ANALYSIS: How did the row start? The UK Government announced this week that it was toughening up the rules on repossessions in England and Wales to help protect homeowners as Britain spirals towards recession.
How did the row start?
The UK Government announced this week that it was toughening up the rules on repossessions in England and Wales to help protect homeowners as Britain spirals towards recession. Ministers moved after calls for action sparked by allegations that newly nationalised Northern Rock was using bullish tactics against struggling borrowers.
What are the new rules?
A new pre-court protocol will require lenders seeking a repossession order to prove that they have tried to find alternative solutions to help avoid mortgage holders losing their properties. UK ministers also said the Financial Services Authority (FSA) should regulate firms which buy property cheaply from struggling borrowers and rent it back to them.
How do the rules affect Scotland?
The FSA consultation covers Scotland, England, and Wales in the same way. However, the court protocol does not apply north of the border because Scotland has a different legal system.
The Scottish Government yesterday claimed that Scots were already better protected than borrowers south of the border through the Mortgage Rights (Scotland) Act 2001. Under that act, an owner has the right to ask a sheriff for extra time to pay off arrears or to find somewhere else to stay, and sheriffs can take account of the owner's circumstances and action taken by the lender.
The Scottish Government said that, in the current circumstances, it would expect sheriffs to "exercise that discretion" over the statutory protection against repossession, which was not available elsewhere in the UK. Scottish ministers added that the new protocols for England and Wales "only encouraged parties to exchange information early", which was also provided for under the 2001 Act.
Is the Scottish Government right?
Not according to legal experts and opposition politicians who said that, while Scots were better off before the new protocol, they are now at greater risk of having their homes repossessed than borrowers south of the border.
Solicitors said that, until the new rules were announced, Scottish borrowers had the advantage because of their right to ask for a stay of execution under the act. But now borrowers south of the border have greater protection because the new protocol puts the onus automatically on lenders to prove they have done everything possible to avoid repossession.
As a result, Scots are disadvantaged, because the onus remains with them. And unlike borrowers in England and Wales, Scots are not guaranteed legal aid.
What do the experts think should be done?
Mike Dailly, principal solicitor at Govan Law Centre, believes that Scots borrowers should be given the same free legal representation as those south of the border. Reforms are also needed to change the situation where under Scots law homeowners are forced to pay for lenders' legal expenses, giving lenders an incentive to raise proceedings and creating a disincentive for borrowers to take their fight through the courts.
Where does that leave Scottish homeowners meanwhile?
That depends who you believe but, with the Scottish Government stressing last night that it would act if Scotland was found to be worse off, it looks as though Scots borrowers may see new measures emerging after all.
