Scottish repossessions - Pre Action Requirements (PAR)
Recent decisions of the courts in the pre repossession process will be of interest to all in the sector, especially those who administer or manage defaulting mortgage accounts.
The Pre Action Requirements (PAR) are broadly the Scottish equivalent of the English Pre Action Protocol (PAP). One important difference however is that rather than being a protocol the PAR have the force of the law. This means that if a creditor does not, in the opinion of the court, comply with the PAR then the repossession court action may be thrown out by the court.
The PAR have been affected by various court decisions. The current rules came into force in 2010. Almost as soon as this happened the Supreme Court made a very important ruling. It said that a calling up notice was required in all Scottish repossession cases. This decision went on to have a crucial effect on when PAR need to be carried out. In the 2012 Sheriff Court decision of NRAM -v- Miller the court ruled that a borrower is in “default” when the two month calling up notice period expires without payment being made (note, not the same as going into mortgage arrears).
Under the PAR certain information has to be provided to the customer “as soon as is reasonably practicable” after they are in default. Therefore if that information was provided before the calling up notice had expired then it was too early. That meant the PAR was not complied with. In practice, this has meant that the Letter Before Action (LBA) and the information goes out at the start of the whole process (to be compliant with the FCA) and also on expiry of the calling up notice to comply with this ruling. In a newer case, Main -v- Mortgage Express the Sheriff Appeal Court agreed with the 2012 ruling. Unless there is an appeal to a higher court this looks to be well established.
In another fairly recent case NRAM -v- Savage the court ruled that before any part of the PAR is carried out the borrowers must be in “default”. In other words, only what is done after the Calling Up Notice (CUN) expires counts. The court may not grant a repossession order unless it is happy that the PAR have been complied with. This decision does have the potential to cause problems.
In Lancashire Mortgage Corporation -v- Plowright reference was made to the lenders’ duty under PAR to make “reasonable efforts to agree proposals” with the customer. The court pointed out that its duty was to make efforts so in other words more than one effort is required by the lender.
In the 2015 decision of the Court of Session in Swift Advances Plc -v- Martin it was ruled that if a debtor cannot clear the loan, even if he is trying to sell the property, then there is nothing under the PAR to stop the creditor bringing a court action to obtain the authority of the court to sell the property. In this case, the creditor was being offered only a small fraction of what was due. The court ruled that the creditor was not bound to accept that.
To find out more about this matter or to discuss a similar matter please contact Brian Fairgrieve or David Forrester from our experienced Asset Recovery team. Our approach to Asset Recovery is pragmatic and is towards finding solutions that make sound business sense.We can also go beyond the legal aspects of recovery, offering practical support in areas such as property management and sale.< Back