Social Inclusion, Housing and Voluntary Sector Committee, 20 Sep 2000

Meeting date: Wednesday, September 20, 2000

Official Report 181KB pdf

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Housing Bills

I welcome the witnesses from the Law Society of Scotland. I am terribly sorry for keeping you waiting. I welcome you warmly to the meeting. Thank you for the paperwork that you submitted. You probably know our procedure. I will ask you to introduce yourselves and give a brief introduction to your submission, then the committee will ask you questions. If there are issues that you wish to flag up for us, you will get the opportunity to do so.

Thank you. My name is Linsey Lewin and I am secretary to the Law Society of Scotland's conveyancing committee. The conveyancing committee has considered a number of the new bills from the Scottish Parliament. For today we have looked at the Mortgage Rights (Scotland) Bill.

Our spokesman for the bill is John McNeil, who has been a member of the conveyancing committee for more than 30 years, on and off. He is a former convener of the committee and a past president of the Law Society of Scotland. John is the senior partner at Morton Fraser, a well-established law firm in the city, which deals with conveyancing. The conveyancing committee has considered the bill and our briefing note is based on its comments. John also has comments to make on the Family Homes and Homelessness (Scotland) Bill, but in the main it is the Mortgage Rights (Scotland) Bill that we wish to comment on.

Before we came in, we were watching the television monitor and heard the questions that were asked of Cathie Craigie about the briefing note that we submitted a fortnight ago.

I wish to speak to two points on the briefing note. The first has already been raised: a sheriff's ability to grant a court order in relation to the suspension of a heritable creditor's rights. If the property in question is the debtor's sole or main residence, we feel that it is illogical—with great respect—to apply the proposed legislation when alternative accommodation is readily available to the defaulting debtor. For that reason, we think it right and proper that the applicability of the legislation should be to a debtor's sole residence.

As regards the notices that require to be served under the Conveyancing and Feudal Reform (Scotland) Act 1970, it is clearly provided that notices to the occupier of the property presuppose that he or she is a tenant and that the purpose of the notice is to put the tenant on notice. In some circumstances, the creditor—the lender—cannot recover the possession of the property without a court order.

We take the view that because one of the applicants for a stay of proceedings is the non-entitled spouse under the Matrimonial Homes (Family Protection) (Scotland) Act 1981—the spouse of the debtor, who is probably estranged but who carries on living in the matrimonial home and therefore has occupancy rights in the matrimonial home—he or she should be entitled to notice under the 1981 act. That does not appear to be provided for in the bill as drafted.

Those are the main points of principle we mentioned in the briefing note. The remainder of our points are mainly of a drafting nature and I hope that they can therefore be accommodated. If members of the committee wish to have any points clarified, I will do my best to do that.

I heard a few remarks about our suggestion that a stay of the effect of a calling-up notice should not be for the full five-year period. Cathie Craigie suggested that there may have been a misunderstanding on our part of the effect of a calling-up notice. With respect, that is not the case. We were fully aware of the fact that the purpose of having a five-year limit on a calling-up notice is that a calling-up notice expires after five years. If the court were to make an order limiting the period of suspension to less than five years, when the calling-up notice revived, that would mean that the defaulting debtor would require to pay the full balance of the mortgage.

We understand that that is the case, but felt none the less that the full five-year period was perhaps excessive from the point of view of the enforcing creditor and that it should be possible for the sheriff to impose a two-year period of suspension, followed by the right of the debtor to reapply for a further period of suspension of two years, making the total of four years a possibility.

Thank you. That was very helpful. I am sure that committee members will wish to engage with you on a number of those issues. I ask you to help the committee as we try to understand these bills. Can you give us a broad outline of the procedures that are currently used by creditors against the debtors who are in default? Can you explain to us the calling-up notice, the notice of default and the application to the court under section 24?

Yes, I think I can.

We are not all lawyers.

I am speaking from memory. Basically, there are three remedies under the Conveyancing and Feudal Reform (Scotland) Act 1970. I shall deal with them in order.

A calling-up notice requires to be served by the creditor on the borrower—the last named proprietor of the property as far as the Sasine register or the land register of Scotland is concerned—in terms of which it is stated that the borrower is in default to the extent of £X over X years and that the creditor requires those arrears to be cleared within two months, failing which the property may be sold.

