14:18 PM, 3rd December 2010, About 13 years ago
Up to 3,000 cases currently before the courts are likely to be withdrawn by lenders who will have to start proceedings all over again as a result of the Supreme Court ruling that found lawyers have not served the right paperwork on homeowners in arrears with loans secured against their properties.
In the case Royal Bank of Scotland v Wilson, Supreme Court judges ruled the bank had misinterpreted the wording of the law and was at fault for not serving a ‘calling up’ or default notice on the borrowers who were in arrears.
The bank claimed that serving the notice was not required, but the judges ruled the law was misread and allowed the borrowers’ appeal.
This case concerned a family with £50,000 in arrears on business loans and overdrafts secured on their home and a neighbouring family home in Loanhead, Midlothian.
The bank sent a letter to the Wilsons saying: “I regret to learn that your indebtedness to the Bank as undernoted at our above Branch is not being repaid in accordance with arrangements and I have therefore to advise that unless within ten days from the date of this letter you effect repayment of the whole sums due to the Bank or, alternatively, make a substantial payment to account within that period coupled with acceptable proposals to take care of the remaining indebtedness I shall have no alternative but to institute proceedings against you for recovery.
“Such proceedings will involve expense for which you will be liable and it is therefore in your own interest to give this matter your immediate attention.”
The family claimed they did not understand the letter and just thought they were asking them to put their accounts in order and were not a threat to take their homes.
Standard practice in Scotland has meant lenders did not use a default notice and would start repossession proceeding based up on a letter stating the arrears.
This ruling now says this is insufficient and a default notice must be served before the case proceeds to repossession.