What is an Inhibition?

An Inhibition in Scotland is a form of diligence, which means a formal, legal debt recovery tool.

It allows a creditor to stop you from selling your home, or re-mortgaging it, without paying them.  It does not give them the right to sell your home.

It is a preventative diligence, in that it prevents you from doing something with your assets, such as selling land or remortgaging your home. 

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How do Inhibitions Work?

How an Inhibition works is it is made against an individual, not a specific property, and registered in the Register of Inhibitions.

It affects all property that are heritable, such as land and buildings, but does not effect property that can be subject to an Attachment Order

The way an Inhibition works is anyone who is buying a building or land in Scotland has to have their solicitor check the Register of Inhibitions (see here for more information) before any sale can go through.

If the person who is selling the land or building has an Inhibition registered against them, the buyers solicitor will not proceed with the sale, as to do so could put at risk the buyer’s title to the property. 

The person who has the Inhibition registered against them, therefore, has to agree with the creditor who registered it that they will be paid off in full before the sale of the property completes.

Who can use Inhibitions?

Inhibitions can be registered by any Creditor who has obtained a decree or a Document of Debt against someone.

A Decree is a Court Order and has to contain an order for payment of money for an Inhibition to be registered.

Alternatively the Court Order may contain alternative orders, such as the return of a car or failing which, the payment of money.

Where a decree contains two options like that, an Inhibition can still be registered, but on the return of the car, or the payment of the money, the lender is obliged to recall the Inhibition.

Inhibitions can also be registered with a Document of Debt, which may be a legal agreement that has been registered for preservation and execution in the Books of Council and Session. This means the case never calls in Court.

The process used to register this type of Inhibition is called Summary Diligence and can be used for credit union loans, landlord leases and landlord guarantees.

It cannot be used for consumer credit debts that are regulated by the Consumer Credit Act 1974.

Summary Warrants and Inhibitions 

Where Local Authorities or HMRC use the Summary Warrant procedure to collect Council Tax or other taxes, they cannot use Inhibitions.

This is because Inhibitions are a type of land diligence and land diligence cannot be used with the Summary Warrant procedure.

This does not prevent Local Authorities or HMRC using Inhibitions altogether, it just means if they want to, they need to raise a normal court action, like other creditors do, and get a Decree.

Registering an Inhibition

When a Creditor has a Court Order or Document of Debt, they do not need to serve a Charge for Payment before using an Inhibition.

They only need to serve a Notice of Inhibition to the Consumer to say they intend to register the Inhibition in the Register of Inhibitions. After 21 days the Inhibitions becomes effective.

All property such as land and buildings owned by the Consumer, on the date the Notice is served, is caught by the Inhibition.

What Powers does a Inhibition give a Creditor?

A Creditor that register an Inhibition has the power to stop the person that owes them money from:

• Selling their property;
• Securing more debt over their property, (including re-mortgaging it);
• Gifting their property to someone else.

It does not give the Creditor the right to force the sale of the property or force the owner to sell it.

Where the property is in joint ownership, the Inhibition only affects the owner who has the Inhibition registered against them.

In practice this does not mean the other owner can re-mortgage, but does mean if the property is sold, the debt owed to the Inhibiting Creditor, can only be paid from the debtor’s share of the equity.

The other owner must be paid their money in full.

How long does an Inhibition last?

Inhibitions do not last until a debt is paid off, although on the payment of a debt, they should be removed by the creditor.

Inhibitions automatically expire after five years.

However, the Inhibiting Creditor can re-register the Inhibition after the five years.

However, if the Inhibiting Creditor forgets to re-register the Inhibition, the owner of the property can sell it unencumbered by the Inhibition.

How does the Debt Arrangement Scheme affect Inhibitions?

The rules governing the Debt Arrangement Scheme are very clear.

Once someone is in a Debt Payment Programme, it is not competent for a creditor to execute diligence.

Section 4 (2)

It is not competent….
(b) subject to subsection (2A),other than under subsection (2A), to commence or execute any diligence to enforce payment of…..any debt owed by a debtor who has debts which are being paid under an approved debt payment programme.

Debt Arrangement and Attachment (Scotland) Act 2002

This includes registering an Inhibition, although some Creditors argue it does not apply to Inhibitions.

It does not, however, prevent a Creditor relying on an Inhibition that was registered prior to the Debt Payment Programme being approved.

