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What is a trust deed inhibition?

  • Sharon McDougall -
  • Updated - 15th July 2020 -
  • 2 minutes to read

Inhibition in Scotland is a type of ‘diligence’ or debt enforcement that involves obtaining an order of the court. It protects creditors’ rights to be repaid should property or land owned by their debtor be sold, or cash generated by remortgaging.

As far as trust deeds are concerned, if an Inhibition Order is obtained it will remain in place until the end of the trust deed term, when the Trustee should discharge the inhibition if the debtor has complied fully with the conditions.

Sometimes a Scottish trust deed will require the debtor to remortgage their property anyway, if there is sufficient equity that can be released to repay creditors, but unlike sequestration there’s typically no obligation to sell.

Inhibition Orders and property

If you’ve entered a Scottish trust deed and own your own home or other property, the Trustee is likely to seek an Inhibition Order to prevent you from selling it, leveraging its value, or gifting the property without notifying them.

It’s important to know that an Inhibition Order in itself doesn’t mean the Trustee or creditors can force you to sell your home. Additionally, if the property is held in joint names, the Order only applies to your share of the ownership.

An Inhibition Order is made against an individual rather than a specific property, and is applicable to all property and land in Scotland owned by that person. When an Order is made it must be registered in the Register of Inhibitions and remains there until the trust deed ends. It naturally expires after five years.

What impact does an Inhibition Order have within a trust deed?

An Inhibition Order is typically part of a trust deed’s natural process, and the Trustee should explain to you that this restriction will come into force if you own property or land in Scotland.

Some people think they can be forced to sell their home when an Inhibition Order is in place, or that it changes ownership in some way, but it only restricts the actions you can take with regard to the asset.

Given the fact that property is usually a debtor’s largest asset and generates significant funds on sale, Inhibition Orders are used to protect creditors’ right to repayment of the money they’re owed.

For more information on trust deed inhibition and how it may affect you, contact our expert team at Scotland Debt Solutions. We offer free same-day consultations, and work from offices around Scotland.

Sharon McDougall
Sharon McDougall
Manager
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