Collateral damage for residential tenants when a landlord defaults on a secured loan: the enforcement of heritable securities and the habitability of – and eviction from – a privately rented home

Many residential properties in Scotland are used as security for loans. Many such properties are let by the private owner to a residential tenant. It will often be the case that the interests of a heritable creditor with a security over a property and a residential tenant living there will not clash. Where there has been a default in relation to a secured loan, however, issues around enforcement of the security and the implications for any occupier of the security property can arise. In the cases of Pepper UK Ltd v Alvey and Pepper UK Ltd v Rendle (which both flowed from the same debtor’s default), some of these issues came to a head. One point related to the habitability of the property, and in particular who was obliged to meet the statutory repairing standard for privately let homes. A second matter was the eviction of the tenants from their home by the heritable creditor (to allow a sale with vacant possession). This article uses these cases as the basis for a discussion of what the law ought to do in such circumstances to best balance the apparently competing interests.