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Reform of securities 20/06/2019 The Scottish Law Commission has published a Discussion Paper seeking views on proposals for the reform of securities

Reform of securities

The Scottish Law Commission has published a Discussion Paper seeking views on proposals for the reform of securities granted over land and buildings in Scotland.

The use of property to secure debt is of crucial importance to the economy and to citizens. It allows businesses to grow. It allows people to buy their homes. As a result, mortgages are big business: 127,306 transactions were registered in Scotland in 2017/2018.

According to the Commission, the law on security over land is in need of reform. Over 50 years have passed since the last major review, which led to the introduction of the “standard security” by the Conveyancing and Feudal Reform (Scotland) Act 1970. Many changes in society and in technology have occurred in that period.

The basic structure is fit for purpose, says the Commission, but much needs to be improved. For example, court decisions show that key rules are unclear and there are too many compulsory forms of document, which are difficult to use.

The Discussion Paper considers creation, variation, transfer and discharge of standard securities, as well as which types of obligation can be secured. A second Discussion Paper on enforcement is scheduled for 2020. Consumer credit and regulatory issues are outwith the scope of the project.

The Discussion Paper sets out over 60 proposals and questions, including that:

  • The law on security over land is consolidated,
  • The compulsory forms of document are abolished,
  • The “standard conditions”, which govern every standard security, in their current form are abolished,
  • People who lease mortgaged properties should be clear about their rights and responsibilities, and
  • A sunset rule under which very old securities are automatically extinguished after a certain period of time should be considered.

Comments can be made until 30th September 2019, and will help shape the recommendations to be made in the Commission’s final Report.

The Discussion Paper can be found here.


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