09 Sep 2013

Clarification on Entitled Residents in Scottish Repossession Actions

Clarification on Entitled Residents in Scottish Repossession Actions

Jane Gordon, Senior Solicitor, provides an update on new case law concerning the definition of an ‘Entitled Resident’ in a Scottish repossession action.

Jane Gordon, Senior Solicitor, provides an update on new case law concerning the definition of an ‘Entitled Resident’ in a Scottish repossession action.

A recent case where we acted for the lender has helped to provide further clarity on who the Courts will deem to be an ‘Entitled Resident’ in terms of the Home Owner and Debtor Protection (Scotland) Act 2010 and who therefore has the right to defend a repossession action.

Background

In this case, our client obtained a Decree for repossession against the sole borrower back in 2012. However, the ex-wife of the borrower - who still lived in the property following her divorce from the borrower despite not having any share in title - managed to obtain a temporary Court Order (an ‘Interim Interdict’) at the Court of Session to prevent our client from setting an ejection, and applied to the Court to reduce (make void) our client’s Decree.

‘The ex-wife’ argued that she was entitled to live in the property, having done so for 40 years making contributions to loan repayments, and that she would be made homeless if she were ejected from the property. She argued that the arrears had accrued as a result of her husband’s failure to maintain payments, and she should not be punished for his actions.

In our view, ‘the ex-wife’ had no right or title to occupy the property in terms of the legislation and no basis to seek reduction of our client’s Decree. Our client instructed us to apply to the Court to Recall the Temporary Order - which would then allow us to set a date for repossession.

The Decision

The Courts ultimately agreed with our interpretation of the law and Lord Drummond-Young was persuaded to recall the interim interdict.

In making his decision, Lord Drummond-Young did express that he had “great sympathy” for the ex-wife, but that ultimately she did not have a valid case. He further noted that “...the first defenders are entitled to enforce the standard security, if necessary by repossessing the house and selling it. The fundamental objectives of the law of heritable security would be frustrated if that course were not available.”

Lord Drummond-Young also noted that: “It is clear that the present pursuer ‘the ex-wife’ is not an entitled resident...... Consequently the pursuer had no right to oppose the grant of Decree for possession of the subjects in the proceedings brought by the present first defenders [our client]”.

In addition to this, Lord Drummond-Young continued that: “as a matter of law it does not matter whose fault it is that the sums due to a secured creditor have not been paid; it is the mere fact of non-payment that gives rise to the creditor’s remedies....... If the sums due under the loan cannot be paid, the first defenders as security holders are entitled to enforce their statutory rights.”

Conclusion

Usefully, this case also provides a useful precedent that may be referred to in future repossession actions where a similar challenge is made.

It also is an important decision highlighting the fact that case law in the area of repossession is still developing, and that those representing lenders still have an important role to play in ensuring that it is shaped in accordance with their interests.

Jane Gordon, Senior Solicitor

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