29 Oct 2012

Repossessing Abandoned Properties: NRAM v Fowlie

Repossessing Abandoned Properties: NRAM v Fowlie

Jane Gordon, Senior Solicitor, examines a recent Scottish decision which gives further judicial backing to the proposition that unoccupied properties can repossessed without compliance with many of the burdens of a "standard" repossession action.

Jane Gordon, Senior Solicitor, examines a recent Scottish decision which gives further judicial backing to the proposition that unoccupied properties can repossessed without compliance with many of the burdens of a "standard" repossession action.

The recent case of NRAM v Stuart Douglas Fowlie has given further judicial validation to the proposition that unoccupied properties can be repossessed without having to comply with many of the burdens of a "standard" repossession action.


In Fowlie, the pursuer instructed us to repossess security subjects which were currently in the Trustee's possession. After taking possession, the Trustee decided it was not in the interest of the general pool of creditors for him to market the subjects and, accordingly, indicated that he was willing to relinquish possession to the pursuer as the first ranking security holder. 

In the circumstances, it was important for the pursuer to establish their own right to sell as soon as possible. The borrower was traced but did not respond to correspondence or the Calling-Up Notice. As such, voluntary surrender of the subjects was not an option.

A declaratory action was raised in which the pursuer asked the Court to follow the recent decision by Sheriff Braid in Accord Mortgages v Edwards 2012 GWD 22-445 by declaring that: the Calling-Up Notice had been properly served; the property was not being used to any extent for residential purposes and lastly, that NRAM had the right to exercise all powers competent to a creditor in lawful possession.

Declaratory Actions

By raising an action of this nature, the pursuer avoided the requirement for compliance with the pre-action requirements and did not require to serve statutory notices on the borrower and occupier advising them of their right to argue that the application is unreasonable. Further, unlike a standard repossession case, the declaratory does not call in court unless it is defended. Accordingly, unnecessary costs and procedures can be avoided. 

At first glance, this course of action may appear to look like an attempt by lenders to 'side-step' legislative measures introduced to protect the borrower. It should be noted, however, that the principle aim of those measures is to ensure that an occupier has an opportunity to protect himself from homelessness, and that is not always a relevant consideration. If homelessness is not a possible outcome, incurring the further procedure involved in the standard repossession action is unlikely to be in the borrower's interests given that the costs of compliance will ultimately be added to their mortgage account. Of course the borrower (or, in the case of a deceased borrower, their representatives) still have the option of defending the action of they so wish.

Edwards and Fowlie are both clear examples of cases where the intended benefit of the protective legislative measures are left redundant by the particular case circumstances. In both cases, it was clear that creditors were the only parties interested in the security subjects. There was no benefit to be had from issuing correspondence to satisfy the Pre-Action Requirements (the lenders would, in any event, have already issued considerable correspondence inviting proposals for arrears to be addressed). Similarly, there would have been no practical sense in depositing notices at the security subjects which are known to be unoccupied.

Aberdein Considine acted for the pursuer in both Edwards and Fowlie.

Appropriate Use

It is important that lenders carefully consider when to use declaratory actions though guidance can be taken from the two judgements. 

In Fowlie, Sheriff Mann made clear that the heritable creditor must be in a position to demonstrate that, on the face of the facts, the subjects are "unoccupied and thus not being used for residential purposes". The Sheriff was satisfied by the production of a Field Agent Report and a report from Sheriff Officers. No doubt he will also have taken into account that the borrower's Trustee was in possession at the material time. 

Sheriff Mann also agreed with Sheriff Braid's conclusion that "the determining factor in deciding how the creditor must exercise his remedies is the use to which the subjects...are being put". Neither Sheriff formed the view that a building is used to any extent for residential purposes simply by virtue of the fact that it has been occupied in the past or was intended for residential use. 

This reasoning allows heritable creditors to extend the use of declaratory actions to "abandoned property" cases, where the borrower cannot be traced and the subjects are empty. Depending on the facts pertaining to a particular case, the lender could reasonably conclude that there is very little risk of a declaratory action being rendered incompetent by subsequent discovery that the property is being used for residential purposes. In such cases, the logical step is to raise a declaratory action in order to reduce procedure and take possession as quickly as possible. 

Jane Gordon, Senior Solicitor

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