Legislation regulating possession procedures

Some secured loans and second mortgages are covered by the Consumer Credit Act 1974 ('the 1974 Act'). For example;

• loans of any amount that were taken out after 6 April 2008

• loans under £25,000 that were taken out before 6 April 2008

• loans under £15,000 that were taken out before 1 May 1998.

However, some loans are exempted from the 1974 Act. For more information, please see the section on secured loans and second mortgages.

Possession procedures in relation to defaults on mortgages taken out over residential property are regulated by the Conveyancing and Feudal Reform (Scotland) Act 1970 and the Heritable Securities (Scotland) Act 1894. Either Act can be used to enforce the rights of lenders when a borrower has defaulted on their mortgage agreement, however the 1970 Act is the most commonly used.

The Home Owner and Debtor Protection (Scotland) Act 2010 amended both the 1970 and the 1894 Acts to further regulate the procedure that lenders have to follow in order to repossess a property. It set down pre-action requirements that lenders must follow before they can apply to court to enforce their rights when a borrower has defaulted on their mortgage agreement. [1] The 2010 Act also requires that all repossession actions call at court.  

Additional guidance for lenders has been provided by The Financial Services Authority (FSA) and the Council of Mortgage Lenders. The FSA has produced guidance for lenders on dealing with possession on mortgages taken out after 31 October 2004. The guidance is in the FSA Handbook, Mortgage Conduct of Business 13. For mortgages taken out before 31 October 2004, possession can be dealt with either under the Mortgage Conduct of Business, or under the Council of Mortgage Lenders' statement of practice on arrears and possessions.