Real Estate Finance (Development)

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?

The MTSA changed how companies create security over their Scottish assets. 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 now 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. Previously, the only way to create security over these types of assets was to transfer possession or title to them to a lender (which is impractical in the vast majority of cases) or grant a floating charge.

The MTSA, introduced three key changes to the existing framework:

creation of a statutory pledge – a new form of fixed security which enables security to be granted over high-value moveable assets related to property development without the burdensome and disruptive requirement of delivering the secured asset to the lender. This allows for effective fixed security to be taken over moveable assets, while minimising the impact on daily use and allowing continued operation;

assignation of future claims – it is now possible to grant fixed security over future income streams, for example, by assigning a future claim to rental income or receivables under a future contract; and

modernisation of registration process – the MTSA introduces two new registers: Register of Assignations and Register of Statutory Pledges. Each of these newly created registers are available online and allow for electronic registration, streamlining and modernising the existing administrative-heavy framework.

How does this impact on Development Real Estate Finance?

The MTSA provides an innovative solution to the REF development sector by modernising the way fixed security may be taken over various classes of asset.

It is normal in a development finance transaction for the principal development contracts and key agreements for lease to be assigned in security to the lender. The previous administrative burden associated with intimating multiple notices is reduced as it is now possible to register the assignation online via the newly created Register of Assignations without having to give notice to underlying tenants or counterparties to development documents.

The ability to assign future rights also helps to reduce the administrative burden in transactions, given that previously future rights could only be assigned at the time they are created and this often required future security to be granted as a condition subsequent. Provided future rights are properly described, they can now be effectively secured at completion.

Prior to 1 April 2025, where a development involved the procurement or use of high-value moveable assets, fixed security over these moveables was rarely taken in commercial practice due to the requirement for the lender to have possession and/or control over the assets. The statutory pledge allows for fixed security to be created without the need for possession on the part of the lender.

It is now possible for statutory pledges to be granted over shares in Scottish companies. The requirement under the old law 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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