Notice of default

The notice is in a prescribed form and is Form B of Schedule 6 and must be served in the same way as a calling-up notice. [1] It must specify the default, for example that the borrower has failed to pay an instalment of the loan and that they have one month to make good the default. It must also be sent to any other occupiers of the property. If the lender fails to do this then the notice will have no effect. [2] 

Once a borrower has received a notice of default s/he has the option to:

• Make good the default. For example, by paying off the arrears within one month.

• Object to the notice of default by applying to the sheriff court asking for the notice to be set aside or varied. This can be used as a delaying tactic but it is likely that it will involve an increase in legal expenses for the borrower. Any objection to a notice of default must be served within two weeks of it being received by the borrower. [3]

• Negotiate a repayment plan with the lender. The lender may prefer to wait until a repossession action has been started before entering into serious negotiations with the borrower.

If these solutions do not work in the favour of the borrower then the lender can pursue an action for repossession by serving a calling-up notice in accordance with section 24 of the 1970 Act.

Where an action for repossession started before 30 September 2010 a borrower could have responded to a notice of default by lodging a 'section 2 order' to suspend the enforcement action, this would allow borrowers to catch up with repayments or find alternative accommodation before their home was repossessed. This procedure was repealed by the Home Owner and Debtor Protection (Scotland) Act 2010, [4] now lenders must follower the pre-action requirements before they can repossess a borrower's home.