One house, many rooms

Commercial property, matrimonial property, rural property, intellectual property – and the main programme, domestic conveyancing itself. Most civil law practitioners could have found some reason to be at the Society’s annual conference this year, and the 600 or so who made their way to the Edinburgh International Conference Centre certainly had a tempting array of themes and speakers to choose from.

One thing that strikes you at the EICC is the level of organisation. Uniformed staff were constantly on hand to advise where each of the numerous suites and seminar rooms could be found – and make sure one didn’t inadvertently end up as the case study in the psychiatrists’ convention also running that day. Regular announcements over the public address system, impossible to ignore, helped ensure that delegates were seated more or less on time for the start of each session. A circular catering point in the middle of the large coffee/lunch/exhibition area enabled people to converge from all directions, be served promptly and then wander round the stands or simply network. There was even someone waiting at the door to collect name badges as we left, perhaps to avoid anyone inadvertently ending up at Haymarket station still displaying their label, as if saying “Please look after this lawyer”, Paddington Bear-style.

The Society’s staff had been equally busy. Half an hour before the start, the entrance hall resembled an airport checkin, with a row of desks and a queue several deep at each. Truly this was CPD for the masses. Each delegate pack contained enough photocopied presentations for a whole weekend’s reading. And after their organising five full-day lists of speakers, at least one last-minute replacement had to be found when an Executive minister pulled out.

The only real problem was the clash of interesting seminars. It wasn’t just your Editor, trying to sample each of the five programmes, who found himself with some difficult choices – others could be heard regretting the scheduling of IT in the Conveyancing Process against the panel session on gazumping and gazundering, or Property Rights of Cohabitants against SDLT. Perhaps too, the concurrent programmes should conclude before the keynote address, to give everyone a chance to hear the principal speaker. But none of this should detract from the overall success of the event.

Logistical challenge

Iona Ritchie, head of the Update department, called the conference “a fantastic success for the Society”, adding: “It was the largest of its kind since our 50th anniversary event in terms of the number of contributors, and it was their expertise which made this the number one legal conference of the year.”

“The feedback from everyone has been tremendous and I’m absolutely delighted that everything went so smoothly on the day. The numbers involved meant it was a huge logistical challenge compared to previous years, but the team at Update, the Society’s event management company, worked incredibly hard to make it such a success.”

Duncan Murray, the Society’s President, said: “The Property Matters theme chimed absolutely with the current legal climate in Scotland and provided an important platform for discussing key issues affecting solicitors today.

“It was a hugely ambitious initiative – the equivalent of running five conferences all on the same day. The scale of this event and slick professionalism of Iona and her team on the day illustrate the experience and expertise Update has amassed in the last few years. I heartily congratulate everyone involved.”

Some of the speakers’ topics may form the basis of future Journal articles; here we can only try and convey a flavour of the different sessions.

CONVEYANCING:

Can we improve the Guideline?

At one point your Editor found himself only one of a good couple of dozen scurrying up the levels from one session to another, as delegates converged for the panel session on the Gazumping, Gazundering etc Guidelines, which promised a lively exchange.

In fact, the session didn’t turn into the grilling for Bruce Ritchie and James Ness, the Society officials who bravely put themselves in the firing line, that it might have. Perhaps it was their admission up front that there could have been wider consultation before the guideline was published. Perhaps it was the clarification that appeared in the February Journal in response to concerns raised (see pages 50 and 51) – which must have taken some of the audience by surprise, as a straw poll revealed that fewer of those present were aware of that development than of the original guideline. At all events the session recognised that the gazundering issue (the controversial element of the guideline) was only part of a wider picture where other troublesome features include difficulties in obtaining loan instructions in good time, and quite possibly in the fairly near future the purchaser’s information pack – of which Morton Fraser’s George Clark described himself “an implacable opponent”.

Why did the Society pass the guideline? Bruce Ritchie addressed the question in opening the discussion. It came on the back of some high-profile media stories – “House price hype inquiry” and suchlike – arousing significant press interest in the housebuying process, and the Professional Practice Committee felt some response was necessary. Added to that there was significant concern in the profession at the way the market was developing, and a feeling that something needed to be done to stabilise the market and restore some integrity. At the same the Society accepts it has no control over clients, or the market as such, and that solicitors are only acting on the basis of their clients’ position.

With the sudden growth in the popularity of fixed prices – three quarters of properties in the south side of Edinburgh then being advertised were apparently on offer at a fixed price – the Society is beginning to receive calls about what a fixed price offer actually means. The great majority of those present agreed with the view that it means an obligation to accept the first clean offer, as opposed to an invitation to treat (like any other upset price), which of course raises in turn the question of when an offer can be regarded as “clean”. A further straw poll revealed no clear view on whether the Committee should consider regulating on this topic.

