Thousands face extra bills as court ruling hits property sales

The Herald reports that "A landmark ruling on repossessions is resulting in the suspension of property sales at the last minute and thousands of Scots facing large bills from banks on top of losing their homes. Almost a week after the decision by the UK Supreme Court effectively ground all Scottish repossession cases to a halt, there are concerns that hundreds of property deals could be halted as a result.

There are also warnings of the impact of the judgment on the cash-strapped courts service, with thousands of cases scrapped and having to come back into the system.  Last night, the Law Society of Scotland called on solicitors to put the brakes on all purchases of repossessed homes until it can be proven it is compliant with last week’s “earthquake” judgment.

Bruce Ritchie, director of professional practice at the Law Society of Scotland, said: “The society’s conveyancing and civil justice committee will be looking at this in detail but our preliminary view on current transactions that have not yet settled is that buyers’ solicitors should be firm about declining to settle the transaction until selling creditors can produce evidence of having followed correct procedure.”

Mike Dailly, of the Govan Law Centre, said he would pursue legal action against the lenders for putting the bill for dealing with the judgment on to his clients. He said: “The question that no-one has asked is ‘who’s going to pay for all this?’ I have no doubt UK banks will do what they always do and pass these costs onto consumers by adding them to their mortgage – which they can do if the costs are reasonable.  “We could be looking at up to £40 million or more. “It’s not reasonable to expect vulnerable Scots facing repossession to pay banks and their lawyers twice for what is essentially their solicitors’ responsibility and failure.” "

Update: unfair bank charges on BBC 1's Rip-off Britain

Unfair bank charges, including clients of Govan Law Centre, were featured on BBC 1's Rip-off Britain at 9.15am on Monday, 29 November 2010.

Sadly, the programme decided to take a soft approach and focus on peripheral issues around charges (e.g. communication concerns) as opposed to the tough question of whether the UK bank charging model was unfair in law, whether it was morally acceptable to exploit vulnerable consumers to subsidise better off customers,  as well as overlooking the plight of thousands of UK consumers still trying to seek refunds of unfair charges.

GLC predicts major shockwaves for Scottish repossession law following RBS v. Wilson and others

A judgment of the UK Supreme Court today looks set to have profound implications for the law and practice of repossessions in Scotland. According to GLC's Principal Solicitor, Mike Dailly, the case of RBS plc v Wilson and others "may be to Scottish repossession proceedings what Cadder has been to criminal proceedings in Scotland". 

The UK Supreme Court upheld the appeal of two sets of Scottish homeowners in the case of Royal Bank of Scotland plc v. Wilson and others [2010] UKSC 50, where a lender's certificate of default did not amount to a 'requisition' for the purposes of section 5 of the Heritable Securities (Scotland) Act 1894, and where the court held that in the circumstances of the case, a 'calling-up notice' should have been served. 

 The standard practice of most lenders in Scotland in reposession proceedings has been to raise a writ founding upon a 'default' in terms of standard condition 9(1)(b) (of sch 3 of the 1970 Act) and seek recovery in terms of section 24 of the Conveyancing and Fedual Reform (Scotland) Act 1970.  In essence, lenders would not bother with a default or calling-up notice and would simply raise repossession proceeding based upon the mortgage arrears (lodging a 'certificate of default' setting out the amount of arrears). 

And that was that for many years in Scotland - defenders could use the Mortgage Rights Act (Scotland) 2001 and now the Home Owners & Debtor Protection (Scotland) Act 2010 to obtain a chance to pay, re-mortgage or restructure, sell, or apply to the Mortgage to Rent Scheme.  But no-one challenged the orthodoxy of the lender's right to use standard condition 9(1)(b) for a repossession based upon mortgage arrears; until now.

The UK Supreme Court's ruling makes it clear that standard condition 9(1)(b) cannot be used for a failure to comply with mortgage payments, and instead a calling-up notice is necessary in an arrears case. At para 74 Lord Hope says "As standard condition 9(1)(b) refers to a failure to comply with any other requirement arising out of the security, this section must be taken to refer to defaults other than in respect of the debt secured by the standard security. Content for its application is to be found in the requirements that are set out in standard condition 1 (maintenance and repair), standard condition 2 (completion of buildings), standard condition 3 (observance of conditions in title) and standard condition 5 (insurance) and any other similar conditions that may have been included by way of variation to maintain the value of the security subjects".

GLC's Principal Solicitor said: "The fact the UK Supreme Court has stated that standard condition 9(1)(b) cannot be used for a failure to pay ones mortgage, and that in such cases a calling-up notice and standard condition 9(1)(a) should be used instead, will send shock waves to lenders and their solicitors in Scotland.  More than that it could mean thousands of cases might have been raised incompetently, with defenders entitled to seek dismissal with expenses in principle.  GLC would recommend that all homeowners in Scotland currently subject to repossession proceedings seek advice from a law centre solicitor or local firm of solicitors in light of this decision".

Local Government & Communities Committee backs Property Factors Bill

The Stage 1 Report of the Scottish Parliament's Local Government and Communities Committee has supported the general principles of the Property Factors (Scotland) Bill, which will help pave the way for the Bill's forthcoming Stage 1 debate before the Chamber next month. 

