Section 88 — Protection of purchaser under contract where creditor applies for warrant for sale

Bankruptcy and Diligence etc (Scotland) Bill: Stage 3 – in the Scottish Parliament at 3:15 pm on 30th November 2006.

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Photo of Murray Tosh Murray Tosh Conservative 3:15 pm, 30th November 2006

We come to group 18, on land attachment and protection of purchaser under missives. Amendment 70, in the name of Murdo Fraser, is the only amendment in the group.

Photo of Murdo Fraser Murdo Fraser Conservative

I fear that this group, unlike the last, will be of limited interest, other than to commercial lawyers. As I have been a commercial lawyer myself—and, who knows, I might have to be one again—it is of considerable interest to me. [ Applause. ] I thank my fellow members for that vote of confidence.

Amendment 70 originated with the Law Society of Scotland, and requires the sheriff, when considering whether to make an order under section 88(2),

"to have regard to the desirability of securing that a person who, before the notice of land attachment was registered, has completed missives for the purchase of the property is able to acquire title to the property."

The bill, as currently drafted, recognises that a warrant for sale following an effective land attachment may adversely affect the position of an innocent third party who, in good faith, contracted to purchase the property prior to the attachment.

Following the recommendations of the Scottish Law Commission report on diligence in 2001, the bill includes a dual mechanism to protect such purchasers, first by providing that a warrant for sale cannot be granted until six months have elapsed since the registration of the attachment, and secondly by allowing purchasers to make representation to the sheriff, who may sist the application to allow the purchase under contract to be completed.

In most standard conveyancing transactions, as members will be aware, six months is sufficient for completion, and that mechanism will provide adequate protection for purchasers under the prior missives. However, a significant minority of transactions cannot be completed within a six-month timescale, usually because the transaction is dependent on the granting of planning permission, which can often be a lengthy process, particularly if an appeal is involved. Although it is still open to the sheriff to sist the application in such cases, there is a legitimate concern that the legislation offers no further guidance in that decision-making process, and that it leaves open the possibility that an application will not be sisted and a warrant for sale granted. The effect of transactions of that kind, which often involve the investment of large sums of money, may be greatly prejudiced if the purchaser has little in the way of guarantee that the transaction will be safeguarded against the intervention of a land attachment, possibly for as little as £3,000.

At stage 2, I introduced a similar amendment, which the committee voted on and disagreed to, as it would have obliged the sheriff to sist the application for a warrant for sale and required the prospective purchaser to pay the price under the contract to the creditor, where missives for the purchase of the land had been entered into, before the land attachment was registered. During debate on that amendment, the minister said that the best way forward in such a case was to allow the contract to be completed, but he raised concerns that the amendment would not allow the sheriff discretion not to sist, particularly when there was likely to be a sizeable delay before the purchase price would be payable.

Amendment 70 is designed to accommodate those concerns by placing no obligation on the sheriff to sist. It would simply require the sheriff

"to have regard to the desirability of securing that a person who, before the notice of land attachment was registered, has completed missives for the purchase of the property is able to acquire title to the property."

It would not remove the sheriff's discretion; it would simply offer guidance on the outcome that should be aimed for. It would allow the sheriff to proceed with the application for land attachment when they felt that it was appropriate, for example when the delay involved would be excessive. I hope that that is sufficient explanation.

I move amendment 70.

Photo of Murray Tosh Murray Tosh Conservative

At this stage, I should say that I am using my power under rule 9.8.4A of the standing orders to extend the next time limit by 10 minutes.

Photo of Allan Wilson Allan Wilson Labour

Section 88 allows the sheriff to suspend an application for the sale of land if satisfied that the debtor should be allowed to sell the land to a buyer. As has just been said, in many cases it will make sense for the buyer to take the land, which is one reason why there is a minimum six-month gap between attachment and sale and why the bill allows a buyer to ask the court to suspend an application for a sale order.

Amendment 70 purports to help the sheriff decide whether to suspend the application by having regard to the desirability of allowing the buyer to take title. That prompts the obvious question—desirable for whom? It will undoubtedly be desirable for the buyer, but it may be very undesirable for the attaching creditor.

It is worth keeping in mind the fact that in most cases the attaching creditor will have no particular need to prevent the buyer from taking the land.