Once the calling-up notice expires—and the debtor may dispense with the period of notice or agree for it to be shortened from two months to one month, or whatever—the heritable creditor, the lender, may proceed to sell the property under the statutory powers in the 1970 act, after due advertisement and after ensuring that the price that is achieved is the best that can reasonably be achieved, given the market conditions at the time.

To achieve a sale, if the borrower, the house owner, is still in residence and there is no kind of rapprochement between the debtor and creditor whereby some accommodation is made for paying off the arrears—a de facto, if not de jure, suspension of the calling-up notice—and if the parties have come to the end of their respective tethers, the creditor must go to the sheriff court for an application to recover possession of the property under section 24 of the 1970 act. That simple, short form of initial writ is presented to the sheriff court and is rarely defended, as there is no stateable defence in 99.999 cases out of 100. That is the logical progression from calling-up to recovery of possession.

A notice of default specifies the default and expires within one month. After the expiry of the default notice, the creditor cannot proceed to sell the property without acquiring an order to do so from the court. That is the basic difference. Although the default notice lasts only one month, it does not automatically, on expiry, allow the creditor to sell the property—although all the other remedies that are available to the creditor under the act can be instantly enforced.

Essentially, those are the procedures that are available under the 1970 act. As I am sure you have heard from the Council for Mortgage Lenders—whether verbally or in writing—most responsible banks, building societies and institutional lenders will bend over backwards before they invoke any of those proceedings. They may well instruct their solicitors to serve notices of default and/or calling-up, but on expiry of those notices they do not straight away proceed to exercise the ultimate sanction of selling the roof over somebody's head.

Although I am involved only as a practising solicitor, my firm acts for a number of very large lenders in a great deal of mortgage and recovery of possession work, and I understand that the creditor is forced to take the ultimate sanction only in a small minority of cases.

That was very interesting. You probably heard Cathie Craigie say that that happens because people often take action themselves. For example, they might receive notice that legal action is being pursued against them and leave the accommodation. Do you have any figures for how many people pursue those actions?

No, although I understand that the statistic stands at roughly 6,000 for any given year.

Can you give us a breakdown on how many creditors use different methods such as calling-up notices or notices of default?

I am sorry—I have no idea about the numbers of notices served. However, I can say that different major institutional lenders adopt slightly different practices. Although it is not appropriate for me to name names, I get the impression that there is an increasing tendency for the more thoughtful institutions to take all three steps at once when they come to the end of the road with negotiations with the borrower.

Last week, we heard evidence from Shelter and the Scottish Council for Single Homeless, both of which are very supportive of the bill. Do you have any sympathy with the bill's overall rationale?

Oh, indeed. In the preamble to our briefing note we say that we welcome bringing the two jurisdictions in England and Wales and Scotland into line in this regard. As I said in my introduction, our main concern is the fact that anyone who owns a holiday home might be able to get off the hook in that respect. The bill's provisions should not operate if those people have another place to go to.

Not all repossessions have to go through the courts. In percentage terms, how many cases go through the courts and how many are dealt with by the other means that you mentioned?

I am afraid that I cannot give you any statistical analysis on that. My hunch is that the figure is roughly 50:50 where there is serious default and the creditor is contemplating or taking action. In roughly half the cases, the borrower simply abandons the property.

You have dealt with the fact that an application to the court for repossession more or less goes through on the nod because in the majority of cases there is no arguable defence. If the bill is passed and the court is required to apply the test of reasonableness, each case will probably need to be heard on an evidential basis. How is that likely to impact on the courts' time and resources?

I do not think that I can comment on that—I am not a litigation specialist. That said, I cannot see that there would be a flood of applications for orders under the bill. We all know that the courts are overworked and under-resourced, for reasons that can only be attributed to Europe. I do not see this as adding significantly to their work load.

Mr McNeil, I think you heard my question about sole residence when you were waiting in the coffee lounge. I wondered about the difference in terminology. You talk about sole residence and the bill talks about main residence. I can see that they amount to the same thing. Is there any legal difference?

There is a difference. If one has a sole residence, one has only one place to stay. If one has a main residence, it presupposes that there is more than one.

Maybe I have not made myself clear. The bill talks about main residence—

Sole or main residence.

You have restricted it, then, to sole residence. You want to take "main" out.

We think that the provision should apply only to sole residences.

That clarifies the point.

The second point is to do with whether the suspension period should be five years or two years. I understood your intention that the borrower should be able to apply for a second two-year period. Part of the thrust of the 1970 act, as I understand it, is to encourage people who have got into debt to work out a system for repaying that debt and getting back on their feet. It strikes me that—for obvious reasons—that would be easier over a five-year regime than over a two-year one.

