GUIDANCE NOTE
To:
All Registered Social Landlords
(RSLs)
Subject:
Standard Securities and Floating
Charges held by the Scottish
Ministers
Issued by:
Communities Scotland
Ref No:
CSGN 2005/06
Page:
1 of 4
Issued:
April 2005
Finance Department
Summary
This Guidance Note supersedes Scottish Homes Guidance Note 96/13. It updates the
legislative references and administrative arrangements.
Many Registered Social Landlords (RSLs) granted Standard Securities or Floating
Charges to Scottish Homes or its predecessor the Housing Corporation. These
Standard Securities and Floating Charges transferred to the Scottish Ministers on 1st
December 2003 by virtue of The Housing (Scotland) Act 2001 (Transfer of Scottish
Homes Property and Liabilities) Order 2003, SSI No 2003/532.
Where a Standard Security or Floating Charge exists, RSLs require consent from the
Scottish Ministers, as creditor, prior to making a disposal of properties covered by the
security or charge. Scottish Ministers have delegated authority to grant such consent
to Communities Scotland.
Queries regarding this Guidance Note should be addressed to:
Finance Department
Thistle House
91 Haymarket Terrace
Edinburgh
EH12 5HE
Further copies of this Guidance Note are available from Reception at the above
address (telephone 0131-313-0044).
The Guidance Note and Application Form can also be accessed by logging onto our
website at www.communitiesscotland.gov.uk.
CSGN 2005/06
Page 2 of 4
1.
Background
Many Registered Social Landlords (RSLs) granted Standard Securities or Floating
Charges to Scottish Homes or its predecessor the Housing Corporation. The Standard
Securities and Floating Charges transferred to the Scottish Ministers on 1st December
2003 by virtue of The Housing (Scotland) Act 2001 (Transfer of Scottish Homes
Property and Liabilities) Order 2003, SSI No 2003/532.
Where a Standard Security or Floating Charge exists, RSLs require consent from the
Scottish Ministers, as creditor, prior to making a disposal of properties covered by the
security or charge. Scottish Ministers have delegated authority to grant such consent
to Communities Scotland.
This consent is quite separate from, and must be obtained in addition to, any consent to
disposal required under Section 66 of the Housing (Scotland) Act 2001. This consent
must be obtained before any disposal takes place, even where it is an exempt disposal
or a disposal under the General Consent. CSGN 2005/05 outlines the procedures for
obtaining S66 consent, explains the types of disposal that are exempt from Section 66
of the Act and which disposals the RSL can approve itself by a certification procedure
under the General Consent.
The Scottish Ministers no longer require security over property for HAG investment.
However, they will take a security or charge over property where loan finance is
provided, either in the development period or for a residual loan. It should be noted
that such loans are made only as a last resort, and then on a commercial basis.
2.
Standard Securities
Where the Scottish Ministers hold a Standard Security and consent to a disposal is
being sought, a Discharge or Deed of Restriction will be required. Where the disposal
is of property forming only part of the security subjects, a Deed of Restriction is
required. Otherwise a Discharge is required.
RSLs should instruct their solicitors to prepare an appropriate Deed and submit it to
Finance Department with a completed application form, SMDischarge, as attached at
Annex A. Please note that a separate form must be completed for each Deed submitted.
CSGN 2005/06
Page 3 of 4
3. Floating Charges
Floating Charges held by the Scottish Ministers are over all property, both moveable
and heritable, within the RSL’s ownership now and from time to time. The Scottish
Ministers will not discharge completely any Floating Charges held but specific
situations will be dealt with as follows:3.1
Standard Securities for Private Finance
Where the Scottish Ministers hold a Floating Charge over an RSL’s property and
the RSL wishes to grant a lender Standard Security over some or all of its
properties, the lender will wish to know that the Scottish Ministers have
consented, as Chargeholder, to the disposal and have neither consented to the
winding-up or dissolution of the RSL, nor petitioned for its winding-up.
RSLs should submit a completed application form to Finance Department and a
Letter of Non-crystallisation will be issued if appropriate. The Scottish Ministers'
standard Letter of Non-Crystallisation is attached at Annex B.
It should be noted that the Letter of Non-crystallisation will not say that the
Scottish Ministers have not taken steps to appoint a receiver. This is because the
terms of the Industrial and Provident Societies Act 1968, which governs all RSLs
that may be affected by this Guidance Note, does not allow the appointment of a
receiver.
3.2
Ranking Agreements
If the Floating Charge contains a negative pledge (a clause prohibiting the
creation of a subsequent, prior or equal ranking charge) the lender will require
that a ranking agreement is entered into whereby its security is given priority in
ranking.
RSLs should instruct their solicitors to prepare such a Ranking Agreement where
this is required and submit it to Finance Department with a completed application
form.
3.3
Shared Ownership
Where the disposal is a Standard Security for borrowing related to Shared
Ownership schemes, properties being sold for shared ownership can be excluded
from the Floating Charge held by the Scottish Ministers. This is achieved by
execution of an Instrument of Alteration, sometimes called a Deed of Release. A
standard Instrument of Alteration is attached at Annex C.