The Committee's report is available here; it makes a number of recommendations to amend the Bill to take on board practical issues which arose during evidence; some of the key conclusions are reproduced below:

"45. The Committee believes that there is clear evidence testifying to the problems encountered by members of the public with property factors and that there is therefore a need to proceed with a statutory framework to regulate property factors. It concurs with those witnesses who stated that a voluntary accreditation scheme would not address the problem of factors that provide a poor service to consumers. While the Committee acknowledges the work already conducted by the Scottish Government’s working group in developing a national voluntary accreditation scheme, it does not consider that there is evidence to suggest that this will be ultimately successful in addressing inadequate factoring services. It therefore supports the approach taken by the Member in Charge of the Bill in proposing a statutory framework for the regulation of property factors.

58. The Committee therefore considers that it is appropriate for housing associations and local authorities to be included within the meaning of “property factor” contained in the Bill.

62. The Committee welcomes the meaning given to “property factors” in the Bill. It considers that it is important for the definition to include the ownership and management or maintenance of land that is available for use by the owners of any adjoining or neighbouring residential properties. The Committee considers that consumers should be entitled to a quality service and that a company should not be able to avoid the provision of this service as a land-owning maintenance company ...

110. The Committee recognises that complaints against property factors can often be very technical and concurs that a homeowner housing panel will provide an effective structure for dealing with such complaints.

 122. The Committee considers that difficulties faced by homeowners in switching property factor represents a major issue, particularly in relation to land-owning maintenance companies. While it recognises that there may be less need for homeowners to switch once the provisions in the Bill raise standards in the sector, it nevertheless believes that a simplification of the process would be of benefit to the consumer. The Committee believes this is an important issue that might require legislation. However, the Committee also recognises it is a very complex issue and therefore calls on the Scottish Government to undertake further research".

GLC criticises 'pot shots' from Justice spokesman

Scottish Conservative Party criticism of legal aid payments for asylum seekers and medical negligence claims in Scotland are ‘reckless, unjust, and ill-founded’ according to Govan Law Centre.

On Tuesday, Conservative justice spokesman John Lamont MSP attacked Scottish legal aid payments for asylum seekers cases, which totalled £3.8m in 2010/11. Mr Lamont said: "These are astonishing sums of money and every penny spent from the justice budget on legal aid is money not available for policing the streets and preventing crime".

Mr Lamont added that "The UK government is having a fundamental look at the legal aid system, to innovate and provide a value for money scheme built on sound foundations. The SNP Scottish Government needs to do the same."

Today, Mr Lamont launched an attack on legal aid paid to victims of medical negligence, which totalled £1.27m in the last six months, claiming: “There has been a shocking rise in the amount of taxpayers’ money being used to fund negligence cases against the NHS over the past few years”.

GLC’s Mike Dailly said: “Much of the legal aid ‘paid’ for reparation claims is judicial expenses recovered from opponents as the rules require awards of expenses to be routed through the Scottish Legal Aid Board; so while it may all look like legal aid it isn’t. Accordingly, Mr Lamont’s figures for medical negligence cases are significantly overstated. It’s also reckless to criticise any apparent rise without knowing if, and why, there have been more cases, or more expensive cases”.

“Attacking money paid for asylum seeker cases or blaming the Scottish Government is ridiculous when you consider that the success rate of immigration petitions for judicial review in Scotland have been running at around 80%. In other words, Mr Lamont might wish to direct his outrage at the quality of decision-making by the UK Border Agency. Or he might consider refraining from taking ill-informed pot shots”.

GLC calls for widescale 'FOI' extension in Scotland

GLC has responded to the Scottish Government's consultation on 'Extending the coverage of the Freedom of Information (Scotland) Act 2002', which closed this week, by calling for the Act to be extended to cover the Glasgow Housing Association Ltd, and its factoring company, as well as asserting the general principle that the Act should be extended to a comprehensive range of private, third sector, and other bodies who are in receipt of substantial public funds, subject to 'proportionality criteria'.  GLC has argued that:

"As a matter of general principle, we believe there is a strong case for arguing that any body – whether private, third sector or public – should be subject to the 2002 Act in relation to the public money which they receive (and how it is spent) or public services which they provide subject to fair and reasonable proportionality criteria. Such proportionality criteria could be based around (a) the value of the contract or award and/or (b) the number of employees in the entity".

"We fully support proposals to extend coverage of the Act to GHA. We agree that GHA is a RSL unique in terms of size and public profile. In March 2003, Glasgow City Council transferred its housing stock to GHA with the result that GHA carries out functions which were previously carried out by the local authority. This means that people in Glasgow, who were formerly council tenants and are now tenants of GHA are unable to access information other tenants in other parts of Scotland would be able to access through Freedom of Information Act requests. Extending the coverage of the Act to include GHA will help address this inequity".

"We strongly believe that coverage of the Act should also include GHA’s factoring service, ‘Your Place’. As well as taking on responsibility for Glasgow City Council’s rented properties, GHA took over the council’s factoring responsibilities when the stock was transferred. GHA are now the factors of many ex-council properties. They are in a unique position as a factor in that they are the majority owner in many of the common closes they factor. This means that they often have to balance their role as owner and factor. We feel that it would be in the public interest to be able to obtain information regarding GHA’s factoring service through Freedom of Information requests".