Update on Civil Business in Scottish Courts

The Scottish Courts and Tribunal Service has published further guidance on how business will be handled following the outbreak of Covid-19.

Generally speaking, Possession Proceedings in Scotland can be broken into the following stages:

1.     Service and Expiry of Calling Up Notice;

2.     Adherence to Pre-Action Requirements;

3.     Raising and Serving of Possession Proceedings;

4.     The Judge determining it is reasonable for a Possession Order to be granted;

5.     Enforcement of the Possession Order by Sheriff Officers.

The purpose of this note is to address issues that may arise in the first two stages of the Covid-19 Hold, being the service of Calling Up Notices and the adherence to Pre-Action Requirements. An update on civil business in the Scottish Court is also attached.

Our advice on Calling Up Notices/Pre-Action Letters has been based on the current guidance provided by the Financial Conduct Authority (FCA) on repossessions, namely that commencing or continuing repossession proceedings at this time is very likely to contravene Principle 6 and MCOB 2.5A.1R - absent exceptional circumstances (such as a customer requesting that proceedings continue). The FCA have said that they will not hesitate to take appropriate action where necessary.

Stage 1: Service and Expiry of Calling Up Notices

The Calling Up Notice is the formal demand for payment of the balance due on the mortgage account within two months of the date of service. Failure to pay the balance creates a default on the mortgage account which is the basis of Scottish Possession Proceedings.

The Calling Up Notice is issued to customers by recorded delivery. If the recorded delivery packet is returned to the panel firm’s offices, then the Calling Up Notice is sent to the Extractor of the Court of Session. The Extractor then acknowledges receipt of the Calling Up Notice by stamping and signing it and returning a copy to the panel firm. The date of acknowledgement by the Extractor has been treated as the date of service and the start of the aforementioned two month period.

Whilst no new Calling Up Notices are being issued during the hold, there are two issues to address:

1.     On some accounts, the Calling Up Notice was sent by recorded delivery before the hold, but this has not been collected by the customer. The recorded delivery packet has then been returned to our offices after the hold came into force. Normally we would immediately send the Calling Up Notice to the Extractor of the Court of Session, but would not recommend doing this at present as this could be construed as continuing possession proceedings and contravene FCA guidance. We are therefore retaining the returned Calling Up Notices and recording the affected accounts. We would propose sending the Calling Up Notice to the Extractor of the Court of Session once the hold is lifted. When this has been done, a copy of the Calling Up Notice sent to the Extractor of the Court of Session can be provided to the customer by ordinary post to keep them updated on proceedings.

2.     For a small number of cases, the Calling Up Notice may have been sent to the Extractor of the Court of Session before the hold came into force, but acknowledged after. We would not recommend relying on those Calling Up Notices as this could be deemed, again, as continuing the possession proceedings during the hold. We would propose that these Calling Up Notices are re-sent to the Extractor of the Court of Session once the hold is lifted to minimise any risk of contravening the FCA guidance. If the Calling Up Notice is sent to the Extractor of the Court of Session once more after the hold then we would propose to provide a copy by ordinary post to the customer to keep them updated.

The above recommendations will not need considered if you employed sheriff officers who successfully served the Calling Up Notice before the hold came into force. The other exception would be if the customer(s) have clearly expressed that they wish possession proceedings to continue.

Stage 2: Pre-Action Requirements

Following the expiry of the Calling Up Notice, the lender needs to satisfy Pre-Action Requirements before raising possession proceedings. Put briefly the Pre-Action Requirements are as follows:

1.     The customer must be provided information about the mortgage default;

2.     The lender/their agents must make reasonable efforts to agree proposals with the customer about the default;

3.     The lender should not raise possession proceedings if the customer is taking steps which are likely to result in payment within a reasonable time;

4.     The lender must provide the customer with information about sources of advice and assistance.

There is no prescribed method for satisfying these requirements but industry practice has been that a letter is issued to the customer immediately after the expiry of the Calling Up Notice. This letter provides the information required for points 1 and 4 above and encourages the customer to make contact to discuss repayment of the arrears/outstanding balance. Attempts should also be made to contact the customer by another method (usually by telephone).

Our recommendation is that if a Calling Up Notice expires during the hold that you do not issue Pre-Action correspondence until the hold is lifted.  

In terms of the first point, the lender is required to provide the customer with information about the terms of the mortgage deed and default (including arrears, outstanding balance and charges that may be incurred), as soon as is reasonably practicable once the customer is in default (i.e when the Calling Up Notice has expired). This information therefore does not need to be provided immediately. We consider that a hold on possession proceedings by the FCA would be sufficient reason for delaying in providing the information and we think this would be a persuasive argument before any Judge for not issuing the letter immediately. This approach would also reduce the risk of a lender contravening the FCA guidance. The exception would again be if a customer has clearly expressed that they wish possession proceedings to continue.

Update on Civil Business in Scottish Courts

The Scottish Courts and Tribunal Service has published further guidance on how business will be handled following the outbreak of Covid-19. The Scottish Courts are currently only dealing with urgent civil business, meaning a number of repossession cases have been paused or adjourned until later in the year. The examples of urgent business have included orders in relation to vulnerable adults, children and anti-social behaviour.

However, cases with an imminent time bar date have also been listed as urgent which is important for lenders as the emergency legislation passed by the Scottish Government following the outbreak of Covid-19 has not altered the prescription (limitation) period for a debt, which remains 5 years. If a debt in Scotland is deemed to have prescribed then it is considered extinguished and cannot be pursued.

Accordingly, if lenders identify accounts where there has been more than or close to 5 years without a payment by a customer, these should be given an urgent limitation review. If required, the limitation period could be restarted by serving an Action for Payment on the customer. This step could be taken with respect to a mortgage debt in spite of the FCA placing a hold on possession proceedings following the outbreak of Covid-19. Furthermore, serving an Action for Payment would not prevent a lender continuing with possession proceedings once the hold on possession proceedings is lifted. 

Finally, The Scottish Courts have also announced an increase in some of their court fees. Of particular relevance to lenders are:

·         Fee for sending a Calling Up Notice to the Extractor of the Court of Session: £57

·         Fee for raising Possession Proceedings or an Action for Payment: £132

·         Fee for motion (application) to restart a paused court action: £51

If you want to discuss further please speak to your usual contact at Aberdein Considine.

If you want to discuss further please speak to your usual contact at Aberdein Considine. 

• Myra Scott, Partner (E: mscott@acandco.com / T:07741 232105)
• John Di Paola, Associate (E: jdipaola@acandco.com / 07917 467820)