Real Estate Finance (Investment)

What you need to know about the Moveable Transactions Act:

The Moveable Transactions (Scotland) Act 2023 (the “MTSA”) came into force on 1 April 2025 and made fundamental, and very positive, changes to the commercial landscape in Scotland.

The MTSA modernised the law relating to the transfer of contractual rights and the creation of security over those rights and created a new security right (the statutory pledge).

What changed?

It is now easier to use valuable contractual rights, such as rights arising under construction contracts, and, performance bonds, as security for borrowings. It is also possible for companies to create a new type of security called a statutory pledge over their moveable assets in Scotland, such as plant and machinery, vehicles, IP and shares. Under the old law, the only way to create security over those types of assets wasto transfer possession or title to them to a lender (which was impractical in the vast majority of cases) or grant a floating charge.

In addition to providing new opportunities in terms of what assets can be secured, the MTSA has also modernised the process of securing these assets. When securing assets by assignation under the previous law, there was a requirement to intimate the security to the third party (which could be an arduous process involving a number of parties). This usually involveds intimation by post which could be costly and could be particularly so when it involves overseas parties, or where the parties did not acknowledge receipt. The notice process is now more streamlined as electronic notices are permitted, including notices sent via portal or by a simple email. Further and alternative to the notice process, there is a new Register of Assignations: where the assignation (in security) can be registered to avoid this notice process completely.

How does this impact on Investment Property Finance?

Process: In the context of investment property, where there are often multiple third parties involved, the notice process is more straightforward. For example, where the chargor is the landlord of a shopping centre with many tenants, the ability to intimate electronically speeds up the notice process. Furthermore, if the assignation is registered in the new Register of Assignations, this eliminates the need to intimate to potentially hundreds of tenants in a block of flats or student accommodation. 

Potential assets: The MTSA made it clear that  future rights can be secured, i.e. all income, current and future, from an asset can be secured. Along with the smoother intimation process, this makes it easier for more property related contracts to be secured.

In terms of the potential assets that could be secured in a real estate finance transaction, the MTSA extends this with the new statutory pledge, which means that machinery, equipment and other valuable assets can be effectively secured. Previously, fixed security over such assets was not practically possible as it involved the lender having possession or effective control over those assets. The new statutory pledge can be granted by a variety of entities, unlike a floating charge (which is only available to companies and LLPs).

Shares: It is now possible for statutory pledges to be granted over shares in Scottish companies. This requirement for the lender/ security trustee or nominee to be registered in the company’s register of members (an issue which had caused increasing issues with the advent of the PSC regime and the National Security and Investment Act 2021) has been removed.

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