English based lending institutions are undoubtedly a recurring source of grievance. “They don’t care about Scottish practice”, as Sheila Stoddart from Ayton put it. To applause, she complained of often not receiving loan instructions until very shortly before settlement and of feeling unable to accept assurances of a loan offer not in writing. Responding, James Ness recognised the problem and promised to pursue the issue with CML representatives in Scotland. Bruce Ritchie added the suggestion of encouraging clients to complain to the Financial Services Ombudsman over poor service from lenders.

Another thorny issue on which no clear view emerged was whether delay in concluding missives can be regulated. The 1998 guideline designed to achieve early conclusion is, in Bruce Ritchie’s words, “the most ignored and unobeyed guideline we have”. The Society receives daily phone calls complaining of failures to conclude until just before settlement; clients unfortunately don’t understand the risks they run unless the worst happens. The audience were fairly evenly split on a show of hands as to whether the issue could be tackled by regulation, with a large number not committing to a view. The panel speakers could only appeal in conclusion for practical suggestions.

One final point – Bruce Ritchie sought a show of hands on how many in the audience would turn to the Society’s website for current practice guidelines, where they are all posted. “Could be more” was his verdict, as perhaps a third of the audience declared.

MATRIMONIAL PROPERTY:

The sexual revolution

One can usually rely on George Gretton for a fresh angle on a topic, and he set out on the technical-sounding subject of “Division and Sale and Enrichment Claims” by proclaiming that with the coming recognition of civil partnerships, and cohabitants’ rights, “matrimonial property” needs a new name. And in the absence of anything more appropriate, he promptly pronounced his bemused audience “sexual property lawyers”!

The legal system, he continued, has not yet fully responded to the “explosion” of cohabitants buying property together. Despite the statutory protection for spouses, for example, there is still no restriction on one of two cohabiting owners bringing an action for division and sale.

Exploring the question whether one party can insist on buying out the other, on which there exists conflicting authority, he put his weight behind the affirmative answer given in Scrimgeour v Scrimgeour 1988 SLT 590 – the only serious attempt to analyse the authorities, he commented, and supported by the institutional writers.

Supposing each party wants to buy out the other? The professor confidently invoked Roman law itself (“the Scots law is pure Roman law so the presumption is that the rule applies”) in asserting that you then have a closed auction with the court as auctioneer. So decided the Emperor Caracalla in 214, at any rate.

Separating parties who have put money into a property in their partner’s name have sought reimbursement on a number of legal bases, with varying degrees of success. Surveying these, Professor Gretton highlighted the condictio causa data invoked in Shilliday v Smith 1998 SC 725, a decision which, he maintained, “opens the door to claims in a whole range of cases”. He also favoured Gray v Kerner 1996 SCLR 331 (allowing a claim for relief relating to mortgage payments, but restricting it to the post-separation period) as a sensible decision if of doubtful legal basis – and suggested that the point be regulated in a cohabitation or copurchase agreement by providing that any payment by either party bedeemed to be made on behalf of both.

INTELLECTUAL PROPERTY:

Identifying the competition

Lawyers now have to cope with greater uncertainty when advising clients on the legality of IP licensing agreements, according to Semple Fraser’s Scott Kerr.

The approach of the European Commission to block exemptions from the article 81 prohibition on anti-competitive agreements has moved away from a fixed regime of permitted and prohibited clauses, and instead requires licences to be analysed in their commercial context, he explained in his presentation “Making Intellectual Property Work”.

The Commission’s approach, followed in the Technology Transfer Block Exemption Regulation (772/2004), matters because the Competition Act 1998, which governs the domestic market, rests on EU principles: an agreement applying only to the domestic market does not infringe the Act if it would come within the scope of an EU block exemption if that were applied in the domestic context.

One of the four key hurdles, as Mr Kerr described them, for a licence to be protected by the Regulation (the others being purpose, restriction to two parties and avoidance of certain “hardcore” restrictions, which he also expanded on) is that the parties’ combined share of the relevant technology and product market must not exceed 30%, and only 20% if the parties are competitors.

Whether parties are competitors can be a tough one to call as it depends partly on an expectation of what would happen in the market if one party raised its prices. “The choice”, said Mr Kerr, “is whether to play safe or to take the risk that the enforcement of certain clauses (or in some cases the whole agreement) will depend on whether the parties are judged by the court to be competitors in the event of a dispute.”

COMMERCIAL PROPERTY:

Traps for the unwary

The wide application of the Construction Industry Scheme was one of a number of “Property Tax Traps” flagged up by Iain Doran, Head of Property at Dundas & Wilson.

The scheme, set up to combat “the lump” by which building workers commonly avoided tax on earnings, relies on definitions of “contractors” and “subcontractors” that are capable of catching businesses that would never think of themselves in those terms.

“Broadly”, said Mr Doran, “‘contractors’ means anyone carrying on a business which includes construction operations who pays others to do the work.” That means anyone who has spent more than £1 million on construction works on average in each of the last three years – a test quite capable of catching local authorities, brewers, retailers, banks and property investment companies, for example. And “subcontractors” covers anyone who executes, supervises or arranges for construction work to be carried out: including retailers fitting out a shop, and possibly managing agents.

