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Moveable Transactions (Scotland) Act 2023

Section 73 – Secured creditor’s right to appropriate

315.Sections 73 to 76 of the Act provide for a secured creditor who has served a pledge enforcement notice to be able, in specified circumstances, to appropriate the encumbered property themselves as the means of enforcement of the pledge. This is not the same as forfeiture of the property, which is not permitted. Forfeiture is where ownership of an asset is simply forfeited altogether, regardless of its value, meaning in this context that if the value of the item exceeded the debt then the surplus would not be returned to the debtor. In contrast, appropriation allows ownership to transfer to the creditor (subject to all interested parties agreeing) but, to the extent that the value of the item exceeds the debt and costs of enforcement, the creditor is required to return the surplus to the debtor.

316.This section provides in subsection (1) for the general right to appropriate. A creditor who appropriates property becomes the owner of the property.

317.Subsection (2) excludes appropriation in specified cases. In particular, it prohibits the appropriation of:

  • corporeal property that is not possessed by the creditor (for practical reasons), and

  • property where the value is greater than the amount remaining due under the secured obligation (including reasonable expenses) without reimbursing the excess.

318.There is the potential for abuse of a right to appropriate encumbered property, as the value of the property could greatly exceed the sum due to the secured creditor. Subsection (2)(b) therefore safeguards the interests of the provider of the pledge by providing for the secured creditor to be able to appropriate property with a value greater than the sum due to the creditor, but only if the creditor holds a sum representing the excess value in trust pending distribution under section 77 of the Act.

319.Sections 74 and 75 provide for, respectively, appropriation with, and without, a prior agreement to the use of appropriation by the secured creditor as a remedy on enforcement.

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Text created by the Scottish Government to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Acts of the Scottish Parliament except those which result from Budget Bills.

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