standard security

Question 1

what is a standard security

Answer 1

• introduced in 1970
• only form of document through which a fixed charge over heritable propery may be created
• the 1970 Act introduced a codified set of conditions which automatically apply to the provision of any standard security

Question 2

Form A

Answer 2

• used when both the personal obligation of the debtor aswell as the details of the mortgage and the grant of security over the prop are all contained in one document - a postal adress or other common law descritpion will be sufficent.

Question 3

Form B

Answer 3

• the grant of security over the prop 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 sep document
• omits the personal obligation the amount of loan, te rate of interest and repayment details

Question 4

the 2 components the security must contain

Answer 4

• the obligation to pay or perform an the grant of sec over the prop
• if the personal obligation is sep it can be referred to in dif standard securities

Question 5

A direct security

Answer 5

one which is granted over the prop the he owns, in sec of his debts and obligations

Question 6

an indirect security

Answer 6

• one where the borrower grants the personal obligation to pay or perform in respect of the debt or the obligation, but someone else grants the sec over prop owned by that third party.
  before this is awarded the third party needs to gain idnependant legal advice.

Question 7

assigning

Answer 7

• when assigning a form B sec need to ensure the personal obligation is also assigned.
• if it assigned the priority of the sec is reserved

Question 8

changes

Answer 8

• variation - change that is not a change of lender, or a change to the amount of area - could be if getting a divorce
• deed of resrtiction - resricts the standard sec by removing a part of it from its ambit, could also be a partial discharge of the sec. need a full descritpion of the subjects being disburdened
• discharge the standard sec entirely - form F scehdule 4 - if in the sasines reegister need to be reg here aswell

Question 9

where can the standard conditions be found

Answer 9

• in the schedule of the 1970 ACt

- standard conditions are viable, non- varaibel and partially variable.

Question 10

the steps that need to be taken if working for both lender and purchaser

Answer 10

• receive and acrefully read the lenders instructions
• check provisions of cml handbook for particular lender
• after examining the tite draft the standard security
• have the papers signed by the borrowers
• need to get non-entitle spouses cosnent if neccessary
• get matrimonial homes or civil partnership declarations if single
• send the report on tittle to the lender and the request the funds, this should be done in sufficent time for settlement
• intimate any assignation of life assurace
• check an insurance requirments

Question 11

the cml handbook

Answer 11

• part 1 is the main set of instructions that apply to all lenders
• part 2 is specific for the lender

Question 12

cautionary wives

Answer 12

a husband and wife have seperate interests

Question 13

third party

Answer 13

if goign to take sec from a third party for the indebtedness of a borrower need to ensure that third party seeks independant legal advice. need to show good faith throughout

Question 14

how to prove good faith

Answer 14

• warning the third party of the cosnequences, and advising them to seek legal advice
• it applies to whenever the third party is in a non-business relationship with the person with the principal obligation to repay the debt
• can be setaside if you don’t take these steps

Question 15

proving undue influence - gray v binny

Answer 15

1. the existence of a relationship between the parties which creates a dominant or ascendant influence
2. the fact that confidence and trust arose from the relationship
3. the fact that material and gratutious benefit was given to the prejudice of the granter
4. the granter had entered into the transaction without the benefit or independant advice or assitance.

if all 4 elements exist then the lender should be put on notice

Question 16

commercial lender

Answer 16

borrowers and lenders can be rep by the same solicitor if it for less than £250,000
for it to be commercial it has to relate to business purposes

Question 17

types of conflict that may arise

Answer 17

• dislcosure of all relevant circumstances
• ongoing negotiations - if negotiations are at the outline phase
• defects in title/ due diligence package
• securities by companies
• competing creditors ranking agreements
• sec over commercial prop
• leased prop as sec
• enforcement of sec
• powerful clients
• ‘all sums due’ security

Question 18

registration of charges

Answer 18

• when a standard sec is granted by a company you need to reg the details of that comp within 21 days.
  if not the charges are then void and the lender has no rights

Question 19

date of creation

Answer 19

• standard sec - date of recording in one of the registers
• floating charge - date of execution
• ranking agreement - last date of execution

Question 20

charge?

Answer 20

charge of £13 for registering a standard security

Question 21

floating charges

Answer 21

• floars over the assets of the company
• need no consent from the holder to sell the assets until it is crystalised.
• the document can be in any from aslong as it is clear that is dor the purpose of securing a debt.
• they must be registered in the companies register
• when crystalised it becomes a fixed chrage over the assets they have at that point.

Question 22

pari passu

Answer 22

• is when securities are ranked beside each other. they are ranked first past the post an if 2 are regsitered in the same day then they are ranked equally.

Question 23

section 13 notices

Answer 23

the sec of a secured lender who recieves a section 13 notice will only have priorirty for any further advance notices it makes, if it is already committed to making them.

Question 24

calling up notice

Answer 24

• requires the owner of the prop to pay to the creditor the whole sum secured by the standard sec within 2 months of the date on which the calling up notice is served on him.
  can always do this unless
• agreed to restrict their ability under a standard sec
• where the creditor has recieved notice from the debtors trustee in sequestartion that the trustee intendeds to sell the sec subjects
• if the owner does not comply with the calling up notice then can use any remdies avaliable under the standard condition 10

Question 25

notice of defualt

Answer 25

• served in circumstances where there has been a breach of the terms of the standard sec and the breach is remediable
• have one month to remedy the defualt from the date which the notice is served
• typically sued when a debtor has fallen into arrears
• must be in the form set out in sechedule 6 form A of the 1970 act.

Question 26

section 24 court action

Answer 26

prior to rbs v wilson - creditors had the habit of going straight to section 24 action
- must be used after a calling up notice or a default procedure