The Standard Security
Those buying or selling a home can often be tripped up by technical language when navigating their way up the property ladder. This is the first in a series of jargon-busting blogs which aim to clarify the meaning of certain industry terms. In this post we’ll examine the role of the Standard Security.
The mortgage industry is a huge part of the economy in this country and it has changed out of all recognition in the last 40 years. One constant in Scotland during that time, has been the Standard Security, introduced by The Conveyancing and Feudal Reform (Scotland) Act 1971. That is 47 years ago, and yet I can remember its introduction when I was a very young solicitor! There have been changes since the introduction of the 1971 Act but the basic document remains much the same.
The Standard Security is so called because it is the prescribed form of security over heritable property, allowable for a lender to use in Scotland (remember, we have our separate legal system). It enables the mortgage industry to function with a reasonable degree of simplicity because the document is straightforward in its terms and is backed up by a comprehensive set of rules contained in the 1971 Act.
In essence, the Standard Security is an acknowledgement of debt and an undertaking to repay. On being signed by the borrower and registered in the Land Register, it creates rights vested in the lender which are set out in the 1971 Act.
The most important right given to lenders is the right, in certain default situations, to evict the owner, recover possession of the security property and sell the property for value. Mortgage companies could not carry on business in any meaningful way without the Standard Security.
According to UK Finance, figures for the first quarter of 2018 relating to Scotland reveal 6,600 home movers, 6,900 first time buyers and 8,700 home owner remortgages. The scale of remortgaging is interesting – a possible appreciation that current offers are going to be replaced, sometime soon, with higher rates?
The amount borrowed in the same quarter was £1.85 billion for the first two categories and just over £1 billion for remortgages. This is a huge service industry, all based upon the Standard Security.