Even if it were a two-year-plus-two-year regime, the initial aim is still to get that person or that family to pay back their debts over a period of two years, which might be too much. There is a danger that some people in that situation might say, "You are asking me to do it over two years. I cannot do that, but if I had the option of five, I believe I could." You might be excluding some people whom I understand it is the intention that the bill should cover.

I understand the point entirely—it is debatable. As I said earlier, we fully appreciate the reasons underlying the proposal. It could be much better dealt with by a substantive amendment to the 1970 act, to the effect that the sheriff would have the flexibility to suspend the operation of a calling-up notice for a particular period. It would therefore not be automatically suspended for the full five-year period, after which the calling-up notice flies off—or prescribes, or whatever you like to call it—anyway under the act. If you amend the 1970 act to give the sheriff the right to restrict the operation of a calling-up notice for whatever period—

Five would be the maximum.

Yes, with a five-year moratorium/maximum.

I meant to mention a small but important point. A number of the provisions of the act impose duties on creditors in standard securities generally. We are talking about residential property here, are we not? We must make it clear that none of this applies to commercial or other forms of property.

That was the intention.

I have a couple of points on debtors. In your experience, what percentage of people who receive calling-up notices would be entitled to receive legal aid in dealing with their problems?

No legal aid is available for being the recipient, if you like, of a calling-up or default notice. It would be available for defending proceedings for the recovery of possession under section 24 of the 1970 act. The answer to your question, Lord Watson, is that I do not know how many people are, or are likely to be, eligible. Applications for recovery of possession are rarely defended, because there is not usually a statable defence.

In the light of other answers you have given, this may not be an appropriate question, but the Law Society of Scotland may be able to provide the information. You say that you do not have figures of analysis on certain matters. Where would information on the typical backgrounds of those who get into debt and the geographical spread—whether debtors are more prevalent in Dundee than in Aberdeen, for example—of debt across Scotland be held?

That information is most readily obtainable from the Council of Mortgage Lenders, which keeps statistics on socio-economic groupings and so on. Obviously, there are hot spots—that is not the right term—of arrears, which tend to be in the Glasgow conurbation, although they exist, too, in Edinburgh, Dundee and Aberdeen.

I wish to ask about the breadth of experience of the members of the conveyancing committee. You said that you are a conveyancer rather than a court lawyer.

Yes.

Is that true of the other members of the committee? Are there any members who have experience of litigation—the sharp end?

We all like to think that we are expert property lawyers. We are not litigators.

Are you aware that section 2(5) of the Mortgage Rights (Scotland) Bill, would allow the court to

"vary or revoke an order"

on application from either side? Would that not in practice deal with your objection to the five-year period of suspension? If people were not happy with the situation, they could ask for the suspension order to be lifted or for whatever else was appropriate.

That might well deal with my objection. That is an interesting point. Either party may apply for a variation.

I have one or two more questions on what happens in practice. As you have said, it is difficult to gather statistics, but we are aware that many people give up their houses before the final stages of a court action. Do you have any feel for how many people move out after a court action is raised, as opposed to at an earlier stage?

No, I do not have any feel for that.

Is it your experience that legal firms and mortgage companies deal sympathetically with people who come to them with problems? In my limited experience on the other side, when people have had problems, it has been difficult to get legal firms handling repossession arrangements to take much interest once court action has been raised and the case is progressing to its later stages. Does that reflect your experience?

It may mirror my experience of 10 or 15 years ago, but it is no longer the case. The degree of sensitivity with which these matters are handled nowadays by mortgage lenders and, in particular, by the major institutions is quite remarkable. There has been a sea change during my professional life.

I wish to ask a question relating to sheriff court appeals—it arises from the Family Homes and Homelessness (Scotland) Bill rather than from the Mortgage Rights (Scotland) Bill. As you are aware, one of the provisions of the Family Homes and Homelessness (Scotland) Bill gives a right of appeal to the sheriff, rather than to the Court of Session by judicial review, in homelessness decisions. Does the conveyancing committee have any views on that? I will not press the question if it is not your area of expertise.

Are we talking about section 6 of the Family Homes and Homelessness (Scotland) Bill?

Yes.

Please bear with me for a second. [Interruption.] What was the question?

