Note by Sheriff Peter J Braid relating to a case concerning a standard security over property at Mucklets Crescent in Musselburgh. The debtor had died and her estate had been sequestrated.

Following the service of calling up notices and the expiry of the notice period, Accord (the creditor) sought declarator that:

1. Miss Edwards’ representative was in default (within the meaning of standard condition 9(1)(a) of schedule 3 to the Conveyancing and Feudal Reform (Scotland) Act 1970);
2. the subjects were not used to any extent for residential purposes within the meaning of section 20(2A) of the 1970 Act; and
3. Accord had the right to sell the subjects, to enter into possession of them and exercise all other rights and powers under the standard security, in terms of the 1970 Act.

The question arose as to whether Accord was entitled to seek declarator by ordinary action or whether they were bound to proceed under s24 of the 1970 Act (which provides for certain pre-action requirements to provide protection for the debtor).

The sheriff agreed with Accord’s argument that it was not necessary to proceed under s24. In terms of s20, which contains the right of sale, “where the standard security is over land…used to any extent for residential purposes“, the creditor can only exercise its rights by proceeding under s23A (which deals with a voluntary surrender and had no application to this case) or under s24. However, in this case, the property was not being occupied by any person at the time of enforcement and, as such, it could not be said that they were being used by anyone for any purpose, let alone used for residential purposes. The point of time at which the use was to be considered was that at which the creditor wished to exercise its remedies.

The purpose of the pre-action requirements was to give the debtor information and assistance. Since there was no living debtor, nor anyone using the house for residential purposes, it would be impossible for Accord to comply with the pre-action requirements. Further, the court had no power to dispense with those requirements. The sheriff agreed that the court should therefore proceed upon the basis that residential protections did not apply, meaning that the action should continue as an ordinary action with no pre-action requirement.

The sheriff noted that infelicities in the drafting of the Act could result in problems arising where the subjects were occupied; a creditor not necessarily being in a position to know what use is being made of the subjects. Moreover, there may be cases where the debtor has died but the subjects are still being used for residential purposes. The question would then arise as to how a creditor is to comply with the pre-action requirements.

The full note is available from Scottish Courts here.

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