Pragmatic solutions to udal law

Legal Issues

The Insolvency Act 2000

The Insolvency Act 2000 introduces a new section 1A and Schedule A1 into the Insolvency Act 1986. The amendment allows directors of eligible companies entering into company voluntary arrangements a temporary debt moratorium whilst recovery plans are prepared for presentation to their creditors. The moratorium will have the effect of sisting various legal acts or processes from being undertaken or continued against the company for the duration of the moratorium. The maximum period of a moratorium is limited to 28 days plus a possible extension of up to two months.

An eligible company is currently one meeting at least two of the following criteria:

1. No more than 50 employees.
2. Balance sheet total not exceeding £1.4 million.
3. Turnover not exceeding £2.8 million.

Statutory Instrument 2711/2002 published on 1 November brings the relevant provisions into force on 1 January 2003.

Two particular provisions have the potential to impact on the Keeper in the context of the Land Register. In terms of paragraph 12(1)(G) of the Schedule no steps may be taken to enforce any security over the company’s property during a moratorium except with the leave of the Court. Thus a heritable creditor could not exercise his remedies including Power of Sale during the moratorium. The coming into force of a moratorium and its ending must be notified to inter alia the Registrar of Companies in terms of paragraphs 10(1)(b) and 11(1)(b) of the Schedule so a heritable creditor contemplating the exercise of a Power of Sale under a limited company security will be able to check whether or not a moratorium is in place. So will any prospective purchaser. Accordingly the Keeper takes the view that it is up to the applicant in such a case to satisfy him, her or themselves whether there was a need to seek leave of the Court. If any applicant answers the appropriate question on an application form which seeks confirmation that the statutory procedures necessary for the proper exercise of a Power of Sale have been complied with in the affirmative the Keeper will assume that all necessary steps have been taken. If it subsequently transpires that they have not he will take the failure of the applicant to properly inform him into account when deciding on any resultant application to rectify the register.

The second provision is contained in paragraph 14 of the Schedule which provides that a security granted by a company at a time when a moratorium is in force in relation to the company may only be enforced if, at that time, there were reasonable grounds for believing that it would benefit the company. Here again the Keeper would expect any prospective lender to assure him, her or themselves of the position regarding the possibility of the existence of the moratorium and if one is in place inform the Keeper of that fact at the time of making application to register the security using the question on the application form regarding other facts and circumstances. Once again failure to do so could have adverse consequences if difficulty is encountered in enforcing the security.   

Udal Law

Members of the Agency’s senior legal staff recently held meetings with the Society of Solicitors in Orkney and the Faculty of Solicitors in Shetland, to discuss the impact of udal law on the extension of the Land Register to the northern isles in April 2003.  For the Agency, this was primarily a fact-finding mission, to seek the views of local solicitors on the implications of udal law in principle and the way that udal titles are dealt with in practice.

The meetings highlighted a number of issues which will require more detailed consideration prior to April.  For the small proportion of land which is still held on the basis of succession and possession without a written title, there was discussion on the types of evidence that would be appropriate in an application for first registration. In relation to the majority of land in Orkney and Shetland, which is now held on titles recorded in the Register of Sasines, udal law is nevertheless relevant. In particular, for titles to land adjacent to the sea, there are questions as to how udal rights in the foreshore should be reflected in a Land Register title sheet.

The main outcome of the meetings was a shared view that the Keeper and the profession should attempt to find pragmatic solutions to the various issues relating to udal law.  Agency staff are now progressing these issues, and will consult further before formulating guidance which will be made available at the Land Register launch seminars in Kirkwall and Lerwick.   

Automated Registration of Title to Land (ARTL) Project

Dialogue with key stakeholders in the project continues through meetings with various Law Society Committees, the Council of Mortgage Lenders, the Stamp Taxes Office and individual lenders and firms of solicitors.  Considerable progress has been made in determining the future look and practical operation of the ARTL system. To enable digital signatures on digital deeds and documents via Public Key Encryption, investigation is taking place to establish the types of service available in the market. For conveyancing transactions where the solicitor could digitally execute the deed on behalf of the client under a form of mandate, dialogue is ongoing with the Law Society’s Conveyancing Committee and Professional Practice Committee. This matter has also been referred to the Professorial Panel currently considering the legislative issues associated with the introduction of an electronic system of registration. A series of meetings has also been arranged with Institutional Lenders to determine how ARTL will fit in with their back office systems.

A number of requests have been received from local Law Faculties for a demonstration of the ARTL system. The ARTL system has also been shortlisted for the Society of Computers and Law annual award for the most innovative application of technology to the law.   

Business Focus

The Counties of Banff, Caithness, Moray, Orkney and Zetland, Ross and Cromarty, and Sutherland transfer to the Land Register on 1 April 2003. This will complete the Land Register extension programme to the whole of Scotland.

A series of seminars is planned for solicitors practising in these areas. The seminars will comprise presentations on the preparation of applications for registration – covering Pre-registration, Registration Reports and the Land Register Mapbase. They will also include interactive workshops allowing participants the opportunity to ask questions and to explore areas of particular local relevance in more depth.

The seminars are planned for the following dates and venues:

Tuesday 4 Feb 2003 – Mackays Hotel, Wick

Thursday 6 Feb 2003 – Eight Acres Hotel, Elgin

Tuesday 25 Feb 2003 – Ayre Hotel, Kirkwall

Thursday 27 Feb 2003 – Kveldsro Hotel, Lerwick

Invitations to the seminars have been sent out to solicitors based in these counties.   

Contact: sonja.reid@ros.gov.uk  0131 200 3945