Home Owner and Debtor Protection Act in Context

Gavin CorbettPolicy Manager

Overview

• Background • Repossessions Working Group• Overview of Act• The challenge of implementation

Background

• Economic climate – global banking crisis• Rise in repossessions• Housing market conditions

Framework for dealing with repossessions

1. Prevention of problems in the first instance: advice and early action.

2. Provision of support to sustain home ownership through periods of difficulty if it is appropriate to do so.

3. The opportunity to retain a home under different arrangements.

4. Smooth transition to other housing.

Background1. UK / England- mortgage rescue, - financial support, - pre-action protocol, - Homeowner Mortgage Support Scheme2. Scotland: - Mortgage to Rent, - Mortgage Rights (Scotland) Act 2001, - Section 11 of 2003 Act.

Repossessions Working Group• Set up January 2009 – concluded in May 2009

(reconvened Spring 2010)• To look specifically at legal measures and other

forms of help for struggling home-owners • 28 recommendations covering: legal changes, advice,

financial support, joint working, data collection, court processes and legal aid.

• Reconvened to look at tenants of defaulting owners.• Some work continues in Repossessions Advice Group

• Legislate to strengthen protection for home-owners• Address gaps in advice provision• Lenders to exercise forbearance• Lenders and courts to use plain English• Eligibility for legal aid to be kept under review• Better Scottish-specific data on mortgage arrears and

repossessionsThe report also directed some recommendations to the UK

Government: on SMI, HMS and role of FSA.

Some key recommendations

Home Owner and Debtor Protection (Scotland) Act 2010

• Passed February 2010; main commencements September 2010.

• Part 1 deals with repossessions; part 2 with sequestration and trust deeds.

Part 1 amends the following Acts• Conveyancing and Feudal Reform (Scotland) Act 1970• Heritable Securities (Scotland) Act 1894 • Mortgage Rights (Scotland) Act 2001 (Includes repeal of

Section 2)

Overview of HODP Act

• Requires all repossession cases to call in court (except voluntary surrenders)

• Establishes a set of minimum steps to be taken before a creditor can commence legal action: “Pre Action Requirements”.

• Opens up scope for lay representation• Allows for recall of decree.• Certain transitional arrangements

Pre Action Requirements• Modelled on Pre Action Protocol in England and

Wales (Nov 2008)• Consistent with MCOB 13• Lenders submit a PARs checklist to Court.• Clear information about arrears and other expenses• Reasonable efforts made to make arrangements to

clear debt• Desist from action if alternative arrangements are

being made

Lay representation

Advisers other than solicitors or advocates if:

• Sheriff is satisfied that you are competent; and• You are from an approved list of authorised

organisations set out in secondary legislation

Guidance published by Scottish Government

Challenge of implementation

• Transition period• Advice sector capacity• Plain English• Expenses• Interest rates / economic context• HODP Act only part of what needs to be done