What you need to know about the Moveable Transactions Act:

The Moveable Transactions (Scotland) Act 2023 (the “Act”) was passed by the Scottish Parliament in May 2023 and will make fundamental and very positive changes to the commercial landscape in Scotland when it comes into force. The Act modernises the law relating to the transfer of contractual rights and the creation of security over those rights and also introduces two new registers.

There are two areas which will be of particular interest to the construction industry.

Assignations

Assignations (transfers) of construction documents, like building contracts and collateral warranties, play an important part in the contractual matrix in many construction projects. In particular, collateral warranties are relied upon by parties like employers and funders, as well as future tenants and purchasers, to access rights in underlying contracts and appointments. Being able to assign such documents is key to protecting their interests.

The legal framework around assignations is cumbersome. Assignations of construction documents were traditionally effected using hard copy documents, with wet ink signatures, intimated (notified) to performing parties by post. There remain some legal uncertainties around how notice needs to be given and what acknowledgement is required, in order for them to be effective.

Under the Act there will be a new Register of Assignations. The Register will be publicly available and online. It will allow for electronic registration of assignations and online searches, simplifying the existing law. The Act will also make changes to the law relating to intimations. It will be possible to effect an assignation by intimation or registration, or both.

In practice, parties (or their lawyers) may still choose to intimate by giving notice to the performing party when assigning construction documents. If so, under the Act that can be done by email or by an electronic link to a website or portal.

However, the ability to effect an assignation by registration and without the need to give notice, will streamline and modernise the current legal framework and may prove to be a popular option.

Statutory pledges

Under the Act there will be a new fixed security right, called a statutory pledge. The statutory pledge will be available to be taken over most types of corporeal moveable property in Scotland (physical property which is not land or buildings), like plant, machinery, equipment and vehicles. The statutory pledge will allow the security to be non-possessory for the first time i.e. without requiring the secured property to be handed over to the lender.

Again there will be a new, public and online Register of Statutory Pledges, which allows for electronic registration and online searches of statutory pledges.

Statutory pledges will therefore be of interest to contractors or suppliers who want to secure borrowing by making use of their high value property like plant, equipment and vehicles, whilst continuing to use them in day to day construction.

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