Twenty-year security rule: removal of right to redeem

The 20 year security rule

The Land Reform (Scotland) Act 1974 gives borrowers the right to pay off the balance of their loan, plus any interest and fees due, once they each year 20 in the loan term. This is commonly known as ‘the 20 year security rule’.  

Shared equity schemes

The Scottish Government, social landlords and developers have a number of shared equity schemes that provide eligible buyers with an equity loan which is linked to the property’s value. The 20 year security rule poses a financial risk to these schemes should buyers choose to repay their loans at year 20. 

The removal of the right to redeem

To mitigate this risk Scottish Ministers put in place legislation which removes this right in certain circumstances. The legislation came into force on 15 February 2019. As a result the 20 year rule will no longer apply to the named schemes in the order. 

Consultation

There have been a number of consultations which gave social landlords and developers the chance to share their views and let Scottish Ministers know about any of their schemes which should be considered for the order. We have created the tables below which provide further information about the schemes which have been included in the order.  

Table 1 : Exemption applies whether or not the heritable security was granted before the Order comes into force. 

Name of scheme	Date launched
New Supply Shared Equity Scheme (as part of the Low Cost Initiative for First Time Buyers)	October 2007
Open Market Shared Equity Scheme (as part of the Low Cost Initiative for First Time Buyers)	September 2005
Home Owners Support Fund  (Mortgage to Shared Equity scheme)	March 2009
Help to Adapt	April 2015
Help to Buy (Scotland) Scheme	September 2013
Help to Buy (Scotland) Smaller Developers Scheme	January 2015
Help to Buy (Scotland) Affordable New Build Scheme	January 2016
Places for People Scotland New Supply Shared Equity Scheme*	November 2011

 * The Places for People Scotland New Supply Shared Equity Scheme operates on a similar basis to the NSSE with developers scheme.  Further information is available from Scottish Ministers on request.  

Table 2: Exemption applies for heritable securities entered into after the Order comes into force

Name of scheme	Date launched
Low Cost Home Ownership scheme operated by Aberdeen City Council	November 2005
East Dunbartonshire Council New Shared Equity Homes for Sale scheme	October 2012
Aberdeenshire Council Low Cost Shared Equity scheme	September 2015
New Supply Shared Equity with Developers	December 2009
Homestake*	September 2005

* Homestake was the Scottish Executive’s shared equity scheme, managed by Communities Scotland, which allowed individuals and families on low incomes to buy a new build property in partnership with a housing association. It was a forerunner to New Supply Shared Equity. Further information is available from Scottish Ministers on request.