Scottish Government needs to act to Protect Homeowners

Scottish Government needs to act to Protect Homeowners

If the Scottish Government are considering extending the Protections that were introduced by the Coronavirus (Scotland) Act 2020 beyond the 30th of September 2021, they should do what they failed to do last time and increase protections for Scottish Homeowners.

Throughout the Coronavirus Crisis, the plight of tenants has attracted more attention than that of Homeowners, to the extent you would be forgiven for believing there is no risk to homeowners or a greater risk for tenants.

However, this is not the case, and arguably, the risk to homeowners is greater now than it is for tenants.

Homeowners lack a Safety Net

Like tenants, homeowners are at the same risk of experiencing income shocks and have been as likely to have been furloughed, or made unemployed.

Also contrary to popular perceptions, the vast majority have no more financial security or stability than many tenants do. In addition to that, the safety net that is the UK Welfare State, barely exists for them.

Homeowners, do not have the same level of protections as Tenants: they cannot claim Housing Benefit or their Housing Costs when they claim Universal Credit. Discretionary Housing Payments, a discretionary benefit paid by local authorities, to help with housing costs, is not available to them; and the Scottish Government’s Tenants Support Hardship Fund, is only, as the name suggests, for Tenants.

The only UK benefit that exists for them is the Support for Mortgage Interest Payments Scheme, which you would struggle to call a benefit anymore.

Support for Mortgage Interest (SMI)

Since the last crisis (the Credit Crunch) the benefits of SMI have now been eroded under 11 years of Conservative Government, with the waiting time before someone can claim now being 39, rather than 13, weeks; in addition to that, whereas the payments received were previously a benefit, they are now effectively a loan secured over your home.

In addition to that, SMI does not even pay all of someone’s mortgage, but only interest up to the first 2.09% on mortgages up to £200,000.

Now for those who are in a position to have been able to benefit from historically low interest rates, 2.09% may seem more than sufficient, but this fails to acknowledge that across the UK there are millions trapped in higher rate mortgages, where the finance company’s standard variable rate is sometimes as high as 4-5%.

For those with those higher-level mortgages, or higher interest rates, the Scheme will not even pay the interest on their loans.

Coronavirus (Scotland) Act 2020

Now during this Crisis, unlike the last one, homeowners do appear to have been overlooked.

Last time around, there were working groups set up, Pre-Action Requirements were introduced through the Homeowners and Debtor Protection (Scotland) Act 2010, the Scottish Government’s Homeowners Support Fund was refreshed, with a Shared Equity Scheme introduced to compliment the existing Mortgage to Rent Scheme.

However, this time around, homeowners, appear to have been overlooked by the Scottish Government when drafting the  emergency legislation that was laid before the Scottish Parliament. Like with tenants, no eviction or repossession ban was introduced until December 2020; but in April 2020, tenants got the additional protection of landlords (both social and private) being required to give them 6 months’ notice before they raised court action against them.

Homeowners got no such protection and still don’t have any similar protection, despite it being within the legislative authority of the Scottish Parliament to require Mortgage providers to serve a 6 months, rather than 2 months calling up notice on homeowners before raising legal action.

The piece of legislation that governs this area of law is the Conveyancing and Feudal Reform (Scotland) Act 1970 and it is wholly with the legislative powers of the Scottish Parliament to amend it.

We cannot just rely on Lender Forbearance.

The reasons why Homeowners were overlooked when this emergency legislation was introduced, is not exactly clear. Possibly the thought of Homeowners losing their home did not occur to the Scottish Government.

However, it is also true at the time when Lockdown began, the UK Financial Conduct Authority was quick to act and issued guidance to all UK banks that anyone affected by Covid 19 should be offered a 3-month payment break. Some were then offered additional payment breaks. 

However, as we now enter the 14 month of this crisis, lender’s forbearance is wearing thin and we must remember that although many  were offered payment breaks, lenders on the whole did not freeze interest and charges on their loans. Also when people do begin making payments again, many lenders want higher monthly payments to catch up on missed payments.

For those who are continuing to struggle and who may still be affected financially by Covid, the risks that a lender may issue a calling up notice and raise a repossession action within 2 months is now a real danger and will only grow.

This risk can only increase as we come out of this public health crisis and the support schemes that were put in place, such as the Furlough and Self-employed Income Support Schemes are withdrawn. We will not know what the medium to long term effects are of this until March 2023, at the earliest.

Unemployment may increase and people may be forced to accept reduced hours of work or lower rates of pay as businesses look to recover. Against that background those that are struggling to get by will have pretty much no benefit system available to support them with their housing costs. 

It, therefore, seems inevitable that the Scottish Government will have to consider extending many of the protections in the Coronavirus (Scotland) Act 2020 for tenants and consumers to the beginning of 2023 or even longer. If they do, then they need to also think about placing homeowners on an equal footing with tenants and requiring any calling up notice to give 6, rather than 2 months notice of any intended legal action. 


