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Notes for Guidance - Bankruptcy (Scotland) Act 2016 (as amended)

This guidance describes the general functions of Accountant in Bankruptcy, interim trustees, trustees and commissioners in relation to their responsibilities regarding bankruptcies which started on or after 30 November 2016.

7.2 Heritable property which has been conveyed to a third party

This does vest in the trustee, see Burnett’s trustees v Grainger 2002 SLT 699. If a seller dispones a property to a third party and subsequently becomes bankrupt before the third party registers title the property will still vest in the trustee.

Section 79(1)(b) of the Act, makes it clear a debtor’s estate includes any property of the debtor, title to which has not been completed by another person deriving right from the debtor.

However, sections 78(3) and (4) of the Act afford a measure of protection to the third party purchaser, in that:

It shall not be competent for:

  • the trustee
  • any person deriving title from the trustee

to complete title to any heritable estate in Scotland vested in the trustee by virtue of his appointment before the expiry of the period mentioned in subsection (4) below.

(4) That period is the period of 28 days (or such other period as may be prescribed) beginning with the day on which:

  • the order of the sheriff granting warrant is recorded under subsection (1)(a) of section 26 of this Act
  • the determination of The Accountant awarding bankruptcy is recorded under subsection (2) of that section, in the register of inhibitions

On the date of settlement the buyer may be excusably unaware of the bankruptcy and yet the bankruptcy will mean the seller's power to alienate assets is terminated. Section 89(10) of the Act extends the provision so that if someone buys from a person who has just been made bankrupt and, acting in good faith, completes title promptly, the title will be good.

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