Where there are doubts, legal advice should be sought.

Inhibitions and Bankruptcy and Protected Trust Deeds

A debt that has been secured by an Inhibition is treated no different from any other unsecured debt in a Sequestration or a Protected Trust Deed.

When the debtor’s liability for the debt is discharged at the end of the Protected Trust Deed or Sequestration, it should be removed by the Inhibiting Creditor.

Comments

  1. Kerry

    Can you apply for an inhibition order against property that is held on trust for a partnership?

    1. Scottish Adviser Post author

      Hi Kerry

      It is likely some legal advice is required for this.

      Inhibitions are personal and are, therefore, over the person not the property. They affect all heritable (houses, land etc.) that is held by the person.

      The type of person they can be registered against are natural or legal persons. Legal persons include partnerships and trusts.

      It, therefore, depends on who the court order is against (and it is worth remembering partners can be held liable for partnership debts, unless it is a Limited Liability Partnership) and whose name the property is registered under on the title deeds.

  2. Aneka

    I have a joint mortgage with my son who is the sole owner on the title deeds (sole owner proprietor). He got family help to pay the deposit so the mortgage is 50% of the property value. Stupidly there is no legal agreement that protects me in this situation. I am now paying the mortgage. He is not working and is making illegal life choices that I could never ever foreseen (total personality and attitude change and using the property for the illegal sale of substances). I have tried many many times to help him emotionally and financially but he is not cooperating (has not paid a penny to his debts in over a year and I can no longer help).

    Legal advice is that I can stop paying the mortgage which will lead to repossession of my son’s home (in which case I would not see him homeless) OR take court action to recover the mortgage payments and then lodge an inhibition.

    I have no income so the mortgage payments are eating into my small savings. I do not own a property.
    My son is in the process of applying for a DAS (he claims he hasn’t included the mortgage in it).

    My questions are:
    1) How much is a court order and inhibition likely to cost me? A rough estimate please.
    2) If I am continually paying the mortgage and costs continue to rise will that be reflected in the inhibition? Say he owes me £10,000 in mortgage payments at the time of the inhibition but in four years time owes me £20,000 will that be reflected in the inhibition?
    3) If my son gets a DAS will that affect my ability to get the inhibition? He claims he is not including the mortgage in his DAS.
    4) Is there anything else I should be aware of?

    Any information or advice would greatly ease my stress and ability to choose the right course of action. Many thanks.

    1. Scottish Adviser Post author

      Hi Aneka

      Unfortunately, this is not an easy situation and I cannot give you personalised advice. However, I can give you some basic information.

      First, I could not say how much a court order and an inhibition would cost you, but a lawyer should be able to give you an estimate, but costs can vary if the action is defended. There is also no guarantee you will succeed in getting a court order. Nothing is a certainty.

      Also, Inhibitions don’t allow you to sell the property, only to recover what you are owed if your Son tries to sell or remortgage it.

      Also, the Inhibition will only cover the amount the decree is for. It does not increase if the debt increases, though the amount should increase by 8% per annum with the judicial rate of interest.

      Arguably, if your Son’s DAS is approved before you register the Inhibition, then there is an argument you cannot register it if your debt is included.

      If your debt is not included in the Debt Arrangement Scheme, then arguably you could still apply the Inhibition, although your Son could try and include your debt into the DAS through a variation.

      You can only include mortgage arrears into a DAS, so it there are no arrears, he won’t have included it. If he has, then at least the DAS will be making payments to them.

      As far as anything else goes, I would say you need to seek legal advice. Not paying the mortgage may be the only solution, as it may make your Son face up to his responsibilities if he is at risk of losing his home. There also is substantial equity in his home, so this would allow you the chance to recover some of what you are owed.
      He also may lose his home, but that doesn’t mean he will become homeless. He may get social housing or a private tenancy. Its his decision if he doesn’t want to pay the mortgage.
      On a positive note he is entering the Debt Arrangement Scheme to deal with his other debts, so this is responsible and means he is dealing with them. That is a positive sign. Maybe you should say to him if he is serious about the DAS he has to include in his expenditure a provision that allows him to pay his mortgage. That is standard good practice anyway.
      Finally, you should maybe try to speak to him again or if not you, is there another family member who can. Its not uncommon for children to not understand their parent’s financial circumstances.
      If he is used to you just paying everything, he might assume you can just keep doing this to help him.
      Explain your situation to him and don’t give him the choice, tell him you cannot pay the mortgage anymore and ask he speaks to his debt adviser about how much he has to pay, as otherwise he may lose the home.
      If you cannot do it and no-one else can, get a lawyer to send him a letter. That should not cost too much.
      I wish you all the best.