Evictions beginning again across Scotland

Evictions beginning again across Scotland

As the majority of Scotland, from the 17th May, moves into Tier 2 under the Coronavirus Regulations, there is much to be rejoicing about. Being able to enjoy a pint in your local pub for one, without having to shield under the cover of a weather shredded canopy. Unfortunately, Scotland in May is not the best weather to be enjoying a pint in a garden. Nor is it the best time to be losing your home, if there ever is a best time. 

For some, however, that is what the ending of Lockdown will mean for them. Not the ending of worry and stress, but just the beginning of it.

We are not yet out this Coronavirus Crisis and although most of the emergency rules that were put in place to protect people and businesses will remain in force until the 30th September, the ones protecting tenants and homeowners from eviction and repossession are not amongst them.

Instead, from the 17th May, any area of Scotland that slips into Tier 2 will also see the ban on evictions also being withdrawn, including Glasgow, which is borderline Tier 3, but is still going into Tier 2, despite the First Minister saying she is concerned. [A last minute decision on Friday, 14th May now means Glasgow will remain in Tier 3 for the next week at least].

What Protections do Tenants have?

There will remain some protections for tenants, however. Landlords will still be required to serve 6-month Notices to Leave (private landlords) and Notice of Intentions to Raise Proceedings (Social Registered Landlords) before they begin any legal action. 

These must be served when your Landlord wants to evict you and take you to the First Tier Tribunal for Scotland (Housing and Property Chamber) (private landlords) or the Sheriff Court (social landlords). These protections will remain in place until the 30th September 2021. Previously landlords only had to give you 28 days’ notice, but these were temporarily extended due to Covid 19 (there are exceptions when your landlord wants to evict you for anti-social behaviour or if you have committed a criminal offence).

However, where your landlord has already served one of these notices on you and the six months has expired, if they now take you to the Tribunal or Court and obtain a Court Order, they will after the 17th May be able to begin eviction proceedings.

Where they have already obtained an Order allowing them to evict you, and your area moves into Tier 2 they may now be able to evict you.

What Protections do Homeowners have?

When a secured lender or mortgage provider wants to repossess your home, they must first serve on you a Calling Up Notice that gives you 2 months’ notice before they can take you to court and request the court provides them with an Order allowing them to repossess your home.

Once they take you to Court, however, and obtain an order, the procedure for removing you from your home is the same as it is for a Tenant.

What is the Procedure for Evicting you or Repossessing your Home?

If a Landlord or Mortgage provider wants to evict you, they must first serve on you a Charge for Removing, served by a Sheriff Officer, ordering you to leave the property. This must give you 14 days’ notice.

If you have still not left the property after those 14 days, the Landlord or Mortgage Provider must then arrange a Sheriff Officer to send to you a Notice of Removal, which must give you at least 48 hours’ notice of the day and time that the Sheriff Officer will attend your home and remove you.

What can you do to Prevent a Repossession or Eviction?

The most important thing you can do is seek advice as soon as you begin experiencing financial difficulties. However, even if you leave it to later, it is never too late to seek advice.

So that means even after a Notice from your Landlord indicating they want to take you to Court or a Notice from your Mortgage Provider telling you that they are calling up your Mortgage.

Ideally, you want advice and representation before your case is heard by the First Tier Tribunal or the Sheriff Court. It is in your best interest to be represented at that hearing. 

However, even if you have done nothing and a court order has been granted against you and a Charge for Removal, and even a Notice of Removal has been served, you may still be able to stop the eviction or repossession right up to the point before the Sheriff Officers remove you from your home.

Minute of Recall

Minutes of Recall are legal remedies that you can use up to the point before you are removed from your home. They can be granted if you were not represented at the Tribunal or Court Hearing, but can be complex, so you should seek advice from a solicitor or your local advice agency as soon as possible.

How Long do Court Order for Eviction and Repossessions Last?

When a Court or Tribunal grants an Order for your eviction or the repossession of your home, it normally has two parts. The first part allows the Landlord or Mortgage Provider to remove you; the other part is the part where they seek money, such as for rent arrears or your mortgage.

Normally, Landlords and Mortgage providers will seek to evict or repossess your home shortly after receiving the court order, using the above procedure.

However, in the case of Tenants, with Social Landlords, the Landlord, when the case involves rent arrears, must use the eviction part within 6 months of getting the Court Order (sometimes the Court can set a shorter period). However, under emergency Coronavirus Laws, they may get longer as the rules governing the eviction ban suspended the running of this 6-month period. This means where the Landlord got an eviction notice one month before the eviction ban, when it ends, he will still have another five months to use it, even though the eviction ban was first introduced in December 2020.