I asked whether you have any views on the provisions in section 6. As you are aware, appeals of that sort are currently limited by judicial review to applications to the Court of Session. The bill proposes a more immediate application to a sheriff in such situations. Does the conveyancing committee have a view on that?

We do not, because we have not had the opportunity to study the Family Homes and Homelessness (Scotland) Bill. I have concentrated on section 1 of the bill, because I cannot quite understand how it ties in with the Mortgage Rights (Scotland) Bill.

I was going to ask Robert Brown about that.

With respect, the provisions in section 1 of the Family Homes and Homelessness (Scotland) Bill seem to be superfluous.

I will come back to that at the end.

I will have to read that exchange in the Official Report—I was reading something else and did not hear Robert Brown's previous question.

I want to go back to the point that Robert Brown made about the attitude of high street lenders. I acknowledge that the vast majority of high street lenders follow a code of good practice and are sensitive to people's needs. How do you feel about those who are not members of the Council of Mortgage Lenders or nationwide companies that are sensitive to people's needs? Do you think that there are problems that need to be addressed in that area? Do you think that the Mortgage Rights (Scotland) Bill would assist people who borrow from organisations that do not take into account borrowers' circumstances and needs before rushing to court?

I am sure that it would. I was absolutely astonished to hear that only about 50 per cent of repossessions are initiated by members of the CML. That means that an awful lot of repossessions must be initiated by other lenders who are—one can only assume—fringe banks and moneylenders in the worst sense of the term. I suspect that a considerable number of repossessions are in respect of second mortgages that have ferociously high interest rates.

People get themselves into serious bother because they have borrowed to buy a car or to do home improvements and have been unable to get an additional mortgage from their main lender for that purpose. I refer to loans made under the Consumer Credit Act 1974, which are usurious, to be frank. The Mortgage Rights (Scotland) Bill would help people who are in trouble because of such borrowing.

Thank you for the briefing that you have given the committee and for the support that your organisation has indicated for the Mortgage Rights (Scotland) Bill. I do not want to abuse my position as a member of the committee to enter into discussions with you today, but I would be happy to meet your organisation to talk through in more detail some of the issues that you have raised.

Thank you. We would greatly appreciate that.

The committee will find your evidence very helpful in its stage 1 consideration of the general principles of the two bills. Without wishing to be impolite, what you do after that is your own business.

I was going to ask for John McNeil's views on the Family Homes and Homelessness (Scotland) Bill and the appeals system for the homeless, but there is no point my doing that because he has no views on the bill yet.

I want to go back to the answers that were given to Mike Watson, when you spoke about the need for the Mortgage Rights (Scotland) Bill to apply only to sole residences, rather than to main residences. In your view, is a second or third home always a holiday home?

No, not at all.

Can you envisage circumstances in which it would be unfair or unreasonable to grant repossession of a second home because, for example, that might interfere with a person's employment?

That is a fair point. To be frank, we are not going to change our minds. We have presented our considered view. The main criterion on which a sheriff should grant a stay of execution is whether people will be rendered homeless.

I understand that that is the main criterion. However, I know from my experience as an MP that most MPs have second homes in London. I rent mine, but I know that many MPs buy their second homes in London. I realise that that would come under a separate jurisdiction.

That would be a nice investment.

Yes, for some MPs.

Many Scots never leave Scotland, but they live in one part of the country and work in another, which might require them to own a small flat in a second city. To repossess such a flat might deny that person the opportunity to continue their employment. Could not there be exceptions in the legislation? The phrase "main residence" might be better than "sole residence". That would allow sheriffs the discretion to make judgments in such circumstances.

That is a matter for Parliament—advised by the committee—to decide. As I said, the Law Society of Scotland believes that a stay of execution should apply only in respect of a sole private residence.

If the residence belonged to an MP who earns £49,000 per year I would agree, but not everyone is in such circumstances. Some people own small properties in which they work and live during the week, but return to their main home at weekends. It would be unjust to allow such properties to be repossessed.

You might be right.

That is on the record. You are the first person to say that about me in a long time.

Do you see any overlap between the two members' bills?

I do not understand what additional protection section 1 of the Family Homes and Homelessness (Scotland) Bill is supposed to give. It simply highlights family homes, rather than the private residences to which the Mortgage Rights (Scotland) Bill refers.

That is something that we will consider. I assume that you do not have any other comments on Robert Brown's bill because you have not had a chance to examine it.