      1. Aneka

        Many many thanks. I think I will sleep better after this.

  3. Dominika

    Hi,
    How many times , after expiring, can inhibition be placed on the the same property?

    1. Scottish Adviser Post author

      Hi Dominika

      I am not aware of any limit to the number of renewals that can be made, providing the debt it is trying to safeguard still exists.

      This is where the Law of Prescription becomes relevant, and as the debts protected by an inhibition will probably have a court order enforcing them, the 20 year prescription rule will apply, and that of course can start running again everytime the debt is relevantly acknowledged or a relevant claim is made.

      One thing though, there can sometimes be gaps between when inhibitions expire and can be renewed, if the creditor is not attentive to the expiry date every five years. If this happens, no inhibition will affect the property.

  4. Debs

    Hi

    My factors have placed an Inhibition on me which I found out about today for the first time because I was due to complete the sale of my property next week. My lawyer has said this now can’t go ahead as there isn’t any profit to pay off the debt. They sent this to an old address and I found out about it today. I don’t have the money to pay it. If I am sequestrated does the inhibition disappear as part of the sequestration?

    1. Scottish Adviser Post author

      Hi Debs

      Inhibitions are personal, so what this means is they affect your ability to deal with any heritable property you have, such as a flat.

      This mean you cannot remortgage, sell or gift the property without getting permission from the inhibiting creditor, who can prevent you doing any of these things without their permission or until the debt is paid.

      Inhibitions last 5 years, but can be renewed by the Creditor.

      You don’t say how much profit there will be from the sale of the property. If there may be some, even if not enough to pay the debt in full, they may agree to the sale if they are going to receive a partial payment from the sale. They will only agree to this if you give your solicitor an irrevocable mandate that allows him to pay any profit over to them.

      This would mean there is still a debt to be paid, but you could then offer to repay them this by instalments afterwards.

      If there is not likely to be any profit to pay them, they will be less likely to allow the sale, but equally if they think you are just going to stop paying the mortgage and let the mortgage provider force the sale of the property and then go bankrupt for any debt left over, getting even a committement to enter a repayment plan with them may be better than nothing.

      If you do go bankrupt, Inhibition debts no longer get any priority over other debts, such as credit cards and loans, so the debt is included in the bankruptcy and your liability for it is discharged when your discharged for other debts. Inhibiting Creditors can make a claim in the bankruptcy like any other ordinary creditoe, but are effectively treated the same. So if they get 3p in the £, so does the inhibiting creditor.

      This is important as if you go bankrupt, your Trustee in Bankruptcy has a choice. They can sell you property themselves if there is any profit to be made, particularly if you don’t object and the proceeds will go to them. They then pay off any mortgage, the costs of the sale and then can use the sum to pay their fees. If there is any money left this goes to the Creditors, but the Inhibiting Creditor doesn’t get paid first over other debts like credit cards and loans, they just get a share.

      You can see, therefore, even if there is some profit to be made from the sale of the home, its probably in their interests to agree to the sale, as if they don’t, you could go bankrupt and they will unlikely receive much if anything.

      For you it may help you avoid going bankrupt.

      It is entirely up them, however, and they can be what you may deem to be unreasonable if they want. However, it may be a letter to them from your solicitor explaining if they don’t want to come to an arrangement you will go bankrupt, and how this would not be in their interests, will result in a change of heart.

      If not, and you don’t want to keep the property you may have to go bankrupt. If your Trustee in Bankruptcy does not want to sell the property, which he may not if he doesn’t think it would be profitable enough, then the only option is to look at Voluntarily Surrendering your property to the mortgage provider to let them sell it.

      You should seek advice on going bankrupt before you go any further and on Voluntarily Surrendering your property to your Mortgage Provider.

      You can get free advice here if your Solicitor cannot provide it.

  5. Chris

    Hi how much would it be to place an inhibition order on a company who owe me money for a vehicle

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