NEWS // Attached to your home...? Beware of "Land Attachment"
The Scottish Parliament passed the Bankruptcy and Diligence etc. (Scotland) Bill on 30 November 2006 and it is expected to receive royal assent shortly. Diligence is the enforcement of civil court orders (Decrees). The Bill has attracted controversy through the proposed new “Land Attachment” diligence under which property, including dwelling houses, can be attached and ultimately sold by a creditor to pay any debt over £3000. Worries remain that Land Attachment will be seized up by unsecured creditors resulting in thousands of families being threatened with homelessness.
Land Attachment will be a new form of diligence which will be available for use against people with more than £3,000 of unsecured debts. Land Attachment will allow a creditor holding a decree to enforce payment of the debt by obtaining a right over heritable property belonging to the debtor and to sell that property in satisfaction of the debt. A notice of Land Attachment will be registered in the relevant property register (either the Register of Sasines or the Land Register of Scotland) and in the Register of Inhibitions (personal register) and if the debt remains unpaid for 6 months then the creditor may enforce his right and apply to the sheriff for a warrant to sell the debtor’s land subject to the Land Attachment. On the granting of the warrant of sale the Sheriff shall appoint a suitable independent solicitor to market and sell the attached land. From the date that the notice takes effect, until the Land Attachment ceases to have effect, the creditor will step into the shoes of the debtor and will have the same rights and obligations as the debtor of the land (including any right of the debtor to receive rent from a tenant and any lease granted over the land). (Where the debtor has already granted a standard security over the land and this has been registered then the Land Attachment will rank after that pre-existing standard security.)
Concern has been expressed that there are currently insufficient safeguards to prevent people being made homeless as a result of Land Attachment. Critics have argued that the debtor’s home should be excluded from the Land Attachment but the bill has been passed without this exclusion. Instead, the Scottish Parliament has provided that it may be possible for regulations to be made in the future which would exclude the debtor’s home from Land Attachment.
A statutory obligation has been included in the final version of the bill obliging the Scottish Ministers to produce a statement on the effects of Land Attachment. A formal statement must be laid before the Scottish Parliament reporting on the impact of Land Attachment on debt recovery and homelessness within 15 months of enactment. This statement must detail the number of Land Attachments registered, the number of warrants for sale that have been granted by the courts and the number of people made homeless as a result. If Land Attachment does lead to a major increase in homelessness then the Scottish Ministers could use their power to pass regulations to exempt dwelling houses from an application to sell land that is subject to Land Attachment.
Fears remain that unsecured creditors will see Land Attachment as an attractive option which will result in an increase in homelessness either directly or indirectly (e.g. by a debtor using mortgage payments to repay a Land Attachment debt). The debtor has a minimum of six months between attachment and sale to sort out the debt problems. Without being advised of the risks of loans/credit, everyone in debt – whether with a store card or a car loan – is putting themselves at risk of losing their home.
For further details please contact Jane Ramsay on 0131 226 8222 or email her at jane.ramsay@mbmcommercial.co.uk