Assignation of Mortgages
Let the lenders beware
In a move that has significant ramifications for the mortgage industry, the sheriff court this month held a lender, which acquired a standard security through a portfolio sale, had no title to sue, so could not repossess a defender’s house.
The decision where OneSavings Bank could not enforce its standard security could prove to be another costly blow for banks and will, no doubt, be unwelcome in a climate where the industry is struggling to recover from the housing market crash and widespread PPI claims.
No title to sue
The security, designed to give the mortgage provider certain rights over the property, was originally granted by GMAC and had been assigned to another lender once already before being acquired by OneSavings Bank.
Sheriff Mann, sitting in Banff, held it hadn’t been registered properly in the Land Register in line with the Conveyancing and Feudal Reform (Scotland) Act 1970.
This meant OneSavings Bank had no title to sue, and could not enforce its security and repossess the defenders’ home.
The defender — represented by Ledingham Chalmers and counsel Adrian Stalker — had successfully argued the assignations were invalid as it they did not comply with the statutory form set out in the 1970 Act.
The assignations claimed to make the security one for all sums due; however, the form in which they were lodged with the register reduced them to a security for only the amount due on the mortgage at the date of assignation.
While Sheriff Mann considered it to be a technical argument, this style of assignation is one widely used in the industry by lenders and their agents. And, as such, any lender seeking to enforce a standard security, which has previously been assigned, may encounter a similar argument regarding its title to sue.
So the message is clear: anyone facing an action for repossession where security has been assigned previously should check the style of that assignation, because they may find lenders have no title to sue after all.
Rebecca Walker is a senior associate based in Aberdeen, specialising in commercial litigation. She is one of few lawyers to have been awarded a Certificate of Proficiency in Insolvency (CPI) by the Insolvency Practitioners’ Association.