RSLs should instruct their solicitors to prepare an appropriate Deed and submit it
to Finance Department with a completed application form.
CSGN 2005/06
Page 4 of 4
3.4
Sales to Sitting Tenants
Where the disposal is a sale of property to a sitting tenant under statutory or
contractual right to buy provisions the property requires to be excluded from a
Floating Charge in order to give the purchaser clear title to the property. This also
requires the execution of an Instrument of Alteration, sometimes called a Deed of
Release.
RSLs should instruct their solicitors to prepare an appropriate Deed and submit it
to Finance Department with a completed application form.
4.
Administrative Arrangements
Applications should be sent to the Finance Department who will register the applications,
liaise with solicitors, have deeds executed as appropriate, and return the completed
paperwork to the applicant.
The Finance Department will arrange to have Deeds executed within 8 working days
provided the Deed is in order and the application form is satisfactorily completed. Where
further information is required, the Deed will be executed within 8 working days from receipt
of all information.
ANNEX A
CSGN 2005/06
Application Form: SMDischarge
Application to the Scottish Ministers, as creditor (holder of a Standard Security or a Floating Charge over the
Registered Social Landlords (RSL) property), to discharge a Standard Security or Floating Charge.
Please complete a separate Form for each Deed submitted.
Name and address of RSL:
Contact Person:
Telephone number:
Description of property / land to be disponed:
Please indicate which of the categories opposite
are relevant to this application.
Standard Security is held by the Scottish Ministers
Floating Charge is held by the Scottish Ministers
If a Floating Charge is held by the Scottish
Ministers, does it contain a negative pledge ?
Please indicate the type of disposal:
YES / NO
Standard Security for Private Finance
Standard Security for Shared Ownership
Sale to sitting tenant
Other, please detail opposite
If the disposal relates to security for private
finance does the lender require a first charge?
YES / NO
Please answer YES to one of the following (see CSGN 2005/05):
Is the disposal an exempt disposal under S66 of
the Housing (Scotland) Act 2001
YES / NO
Is the disposal covered by the Section 66
‘General Consent’?
YES / NO
Has an application been made to the Scottish
Ministers for specific written Section 66
consent ?
YES / NO
Discharge of Security
Deed of Restriction
Please indicate which of the responses opposite
you are seeking in terms of this application:
Letter of Non-Crystallisation
Instrument of Alteration / Deed of Release
Ranking Agreement
ANNEX B
CSGN 2005/06
LETTER OF NON-CRYSTALLISATION
TO WHOM IT MAY CONCERN
We, the Scottish Ministers, by virtue of the Housing (Scotland) Act 2001 (Transfer of Scottish
Homes Property and Liabilities) Order 2003, SSI No 2003/532, the holders of a Bond and Floating
Charge dated the ………. (date) of …………… (month) ………. (year) and registered in the
Register of Friendly Societies on the ……..………. (date) of ………………(month) ………. (year)
confirm that:-
1
we consent, as Floating Chargeholders, to the disposal of
………………………………………………………………………………………..
(description of disposal); and
2
as at this date we have not consented to the dissolution or wind-up of
………………………………………………………………(RSL’s name) in terms of
Paragraph 9 of Schedule 7 of the Housing (Scotland) Act 2001.
For the avoidance of doubt, the terms of the Industrial and Provident Societies Act 1968 which
governs this housing association, registered with the Scottish Ministers, does not allow the
appointment of a Receiver.
Yours faithfully
(Signature by authorised signatory)
Name:
Designation:
For and on behalf of The Scottish Ministers
ANNEX C
CSGN 2005/06
INSTRUMENT OF ALTERATION
BY
THE SCOTTISH MINISTERS
IN FAVOUR OF (RSL/Lender)
WE, THE SCOTTISH MINISTERS,
CONSIDERING that we have been requested to grant these presents by
………............................................................. (Name of RSL), registered under the
Industrial and Provident Societies Acts and having their Registered Office at
…………………………………………………………………………………………..
THEREFORE we do hereby alter the terms and conditions of a Floating Charge
granted by the said ........................................................ (Name of RSL) in favour of
the Housing Corporation dated ............................................... and registered on
.............................................. from whom Scottish Homes acquired right by virtue of
Part 1 of the Housing (Scotland) Act 1988 and from whom we acquired right by
virtue of the Housing (Scotland) Act 2001 (Transfer of Scottish Homes Property and
Liabilities) Order 2003, SSI No 2003/532
to the effect that the subjects specified in the Schedule annexed and executed as
relative hereto are hereby released from the said Floating Charge, notwithstanding
that the said subjects or any part thereof shall continue to be comprised in the property
and undertaking of the said .................................................................. (Name of RSL).
IN WITNESS WHEREOF
SCHEDULE
Property referred to in the foregoing Instrument of Alteration:
7