The creditor has a security and will have to be paid if the buyer is to get good title. The creditor would want to prevent only a sale that is harmful to them, for example if the price was so low that they would not be paid, perhaps because the land was being sold for less than it was worth. It may not be desirable for the buyer to take the land in those circumstances.

It is clear that there is a flaw at the heart of the amendment. It would bring confusion rather than clarity. Section 88 allows the sheriff to decide what is best in the circumstances, balancing the interests of all concerned. We should leave that matter to the good sense of the sheriff. If the buyer makes a good case, the sheriff will sist the application. If not, the sheriff will refuse. Therefore, I ask Murdo Fraser to withdraw amendment 70.

Photo of Murray Tosh Murray Tosh Conservative

I can give Mr Fraser two minutes to wind up.

Photo of Murdo Fraser Murdo Fraser Conservative

Thank you, Presiding Officer. I do not think that I will take two minutes.

I listened to the minister with great interest. Amendment 70 deals with an important point. We are seeking to create certainty in the purchase process to aid future investment and development. Without the amendment, the bill will create a degree of uncertainty that will not be helpful for future purchases. I intend to press the amendment.

Photo of Murray Tosh Murray Tosh Conservative

The question is, that amendment 70 be agreed to. Are we agreed?

Members:

No.

Division number 17

For: Adam, Brian, Aitken, Bill, Baird, Shiona, Ballance, Chris, Ballard, Mark, Brocklebank, Mr Ted, Brownlee, Derek, Cunningham, Roseanna, Curran, Frances, Davidson, Mr David, Douglas-Hamilton, Lord James, Fabiani, Linda, Fergusson, Alex, Fox, Colin, Fraser, Murdo, Gibson, Rob, Harper, Robin, Harvie, Patrick, Hyslop, Fiona, Johnstone, Alex, Leckie, Carolyn, Lochhead, Richard, MacAskill, Mr Kenny, Marwick, Tricia, Mather, Jim, Matheson, Michael, Maxwell, Mr Stewart, McFee, Mr Bruce, McGrigor, Mr Jamie, McLetchie, David, Milne, Mrs Nanette, Mitchell, Margaret, Monteith, Mr Brian, Morgan, Alasdair, Neil, Alex, Petrie, Dave, Robison, Shona, Ruskell, Mr Mark, Scott, Eleanor, Scott, John, Stevenson, Stewart, Swinney, Mr John, Watt, Ms Maureen, White, Ms Sandra
Against: Alexander, Ms Wendy, Arbuckle, Mr Andrew, Baillie, Jackie, Baker, Richard, Barrie, Scott, Boyack, Sarah, Brankin, Rhona, Brown, Robert, Butler, Bill, Canavan, Dennis, Chisholm, Malcolm, Craigie, Cathie, Curran, Ms Margaret, Deacon, Susan, Eadie, Helen, Finnie, Ross, Gillon, Karen, Glen, Marlyn, Godman, Trish, Gordon, Mr Charlie, Gorrie, Donald, Henry, Hugh, Home Robertson, John, Hughes, Janis, Jackson, Dr Sylvia, Jackson, Gordon, Jamieson, Cathy, Jamieson, Margaret, Kerr, Mr Andy, Lamont, Johann, Livingstone, Marilyn, Lyon, George, Macdonald, Lewis, Macintosh, Mr Kenneth, Maclean, Kate, Macmillan, Maureen, Martin, Campbell, Martin, Paul, May, Christine, McAveety, Mr Frank, McCabe, Mr Tom, McConnell, Mr Jack, McMahon, Michael, McNeil, Mr Duncan, McNulty, Des, Muldoon, Bristow, Mulligan, Mrs Mary, Munro, John Farquhar, Murray, Dr Elaine, Oldfather, Irene, Peattie, Cathy, Pringle, Mike, Purvis, Jeremy, Radcliffe, Nora, Robson, Euan, Rumbles, Mike, Scott, Tavish, Smith, Elaine, Smith, Iain, Smith, Margaret, Stephen, Nicol, Stone, Mr Jamie, Swinburne, John, Turner, Dr Jean, Wallace, Mr Jim, Whitefield, Karen, Wilson, Allan
Abstentions: Byrne, Ms Rosemary, Sheridan, Tommy

Photo of Murray Tosh Murray Tosh Conservative

The result of the division is: For 44, Against 67, Abstentions 2.

Amendment 70 disagreed to.