This means many Social Landlords in rent arrears cases, may be able to use Court Orders that, under normal conditions, would have been too old. 


Time Order: New Online Tool

Time Order: New Online Tool

Advice Scotland is providing a new online tool that can be used by  consumers and advisers alike, to identify when a Time Order may be an appropriate solution for them or their clients.

Time Orders are legal remedies that have been available for 45 year in Scotland, but are rarely used.

However, as I have covered in other blogs on this site (Time Orders: Has their Time come?), with the growth in car finance agreement, like Personal Contract Purchase Plans, Hire Purchase Agreements and Conditional Sale Agreements, I believe there is an opportunity for them to be used more often.

This is based on my own experiences over the last year, where I have applied for a Time Order three times to prevent clients having decrees granted against them in relation to car finance agreements, and been successful on each occasion (read about my Greenock cases: Sheriff Throws light on Time Orders).

I hope with this new online tool, more advisers will begin identifying when Time Orders are an appropriate tool for their clients and give them the tools to apply for one and, if necessary, represent them in Court.

I also hope that consumers will be able to use the tool to identify when a Time Order is an appropriate tool for their circumstances, and either apply for one themselves, or where they need help, through their local money advice agency.






Sheriff Decision Throws Light On Effects of Time Orders

Sheriff Decision Throws Light On Effects of Time Orders



Time Orders are a subject I have touched on and returned to on several occasions in this blog over the last year.

In relation to Hire-Purchase agreements for cars and Conditional Sale and Personal Contract Purchase Plans (PCP), Time Orders allow Courts to give consumers time to pay their agreements where they have went into arrears or defaulted on them, whilst also allowing them to retain possession and use of the vehicles.

The question I have been seeking an answer to is what are the effects of Time Orders once granted?

They have not been easy answers to find.

However, in an unreported decision delivered on the 7th February 2019, Sheriff McIntyre in Greenock Sheriff Court has finally provided an answer to one question I have been asking: what happens when a Time Order is granted?

In a case that involved an action for the repossession of a car, that was subject to a Personal Contract Purchase Plan (which for all legal purposes is a Hire-Purchase Agreement regulated by the Consumer Credit Act 1974), Sheriff McIntyre held that a Time Order varies the terms of a regulated agreement and allows the payments to be repaid in a regulated manner.

He also held that it was possible to argue for the action for payment of money and repossession of the car to be dismissed on the awarding of the Time Order, or for it to be continued or sisted (suspended) to monitor the repayments of the agreement.

The case involved was eventually sisted, as it was felt this was fairer to both parties, as it allowed the creditor to bring the case back into court quickly should the consumer default on the agreed repayments again,

Sheriff McIntyre also held that unlike Time to Payment Directions, which are awarded under the Debtors (Scotland) Act 1987 and result in a decree being granted, a Time Order allows the consumer to retain possession and use of the car.

What are the other effects of Time Orders?

Although the case does not definitively answer other questions I have raised in recent months, it may be possible from Sheriff McIntyre’s reasoning to extrapolate some additional understanding of what the effects of a Time Order may be.

If it varies the agreement, is it unreasonable to assume, depending on how the Time Order is framed, that it may do so to allow the consumer time to remedy their default of the agreement; or, to amend certain provisions of the agreement for the remaining duration of the agreement?

So, for example, where the consumer has arrears of £1,000, a Time Order may allow for those arrears to be repaid at £100 per month, in addition to the contractual payments; or for example, it may reschedule how the full amount owing under an agreement is repaid, changing the contractual payment amounts, the interest rates and ultimately the terms of the agreement? It is clear the court has wide discretion in how it grants a Time Order.

In such cases, where the Time Order is just for the arrears, once these are cleared, providing the issue of legal expenses are addressed, could it be argued that the action should be dismissed? Has the consumer not remedied their default and brought the agreement back into good order? Or likewise, where it varies the terms in which the full amount should be repaid, in effect varying the existing agreement, then after a period of court supervision, should the court not consider dismissing the action and allow the new varied agreement to continue as if there had been no default?

This is important as it may answer another question in relation to Time Orders which I have asked (Time Orders: Has Their Time Come?), and that is if they can remedy a default on an agreement, should any termination of the agreement by the lender, not be reversed? This may then allow the consumer to enjoy again the full contractual and statutory rights that accompanied their existing agreement, including the right to terminate the agreement themselves. The logic being as the lenders right to terminate the agreement arises from the debtor being in default, where the default is reversed, so should, where possible, all the consequences of that default?

This is important for the purposes of s99 and S100 of the 1974 Act, which respectively allows a consumer to terminate an agreement after half the amount owing has been paid and limits the borrower’s liability to that amount (subject to certain caveats).