We have no more comments to make at this stage, although we probably will in future. The bill covers several different areas, some of which—appeals and so on—are not matters for the conveyancing committee. The Law Society of Scotland will have to examine the bill bit by bit and put together a composite briefing note.

That would be helpful. We have to report on stage 1 by the end of October. It would be useful to receive the Law Society's submission by then. We will be grateful for any information that you can give us.

We do not see that section 1 of the Family Homes and Homelessness (Scotland) Bill adds anything to the Mortgage Rights (Scotland) Bill. The same point about sole residence or main residence applies.

I am sure that that is something to which we will return. Thank you for your help.

Thank you.

I should clarify that the Family Homes and Homelessness (Scotland) Bill was notified and lodged before the Mortgage Rights (Scotland) Bill. There seems to have been some misunderstanding on that point.

We will move on. I welcome Liz Cameron from the Edinburgh in-court advice project. I am sorry to have kept you waiting. Please introduce your organisation and make a brief statement, after which the committee will ask questions.

Good morning. I work for Edinburgh central citizens advice bureau. I have worked there for 15 years and have been the deputy manager for the past 11 years. My remit used to be lay representation at employment and social security tribunals. When the sheriff court was picked out to be the centre of a project helping party litigants, I became involved in running that project. I have been running it since it was set up three and a half years ago.

The briefing paper does not address any specific points in the bills. I wanted instead to give the committee a flavour of what is available in court to people who do not have legal representation. The committee will gather that I have considerable experience of people going to court. The project is particularly involved in evictions of people who have secure tenancies, such as council tenants. They must undergo the test of reasonableness as to whether they should be evicted. It is in the light of that background that I might be able to assist the committee.

People who have mortgage arrears problems generally come to the CAB. They can be either the owners or hapless tenants who are suddenly faced with being asked to leave without notice. We do not have a great deal of experience of helping such people in court. There is little point in their going to court because they have no defence. I will be happy to comment on some points that were raised this morning: the impact of time on cases if the new bill became law; the question of legal aid; the restriction on criteria of reasonableness; and the repossession of a second home.

Thank you. We will explore those issues during questioning.

I hope that I have got my head around your service correctly. I might not have, so please bear with me. Can you give me a flavour of the kind of work that you do and the kind of advice that you offer? I am particularly interested in the in-court service. What range of people do you deal with and what issues are involved?

The in-court adviser is a full-time post. The majority of the work—around 54 per cent—is in the heritable properties court. When those people are sent a notice to tell them that their case has been called to court to decide whether to grant a decree of eviction, an insert with that notice tells them that they can get in touch with the in-court adviser. If the person gets in touch with the adviser at that point, we can do a great deal to help them. It might be that they do not have to go to court if we can come to an arrangement with the housing department of the local authority.

We provide a service on a Friday morning, which is the day of the eviction court in Edinburgh. We see a large number of those who turn up and we give them on-the-spot advice. We have three or four advisers available to do that, because the court is busy.

In-court advisers also help people with small-claims cases and summary cause cases. Of particular interest to the committee will be the fact that, under the Debtors (Scotland) Act 1838, we are allowed into courts that deal with defaults of payments of larger sums. We are allowed to help in any court in which a lay representative is allowed. Although the incumbent in-court advisers are all legally qualified, we are seen as a lay representation.

We also have a citizens advice bureau in the court. It has one full-time adviser, one part-time adviser and some administrative support. That bureau has been running since January. We had problems with clients who came for initial advice and were referred to other organisations—including our own main office—for further help, but who did not go to those other organisations. They treated their eviction as the emergency, but if that problem was solved they did not address the fundamental problems. We therefore felt that if we had a unit in the court, people would be more likely to go for that further help. The CAB unit deals with some of the cases that are referred to the in-court adviser, because there is far too much work for the provision that we have. That unit also deals with the long-term aspects of people's problems and considers all the issues.

We know the CAB's work well and are very supportive of it. I want to focus on mortgage repossessions. I know that the pilot project does pre-court work; do you do in-court work as well?

We do not do in-court work. I cannot think of a case of someone coming to us because they were in court for mortgage arrears. We are much more likely to meet them at a CAB.

Do you mean before the case goes to court?

Yes. The reason is simply that people who have mortgage arrears do not go to court, because they know that there is nothing that they can do. If they went to court, the sheriff would listen, more or less, to what they had to say and then ask, "Do you accept that you owe the money?" That is about the only question that would be asked. If the person owed the money, the sheriff would have no discretion. The person's only possible defence would be that they did not owe the money. Such cases come down to a question of fact—is the money owed or not?

