Standard Securities Flashcards
What is a standard sec.
Document signed by person(s) taking out a mortgage agreeing to the mortgage lenders terms & conditions
Function of standard sec.
When a bank, building society or other lending institution makes money available for the purchase or financing of heritable property, it will require among other things, to be granted a fixed charge over the title to the property.
That fixed charge will be registered against the borrower’s title to the property and gives the creditor a certain amount of control over the voluntary sale of the property, effectively preventing the borrower from selling the property and making off with the sale proceeds without repaying the loan
How does it differ from personal loan?
The Standard Security is the only form of document by which a fixed charge over heritable property in Scotland may be created
Personal loans – You normally borrow a fixed amount, repayable by set monthly instalments over an agreed period of time, called the term of the loan.
Personal loans are unsecured loans and standard securities are secured loans (secured over your property). With an unsecured loan, your house is not immediately at risk if you fall into arrears, although the lender can take court action to make you pay the money back.
Can a client grant more than one standard security over their house?
Yes – but not everyone can be first in the queue for repayment in the event of a sale of the property. Instead, multiple securities rank in relation to each other, in accordance with the rules of priority, which will determine the order in which they are entitled to payment in the event of enforcement of these securities.
What is the difference between a Form A and a Form B type Standard Security?
Form A is used where both the personal obligation of the debtor as well as the details of the mortgage and the grant of security over the property are all contained in one document.
Form B just contained the grant security over the property and the personal obligation and sometimes also the details of the mortgage do not appear on the face of the security, but are contained in a separate unregistered document.
In what piece of legislation can you find these?
Schedule 2 of the Conveyancing and Feudal Reform (Scotland) Act 1970
what transaction for type A?
Form A is the one that is most widely used by lenders in residential mortgages
You act for a client who is selling their current home and buying a new one – with the same date of entry for both transactions. They tell you on the phone that “they are just keeping their current mortgage as they intend to stay with Santander”, their current mortgage provider and that “you won’t need to do anything with the paperwork on that front” (as their lawyer) Are they correct?
They are not correct. discharge appropriate
Assignation?
change of lender
there are two styles of assignation. These are contained in Schedule 4 to the 1970 Act and may be in Form A (a separate document) or Form B (endorsed on the standard security).
consent of borrower not needed
must be registered
Variation?
would deal for example with changing the debtor (eg transferring title to the property and the corresponding security from joint names to just one of the parties) or to correct an error in the original standard security, or to alter some of the original lending criteria
Deed of restriction?
operates to restrict the terms of the standard security by removing part of the security subjects from its ambit, and can also operate as a partial discharge of the standard security.
Discharge
a document that discharges the standard security in its entirety. If the title to the property is still in the Sasines Register, the discharge will induce a first registration since the Sasines Register is now closed to standard securities.
What problems might arise for a solicitor who is acting for both borrow (the purchaser) and lender in a residential transaction?
The terms of the loan must have been agreed between the parties before the solicitor has been instructed by the lender and the granting of a security must only be to give effect to such agreement.
Solicitors must not reveal information to one client and not the other. If solicitors find themselves in possession of information that is clearly detrimental to one of the parties, they are under a duty to reveal it to the other party, for whom they also act
how you should approach acting for a husband and wife in the purchase of a house or grant of a standard security. When must particular care be taken and what approach should be followed?
it should be remembered that husband and wife have separate interests and the solicitor must ensure that both partners signing the standard security understand its terms and effect
Standard Conditions
elate to practical matters aimed at preserving the value of the property, such as maintenance and repair, alterations and letting of properties, as well as enforcement such as calling-up and notices of default.
