Free Law Dissertations - Property Law Based On Scottish Law Problem A (i)in Order To Sell The
Property Law Based on Scottish Law
Problem A
(i)In order to sell the property
Formasi Bank is only permitted to enforce their standard security, when Lucy defaults in accordance with the conditions of the standard security.
Condition 8 of Schedule 3 of the Conveyancing, Feudal Reform (Scotland) Act 1970, allows the creditor to call up the standard security in accordance with s19 but this is subject to provisions in the security.
Here there is an acceleration clause after two months of default payment, which means that action may begin once this has occurred. Condition 9 states the scenarios where the debtor defaults on the loan. No calling up notice has yet been served but, so long as Lucy has missed two payments, she is in default by virtue of Condition 9(b).
The creditor has remedies in accordance with Condition 10 of the standard form. These must be exercised in accordance with Part II of the 1970 Act. As the creditors seek advice on distribution of the proceeds after sale, they are seeking the remedy under Condition 10(a).
The creditor must first serve a notice of default in accordance with the statutory form of the 1970 Act. This may be served on the debtor (Lucy) whereby one month’s notice is given to remedy the default of two or more loan repayments. If this notice is not complied with, the creditor may then exercise the sought remedy of sale. However, the creditor must be aware that the debtor continues to have a right to remedy the default up to the conclusion of a subsequent and enforceable contract of sale.
(ii)The ranking of securities
Normally ranking will be prioritised in order of registration but as the Bank of Balhoon notified of their security over the property, there may be a ranking agreement that places the £25,000 in pari pasu with the Bank of Balhoon.
If there is no ranking agreement and, assuming that £128,000 is the best possible price, Formasi will receive £75,000 for the first security and the Bank of Balhoon, £47,000 for their security, with £6000 left over to cover the remainder.
If it is pari pasu, Formasi will receive £75,000 and a dividend of the percentage that £25,000 represents from the remaining debt, which is 34.72% of the remaining balance.
Problem B
(i)Are the options permissible?
The passing of the Feudal Tenure etc (Scotland) Act 2000 states that all prior existing real burdens were to be extinguished unless the superior actively preserved the real burden by registering it prior to the passing of the Act.
In the present case the superior, Georgina Throatwarbler, registered the third real burden dated 12 February 1983. This is therefore the only burden that can still possibly exist and all others are now extinguished as of 28th November 2004, which means that, subject to the conditions of her standard security, Lucy may let the property for residential purposes but no commercial activity of any kind may be carried on by either Petronella or Gabrielle.
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