Would the Mortgage Rights (Scotland) Bill help?

Yes, absolutely.

Does your pre-court work help people so that they do not reach crisis point?

Our work helps people to manage the crisis. In the short term, it helps people to present their case to the sheriff in a way that will make it more likely that they can stay in their houses and make regular payments over a period. Notices usually go out about six weeks in advance of the court calling. If we work with people during those six weeks, we can get them established in a payment pattern. Most sheriffs will not, in such circumstances, give a decree for eviction, but will give those who have mortgage arrears a chance to put their case.

Do you pick people up after they have received a notice, or after some kind of action has been taken against them?

That is when we hope to get most of them. However, if they come to us on the morning of their court appearance, we can—by discussing their circumstances with them—still help them to make a reasonable offer. Most sheriffs will listen to that offer.

Do you think that the kind of service that you offer should be expanded, especially if the Mortgage Rights (Scotland) Bill is passed?

Yes. Over the years, we have tried to establish the service in other courts. A researcher from the University of Edinburgh has produced two reports on our project—the second is not yet published—which have been very supportive of the project and have said how useful it has been. However, funding is the issue.

Thank you for the very extensive paper that you have submitted, which indicates that your organisation has a fairly wide experience. I note, however, that the bulk of your interventions involve the city council housing department, which is understandable. What percentage of the cases that you deal with relate to mortgage repossessions? Do you consider that it is a growing percentage? If so, what is the reason for that?

We do not deal with mortgage repossessions at all. All the cases that are listed in the report concern the local authority. Our main office deals with mortgage repossession that may be part of a much wider debt difficulty, but our service does not.

Almost all our cases start in court, whereas mortgage repossessions do not go to court. We get the people who want to defend the action, or who want to argue with the sheriff that what is happening is not just: that is how we pick up our clients. Because there is no argument against a mortgage repossession, apart from the one that I outlined—that someone does not accept that they owe the money, which is not true in most cases—people in that position do not come to us.

Do the people whom you deal with who fall into that category—and I accept that they will be few in number—come from certain geographical areas or certain occupations?

We work only in Edinburgh.

But even in Edinburgh, what are their backgrounds?

We break down our client base according to postcodes, but I do not have that information with me today.

Have you identified any change in the general trends?

That is not an aspect of our work that I deal with in our main office. However, I would say that such cases are on the increase, that their number has increased over the past few years. There are probably not so many as there were when the problem was at its peak, when, for example, people in England were experiencing negative equity. The situation is not quite so bad, but it is still a real problem.

I appreciate that much of what you say might be apocryphal, as you do not deal with those cases personally. However, the indication is that the problem is increasing.

I do not know whether it has got worse in the past couple of years than it was two or three years ago. However, there have been many more such cases over the past 10 years.

In your opinion, why is that?

I can state only my personal opinion that there has been a greater push for people to buy their own houses. They have taken on a commitment that, in many cases, does not fit in with a lifestyle in which employment is less secure. People take on commitments and find that they cannot keep them up because their jobs are changing—for example, they may lose them or go to a lower salary.

How many mortgage repossession cases do you deal with annually, and how many—

I am sorry, I do not know. I brought figures relating to what we deal with in the courts, but I do not know the figures for our head office.

Could you provide us with those figures at a later date? If you keep a record of them, it might be useful for the committee to see them.

Do the majority of the cases that you deal with involve repossession orders, or are the majority of them resolved before they reach that stage?

We are quite successful in negotiating with the creditors over a wide range of debts, and that applies to mortgage arrears as well. We negotiate a great number of settlements if people come to us early enough. Only the minority of cases would continue as far as repossession.

Are there cases in which the mortgage repossession is unavoidable? What makes it impossible for you to help in those circumstances?

The usual pattern is that someone who has entered into one or two agreements and reneged on them will approach us on the day before the sheriff officers are due to arrive. The chances of our doing anything in those circumstances are pretty slim. If someone has defaulted for the first time, for a temporary reason such as sickness, and there is plenty of time to enter into an agreement that would put some money towards the arrears, that is the other end of the spectrum. I would expect us to be 100 per cent successful in that situation.

What is the banks' response to rescue packages as opposed to repossession orders? In your experience of helping people who have got into financial difficulties, are there examples of good practice in how some banks or mortgage lenders deal with rescue packages?

