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.

We expect that the Act will come into force in Spring 2025, although no date has been confirmed yet. 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.

What is changing?

The Act will make it easier to use contractual rights, such as the right to receive rental income, as security. It will see the introduction of two new registers which are to be set up by the Registers of Scotland:

• the Register of Assignations; and
  
  
• the Register of Statutory Pledges.

Registration in the Register of Assignations will effect a transfer of present and future debts or rental income as they arise without the requirement to give notice to tenants. This will be beneficial for both borrowers and lenders, as effectively securing rental income in student accommodation projects has long been a headache. Under the new regime, effective future-proofed security can be granted in an efficient way at the commencement of a transaction without the cost and practical burden of having to grant ongoing security as rights arise.

It should be noted that it will still be possible to give notice (or intimate) an assignation in security to tenants as the new register and the existing system will run in parallel.

The Act will also modernise the existing law in relation to intimations and will bring welcomed clarity on the rules on electronic notices.

How will this impact student accommodation?

Registration in the Register of Assignations will be attractive in a situation where rental income in relation to student accommodations is secured by way of an assignation of rental income for two main reasons:

• It will allow an assignation of rents to be taken in respect of all future rental income (for example, future leases) without supplemental security being required to be taken as the law currently stands.
  
  
• It will alleviate an administrative burden as it means that notice to large numbers of swiftly changing tenants is not required where the initial assignation has been registered at the Register of Assignations.

The new legislation also extends the potential assets that can be secured by fixed security with the new statutory pledge, which means that any equipment and other valuable assets held within the student accommodation 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 will be available to a variety of entities, unlike the current floating charge (which is only available to companies and LLPs).

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