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Important decision on assigned securities

17th May 2017

As has been widely reported, the April 2017 decision in OneSavings Bank plc –v- Burns has potentially far reaching consequences for lenders who raise repossession proceedings in respect of defaults under secured loans which were assigned to them.

The loan was originally granted by one lender and subsequently assigned twice. The form of assignation was one widely used. However, it did not set out the sums due and outstanding under the security. The borrower argued that by omitting the sums owed, the assignation did not meet the required statutory style under the legislation.

The court, with reluctance, agreed with this argument. The Sheriff decided that the security had not been validly assigned albeit the decision was reached “by virtue of what can only be described as a technicality”.

Needless to say, this decision if upheld on appeal or followed in other cases, will be of considerable significance. Most assigned securities in Scotland have followed the style used in this case. The decision could render many thousands of securities unenforceable by standard repossession proceedings.

At the moment we await news as to whether an appeal will be taken. In the meantime cases will need to be looked at on an individual basis as and when challenges arise. There are a number of possible approaches which may be taken by lenders and we will be happy to discuss matters further.

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