This is important in a consumer finance market where car finance is now believed to be responsible for 90% of all new car purchases and where car debt is on the rise. It is even more important when you consider one of the reasons for this rise, is falling monthly instalments, driven by optional balloon payments at the end of the agreement, which are no longer optional once an agreement is in default or a decree has been granted.

These are still questions that need to be answered.

Either, way, it would appear, from Sheriff McIntyre’s reasoning, the action that is raised in court should not result in decree once a Time Order is granted and its terms are being complied with.

More information about Time Orders can be found here.

Note: the decision of Sheriff McIntyre is not binding on other sheriffs

The Home Owning Betrayal: Support for Mortgage Interest

The Home Owning Betrayal: Support for Mortgage Interest

After the home ownership revolution of the 1980s and 1990s, when millions of tenants were sold the dream of owning their own home, the UK Government is now rolling out the final chapter in that dream for many. The proposed changes to the Support for Mortgage Interest Scheme reads like an original Grimm Brothers fairy tale. Once you’ve read the contents of the new plan, it’s a bit hard to believe it’s appropriate for its intended audience.

Make no bones about it, the new dream is a cruel and barbaric one, which discriminates against the most vulnerable households, many of which have been at the blunt end of welfare reform for the last 8 years.

From the 6th April 2018, those households currently in receipt of what is known as Support for Mortgage Interest (SMI) are being presented with a choice, if they want to continue to have the support, they must accept it will be in the form of an interest-bearing, secured loan. Alternatively, they need to work out themselves how they are going to keep the roof over their head.

Support for Mortgage Interest (SMI)

The Support for Mortgage Interest Scheme was introduced in 1948 by the Clement Atlee Government. It extended housing cost assistance to home-owners like housing benefit provided support for tenants for periods of unemployment, illness, or eventual retirement.

In its current form, to claim the benefit you must be in receipt of a qualifying benefit and it is only payable after 39 weeks (which is intended to encourage homeowners to save or take out payment protection insurance – in the case of those who are in receipt of pension credit, they become entitled immediately). It also only pays the first 2.6% of any monthly interest payment for loans up to £200,000 (or £100,000 where someone is a pensioner). Where interest rates are higher, the homeowner must make up the shortfall and nothing is contributed to the capital repayment of the mortgage.

The new scheme, it is argued, is necessary, as the current £205 million costs are unsustainable. This is even though people can still have their mortgage interest paid if they sign up to it and the Government will not save any money immediately. Also, if you consider the amounts involved, the current costs are less than 5% of what is being spent throughout the UK in other housing benefits.

It has also been argued, it is only fair, as otherwise people and their families will benefit from rising equity in their property and this will be at the expense of the taxpayer (obviously not a concern for many Members of Parliament who buy properties then rent them to other MPs at the expense of the taxpayer).

However, the truth is no-one has ever had their mortgage or home loans paid off by SMI (although plenty of private landlords do get theirs paid via Local Housing Allowance). Also, a significant number of those involved are pensioners and many are already facing other problems such as they still only have interest only or partial repayment mortgages, which means even when their mortgages mature, they will still be left with a substantial shortfall (one in five UK mortgages are currently believed to be interest only or on a partial repayment basis).

In addition to this, there are now rising concerns that the effect of the new scheme will be many households will not sign up, fearful they will get into more debt and will end up in arrears.

A recent freedom of information request by mutual insurer Royal London, found of the 124,000 currently receiving support, only 6,850 homeowners had signed up. As a result, they have called for the UK Government to delay the roll out of the Scheme.

The real fear is the Government will scare off tens of thousands from applying for support and the price of this will be thousands going into arrears and facing repossession.

The Final Chapter in a Grimm Tale

The truth is this is a betrayal. The final chapter in the Grimm Brother fairy-tale of home ownership that successive conservative governments sold in the past.

For many the other chapters involved them being enticed into buying their council and housing association homes in the 1980s and 1990s, often inappropriately. Subsequent chapters involved them being sold interest only mortgages, with inappropriate endowment policies which were never going to adequately pay off the capital amounts owed at the end of the mortgage terms. Then there were the home development loans for new driveways, double-glazing and kitchens, all secured over their properties.

Then there were the mis-sold payment protection policies that people took out in the belief they would provide adequate insurance against unemployment and illness.

Finally, there was the over-arching theme of the story that if you worked hard, paid your taxes and national insurance contributions, then the welfare state would protect you later in life if misfortune fell upon you.

But it was all a fraud.

For many the dream has been a story of being mis-sold, poorly advised and over-indebted.

Just like the fraud the UK Government is telling us now that this new scheme is a way of saving UK taxpayers money. It won’t.

If people do lose their homes or feel they must sell them, then it’s likely we will all pay more when we are paying their housing benefits or local housing allowances.

If you are affected by the changes to the Support for Mortgage Interest Scheme, it is important you seek advice.

Contact the Scottish Financial Health Service or Citizen Advice Scotland.