I cannot comment on individual rescue packages, because I do not deal with them. In general, if the offer seems reasonable, I think that most of the institutions with which we negotiate are open at least to allowing people some time to start making payments. I cannot give any specific examples.

What contribution do you think both bills will make to the families that you deal with? What are the positive aspects of the bills? What will make a real difference?

I can speak only on the Mortgage Rights (Scotland) Bill. It is an excellent start and I support it. Having seen what can be done with people in secure tenancies who wish to argue reasonableness, I think that it is right that people with mortgages should be given that opportunity. I am sorry, but I am not sufficiently prepared to be able to comment on the Family Homes and Homelessness (Scotland) Bill.

I have one final question, relating to the evidence that we received from the Law Society of Scotland about calling-up notices and whether a two-year or five-year period is appropriate. Do you think that the two-year period might be too short for individuals or families whose financial problems you are helping to sort out? Such people might still have difficulties as they approach the end of the two-year period and might not have managed to get themselves back on their feet. Because of insecurity of employment, for example, they might have been out of employment and have only recently returned to the workplace. The five-year period could give them a little bit longer to try to put themselves back on the right track and tackle their debt problems effectively.

I agree that the five-year period is, realistically, a better length of time from the point of view of those people. They need to make their payments and pay an amount towards arrears during the repayment period, so it is much more realistic to spread that over five years, as that puts people in a better position to make the payments.

I know that you operate in Edinburgh. What do you know about arrangements in other courts in Scotland, not least those in Glasgow? Is there any provision equivalent to yours?

The only other court that has provision to help party litigants in eviction cases is in Glasgow sheriff court, where the Legal Services Agency provides a service. It is not the same as our service, it works on a different system, partly because the people providing the service are solicitors and they are looking for legal aid. The two courts are run on very different systems. I do not want to go into too many details, because it would not be relevant for the committee, but you could not run the LSA service in Edinburgh without the sheriffs changing their way of deciding questions of reasonableness. The provision in Glasgow covers only heritable cases, and not the range of services that we cover.

For the avoidance of doubt, in Edinburgh sheriff court, where you are dealing with eviction cases, do mortgage repossession cases come before the Friday court, or do they go somewhere else?

No, they do not go to the Friday court. The Friday court is concerned with local authority evictions and housing association evictions, but the people concerned are all tenants. The evictions for mortgage repossession cases come before a court that is held on a Wednesday.

From what you have said, can we take it that the arrangements in Edinburgh help to prevent people from becoming homeless?

Yes.

I appreciate that it can be only a gut feeling, but what percentage of people who might have become homeless do not in fact become homeless, because of your help?

You are right—this is a gut feeling: I would say that it is about 90 per cent. Some people come to us for what I would call long-term help and work with us for a while. We have figures from the CAB, which tends to work with people long term, and there has not been a single eviction among the 700 cases that it has dealt with.

That is very impressive.

To put that in context, I would add that the in-court adviser deals with more short-term cases and gives advice to people who may go into court that day and who may have the decree of eviction passed on them. Some sheriffs are very hardline and, no matter what advice you give them, if arrears are at a certain level and payments have not been made on a regular basis, they will pass the decree. However, if people are prepared to work with us, we can help them to negotiate with the council even if a decree has been passed.

What percentage of people who are threatened with eviction turn up at court, and how many of them are legally represented?

Court lists come out each week, and I would say that probably less than 50 per cent of people turn up. A lot of cases, although listed, do not call, for a variety of reasons. Out of those who turn up, a tiny minority are legally represented—if, by that, you mean that they have a lawyer.

Yes.

Most of the lawyers are there to pursue on the part of either housing associations or councils; very few people have lawyers. There are other agencies that appear in court with their clients, for example, people from the Wester Hailes advice centre, the Granton advice centre, the advice shop and the Citizens Rights Office. Those are the main people who come, and the Wester Hailes centre has by far the highest number of clients.

Is it fair to say that there is a considerable difference between the number of people who have the right to be represented by a lawyer or by someone else and the number of people who take up that right?

Yes, there is. We hoped that we would address that to a certain extent by sending out an insert with the summons to say that advice is available, and that has helped. Many people call us or turn up at court with the slip, asking who they are supposed to see about it. However, there are always people who do not come for help.

