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Topic starter
28/01/2020 11:32 am
We have been cited to provide evidence in court in relation to a Local Housing Association's action to evict one of our Trust Deed clients.
This is a common question that advisors are faced with so I thought it would be useful to provide my thoughts. Please note, this is in relation to Registered Social Landlords (SRLs), not private ones.
When a tenant enters into a trust deed that achieves protected status, a landlord can only recover arrears incurred after the date of signing the deed. Any debt incurred prior to the trust deed will be included in the trust deed and will rank as a creditor in the trust deed estate and will receive a dividend during the process.
Technically speaking, a RSL still has the grounds to seek an eviction of that tenant as the terms of the agreement has been breached for non payment however, they would be unable to seek decree for payment of the arrears.
In considering whether an eviction should be granted, a Sheriff has to take into account insolvency when assessing "reasonableness" which is legally required before granting an eviction. There are other factors for the Sheriff to consider however the "reasonableness" factor will bring into account factors such as insolvency, health of the tenant, financial position of the tenant etc.
Previous case law suggests a Sheriff will not consider it reasonable to grant eviction where that tenant has entered into a trust Deed or been declared bankrupt allowing the tenant to remain in the property. The tenant is still required to maintain rent payments as further arrears would result in another action for rent recovery and eviction.
In light of the above, it is surprisingly that the RSL is continuing with an action for eviction for one of our clients. The level of arrears is low.
In reality, most RSL will allow the tenant to remain in the property and will clear the rent balance.
It would be interesting if anyone has any experience with this to offer reassurances to individuals looking to seek advice on rent arrears and their debt.
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28/01/2020 11:44 am
Which Housing Association is it that is trying to evict the client?
David is not currently posting in the Trust-Deed.co.uk forum
08/02/2020 11:13 am
Interesting ? I wonder what RSL this is.....?
I work in Social Housing, the usual process for us when a tenant enters into Bankruptcy or a Trust Deed is to freeze the arrears from date it was granted. The Arrears would usually stay in the rent account for a year then after that we would usually write them off, I don't even think we ever bother writing to the Trustee for a dividend at the end of their Trust Deed, it's usually not worth the time and effort lol,,,,,,
Obviously any arrears accrued after they went into a Trust Deed we can take legal action again to recover their tenancy, plus we can use their previous non payment as part of out argument to gain a decree......
09/02/2020 2:40 pm
Good to hear from you Porcupine.
It's interesting to hear the perspective of someone who works within the social housing sector.
Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds 
10/02/2020 8:51 am
Hi Porcupine,
"I don't even think we ever bother writing to the Trustee for a dividend at the end of their Trust Deed, it's usually not worth the time and effort lol,,,,,,"
This is a good example of why Trust Deeds are not a good solution for smaller creditors, often housing associations and credit unions who suffer more than most from writing off bad debt. The dividends paid by the big Trust Deeds companies are ridiculously low after they have taken all their costs, some of which are questionable and need to be closely examined.
An investment in knowledge pays the best interest.
10/02/2020 1:35 pm
It's interesting that you say "Trust Deeds are not a good solution for smaller creditors". It's not that I disagree, as creditors do usually end up writing off most of the debt they are owed, but I think it is missing the point.
The fundamental purpose of a Protected Trust Deed is to provide individuals with debt relief. Assuming this debt relief is indeed needed then what is the alternative? Bankruptcy presumably, in which case creditors are unlikely to be any better off anyway.
Scottish Debt Solutions Expert - Ask me for help setting up a Scottish Trust Deed or Debt Arrangement Scheme plan.
10/02/2020 3:14 pm
In some cases, DAS might well be a realistic, and more appropriate, option than either a Trust Deed or sequestration; individuals avoid insolvency and creditors get a higher return.
An investment in knowledge pays the best interest.
10/02/2020 3:33 pm
I would always encourage a creditor to submit a claim in a Trust Deed or Sequestration as you can start of with little prospect of a return on your debt but a client’s circumstances can change and you can go from a 10p return to 50-100p return. Always submit a claim in the case as you never know.
I think statistically the average length of a DAS plan in Scotland is 7 years. Is avoiding insolvency really that bad for a client if they have no assets to protect and can get out of debt within a timescale quicker than a DAS and move on with their life?
We regularly hear from people who have went through a TD/SEQ, came out the other side, are able to manage their budget better, can save a deposit and go on to buy a house within a 6 year period from the start. If under an average 7 year DAS they would still be in this and then have to go through the rebuilding process at the end of the 7 years.
I do sympathise with the smaller creditors especially small local credit unions but being in the business of lending money is risky and it’s a risk that lenders need to accept.
David is not currently posting in the Trust-Deed.co.uk forum
