not followed the correct procedure or does not have the right to repossess the client’s home.
    •Continue the case – the court sets another date for the case to be reviewed. This may happen if more information is required, or the court wishes to monitor a client’s payments toward their arrears.
    •Sist the case - this pauses the action without a further court date.
    •Grant an order for repossession – the lender is given the right to evict the client.
At this stage, advisers could ask for the case to be continued or sisted if the client is looking at a Debt Payment Programme under the DAS or informal payment arrangement and you need time to put an offer together. This is at the sheriff’s discretion.
 
1     The Home Owner and Debtor Protection (Scotland) Act 2010 »
2     s24 (5)(b) CFR(S)A 1970 »
3     s24(7) CFR(S)A 1970 »
Order for ejection
Where the client has refused to move voluntarily, the lender can also apply for an order of ejection.1s5 CFR(S)A 1970
 
1     s5 CFR(S)A 1970 »
Form for charge for removing
The next stage for those refusing to move is to serve a ‘form of charge for removing’.1legislation.gov.uk/ssi/2011/158/schedule/made
This gives the client 14 days (or longer in some cases) to remove themselves and their belongings from the property.2s216 BD(S)A 2007
If the client does not vacate the property, sheriff officers enforce the eviction. They have the right to remove clients from the property and change the locks.
 
1     legislation.gov.uk/ssi/2011/158/schedule/made »
2     s216 BD(S)A 2007 »
Minute for recall
A minute for recall, rather than a reponing note, may be lodged by the client or an entitled resident. This means the case is heard again.
Minutes for recall can be made at any time before the decree has been fully implemented – ie, before the client is evicted.1s24D(3) CFR(S)A 1970
Recall can be applied for by the creditor, the client (only if they did not appear and were not represented in the proceedings) or an entitled resident (if they have not already made an application in the proceedings).2s24D(2) CFR(S)A 1970
Clients may want to seek legal advice on this.
 
1     s24D(3) CFR(S)A 1970 »
2     s24D(2) CFR(S)A 1970 »