A “contractor” must operate the scheme, and it is illegal for them to make any payment to a non-registered “subcontractor”. So where a landlord offers a contribution towards a tenant’s fitting out costs as an inducement to taking a shopping unit lease, the tenant must be registered before they can receive any money. “I have found out that when this is pointed out for the first time tenants (and their lawyers) are incredulous – but that is the law.”

Another trap Mr Doran highlighted is the difficulties created by the Transfer of a Going Concern rules in relation to VAT on property bought at auction. If a deposit is paid, a VATable supply is made to that extent, and it is too late thereafter to claim TOGC – which may cause cash flow problems and in any event increases the base price for SDLT. However if the deposit is paid and held on the “stakeholder” basis – i.e. is held by the auctioneer or the seller’s solicitors pending settlement – no tax point arises until it is handed over to the seller.

RURAL PROPERTY:

Doubts over new tenancies

There has been only limited takeup of the new forms of farming tenancy under the Agricultural Holdings (Scotland) Act 2003, according to Robert Scott-Dempster of Gillespie Macandrew WS. Speaking to the Rural Property section of the conference on practical issues in managing land post- the 2003 Act, he said that in his experience landlords were reluctant to enter into either the short limited duration tenancies (SLDTs) of up to five years, or the limited duration tenancies (LDTs) of over 15 years.

“The fundamental problem appears to be twofold. The first is that the new style tenancies are too inflexible in the current economic climate prevailing in the agricultural sector. If the fortunes of agriculture were to take a dramatic upturn then landlords might be more comfortable investing in their fixed equipment, but currently there is little incentive. The second is that the confidence of the landlord sector has taken a severe knock and, despite the assurances of [Rural Affairs Minister] Mr Finnie, I think it will be a little while yet before that is restored.”

Unless the parties already know and trust each other, he commented, landlords have usually only entered into SDLTs if necessary as part of some wider agenda, for example as part of a reorganisation involving tenants giving up other lease rights. And of LDTs, of which the takeup “has at best been modest”, he said there remained a lurking concern that the right to buy provisions for 1991 Act tenancies could be extended to LDTs or even upgraded to an absolute right to buy.

The Keynote address: Past the worst?

“One eye on the future and one eye on the past” was the title of Professor Kenneth Reid’s keynote address.

At times the Scottish Law Commissioner threatened to wallow in nostalgia as he recalled the halcyon days (for practitioners at any rate) of the 1960s, when the standard textbook, Burns’ Conveyancing Practice of 1894, was still mostly good law, the most recent legislation was 40 years old and the law reports mainly consisted of reparation decisions. As he contrasted not only the number but the size and complexity of recent statutes (eight principal Acts since the year 2000 alone), the 50-90 or so cases in each of the past 15 years, and more than 30 textbooks on conveyancing and land law published since 1995, we might have been forgiven for thinking that the Commission was planning to bring back the feudal system.

But no. “Shocking as new law may be, the old law can be every bit as shocking”, he proclaimed, reminding us of the rude awakenings occasioned by decisions such as Campbell v McCutcheon (the mineral rights case) and Winston v Patrick on supersession of missives. Obscure laws, tucked away in voluminous sources, forgotten or conveniently ignored until someone decided to spring them on an opposing party to meet a particular client’s needs, could be as much of a hazard.

Professor Reid even had a new scenario to scare us with, quoting a contention of Professor Robert Black in a 1982 article (1982 JR 31): “The law of Scotland does indeed recognise in a sale of heritable property an implied warranty of the condition of the subjects.” Not that Reid fully shared the view, but he did point out that it is based on case law from the 19th century – when Scots law had a unitary law of sale – on dealings in horses. And if correct, he added, it could actually make the single survey quite attractive to sellers!

So what of the future? “There is still much work to be done before we can be said to know our own law”, he maintained, “or avoid the risk that something will come up to surprise us.” The teaching, and study, of law have been shallow compared to the continental tradition. To understand law properly requires thorough research and rigorous analysis” – an essential task of the universities.

Presumably to help morale, he offered the view that some measure of stability may have been reached. On the legislation front, “there is nothing on the horizon that looks like what we’ve just gone through”, he reassured us. Even case law has seen something of a downturn recently, “but watch the ECHR”: the English case Beaulane Properties Ltd v Palmer [2005] All ER (D) 413 could have the effect that positive prescription infringes the article 1 Protocol 1 right to peaceful enjoyment of possessions.

His final concern was that legal academics are being diverted away from the study of Scots law. “On one view the worry is, not that there will be too much law, but that there will be no one left in the universities whose job is to make sense of it. If that came to pass it would be bad news for Scots law, for the law of conveyancing and for those who practise it.”