Support for a new statute on heritable securities, rather than amending existing legislation, has been voiced by the Faculty of Advocates.
Faculty has published its response to the first discussion paper issued by the Scottish Law Commission in its review of the law regarding securities over land and buildings, or standard securities, as contained in the Conveyancing and Feudal Reform (Scotland) Act 1970.
In response to the Commission's question whether the 1970 Act should be repealed and replaced with a new statute regulating heritable securities, Faculty considers that there would be benefit in producing a new statute rather than simply amending the 1970 Act – though it agrees with the further suggestion that the standard securirty should continue to be the only form of heritable security that can be granted.
It further supports the abolition of the set forms, with the Act instead setting out the minimum requirements for a valid security, and a model form that parties can adapt.
Under the Act, standard conditions are applied by default to all standard securities, but the scheme has been found to be inconsistent and out of date.
Faculty states: "In our experience, the standard conditions are almost always varied by larger lenders (and often combined with further sets of default terms and conditions). As such, it seems to us likely that major lenders will wish to use a single, standard set of conditions. The present interaction between these lenders’ standard terms and conditions and the standard conditions in the… Act is unsatisfactory (and often produces security documentation that is hard to read or, worse, contradictory).
"In our view, therefore, it would be best if the new standard conditions remained default conditions only, with parties free to disapply them in their entirety."
It adds that the standard conditions should be contained in secondary legislation in order to allow for easier updating.
"In drafting the standard conditions, we would suggest that the most likely users of the default conditions would be smaller lenders and borrowers. The emphasis, in our view, should therefore be on a relatively simple set of conditions which can be used for a basic security by those who do not necessarily have the resources to produce more complex documentation."