Introduction to the new diligences
One of the intentions of the Executive has been to modernise debt enforcement in Scotland and to introduce mechanisms so that all assets are capable of being attached by diligence to satisfy decrees for payment. The Bill proposes the introduction of three new forms of diligence :
- Land attachment
- Money attachment
- Residual attachment
At the present time the only way an unsecured creditor can obtain security over a debtor's heritable property (land) has been to use an ancient form of diligence called adjudication. In practice while creditors often took steps to inhibit the sale or disposal of land owned by a debtor, very few used the procedure of adjudication to obtain a security or an order for sale of the land. This was mainly because the creditor had to wait for a period of ten years to expire before the property could be sold.
The new diligence of land attachment has two stages and will allow (1) creditors to obtain a security over a heritable property and in the right circumstances (2) the sale of the property.
To proceed with land attachment a creditor must have obtained a decree from the court or hold a document with equivalent effect to a court decree. The creditor must then serve a charge for payment on the debtor and the 14 day notice period must expire without payment. The land attachment is then created by a notice of land attachment being registered in the property and personal registers. The security becomes effective 28 days after registration.
Under the current law, money (coins, banknotes and negotiable instruments) is not subject to diligence in Scotland. Creditors have been unable to seize money belonging to debtors; it is possible to arrest bank accounts, but here it is the obligation owed by the bank to the customer that is the subject of the diligence, not the money itself. To fill the gap the Bill introduces a new form of diligence, money attachment.
As with land attachment the creditor will have to constitute the debt by a decree or equivalent document of debt and a charge will have to be served and expire without payment before money attachment is competent. It will not be possible to attach money in a debtor's home but it will be possible to attach money held in other places, such as takings in a business. The money attachment will be executed by messengers of court who will be able to uplift and remove money subject to the attachment. The bill sets out a presumption of ownership so that the messenger of court can assume that any money found at a debtor's place of business belongs to the debtor unless the messenger has knowledge to the contrary.
This third new form of diligence will allow creditors to attach and realise assets which are not subject to any other form of diligence. The types of property that will be subject to residual attachment will include : intellectual property rights, interests in trusts, annuities and some leases. Again the creditor must hold a decree or equivalent document of debt and must serve a charge for payment before the property can be attached.
We will look at the procedure for the sale of attached property in the next bulletin.