Finally, on homelessness, as some of those whose cases go to court eventually have eviction decrees granted against them, alternative accommodation is an issue. Do you give advice on housing matters as well as on debt?

Yes.

Do you know how many people, if any, seek court decisions on the reasonableness of the homelessness provision that is offered to them in due course by the council?

We refer people to lawyers to seek judicial review. We often speak to people in temporary housing who have inadvisedly turned down the options for alternative housing that they have been offered. In Edinburgh people are offered two options, but the choice that they are given is not great. Often people turn down the first option in the hope that the second one will be better, but usually it is worse and they feel that they cannot take it. We try to negotiate with the council. We argue that the choices were not reasonable and that people should be given a third option, and we are sometimes successful.

It is obviously desirable to sort out such matters by agreement. Would it be advantageous for people in such situations to have the right to an appeal to the sheriff rather than the right to seek judicial review by the Court of Session?

It could be advantageous, if there were provision for advice to be given to people on how they could appeal to a sheriff. The main problem with the Court of Session—I am sure that you are well aware of this—is that people really need a lawyer and cannot make their own case there. There would be a good chance that somebody who was homeless would be entitled to legal aid. If people need a lawyer and receive legal aid, it does not make much difference to them whether they are in the Court of Session or in front of the sheriff. If they were trying to make their own case, they would stand a better chance in front of the sheriff.

You mentioned that very few people who attend the Friday eviction court have legal representation. I want to be absolutely clear about the circumstances in which people would be entitled to legal aid to pay for legal representation. When a council or a housing association seeks to evict a secured tenant, is the tenant entitled to legal aid?

They are entitled to legal advice and assistance in the preparation of their case. They are then entitled to legal aid if the Legal Aid Board concludes that it is in the public interest that they should receive it. The difficulty is that they will not be eligible for legal aid if they have any income. It is possible for people who are earning to be evicted because they are not paying their rent—they may have other debts. Not everybody who faces eviction is automatically eligible for legal aid, even if they get over the income hurdle.

Does the fact that so few people turn up with a lawyer indicate that the Legal Aid Board is refusing any application for legal aid?

I could not say that. The reason that people are turning up without legal representation is that many of them do not think of going to a lawyer. Some people ask whether they can speak to the duty solicitor, but we do not have one in civil cases.

It is well known that the advice agencies that I have mentioned provide help and assistance. In the first instance, many people go to an advice agency rather than to a solicitor.

Would the advice agency advise them to apply for legal aid if they had a chance of getting it?

Not for a lawyer to appear in the first instance. The only situation in which we would advise people to apply for legal aid for legal representation would be if they were going to defend the action, in which case a separate hearing would be fixed.

What usually happens on a Friday is that the sheriff listens to the circumstances and makes a decision based on reasonableness. However, in Edinburgh an explanation of the circumstances is not regarded as a defence. If someone says that they wish to defend the action, the sheriff will not listen to any arguments but will fix a date, maybe six or eight weeks ahead, for a more formal hearing on defence of the action.

What proportion of cases proceed to such a hearing?

Very few cases go to such a hearing. We refer people defending actions to an organisation such as Shelter Scotland, which provides services for such people.

In a case before the Wednesday court, in which a creditor is applying under section 24 of the Conveyancing and Feudal Reform (Scotland) Act 1970 for eviction because of mortgage arrears, is the debtor not entitled to seek legal aid, or is it the case that they do not do so because there is no argument?

The same test for legal aid is applied: what is the person's income and would the Legal Aid Board grant it? In most cases, the Legal Aid Board would turn down an application because money is not being paid to put up a defence. If there were a defence, it is possible that legal aid would be granted.

The conveyancing committee of the Law Society suggested that at the stage when the creditor serves a calling-up notice or a notice of default there is no entitlement to legal aid. Is that right?

It would be better to ask the Legal Aid Board. I am concerned with the practicalities of whether people receive legal aid or not. I know roughly what the rules are but I could not answer your question exactly.

That is fine. I have no idea even though I am supposed to be a legislator.

Do you have any views on the housing bill that the Government is introducing? Do you think that the grounds for eviction that are being introduced as part of the single social tenancy will have an impact on your work?

I do not know enough about the rules to answer your question.

You have not yet looked at the Government's proposals. Maybe we will ask you back at some time in the future.

Thank you very much. Your evidence has been extremely helpful and interesting. We may well seek your views on the housing bill if we launch ourselves into that matter.

Meeting continued in private until 12:33.