Know your boundaries

When registration of title was introduced, the profession and the public were offered a vision of certainty regarding property boundaries. Instead of the rituals of examining boundary descriptions and plans to decipher the extent of property being purchased, conveyancers would have the simple task of checking the land certificate and Ordnance Survey plan with it to establish a property’s boundaries. Any problem would be covered by the Keeper’s indemnity and could be rectified under the legislation.

That day may yet come, but in the short term the consensus of practitioners seems to be that first registrations have resulted in more boundary problems rather than fewer. Boundary problems lead invariably to boundary disputes and, as we all know, such disputes provide a rich vein of material for reality TV shows but do nothing for the blood pressure of practitioners or their clients. Avoiding such disputes and resolving them effectively when they arise could save practitioners sleepless nights.

Causes of boundary disputes

Boundary disputes all arise either from a lack of clarity, or ambiguity, in the delineation of boundaries (a drafting or plan preparation problem) – which can admittedly be complicated by subsequent variation of boundaries – or from a mis-match between the expectations of the client and the reality of the boundaries (a title inspection or a communication problem). There are of course some common examples of situations in which boundary problems arise:

• The sasine title either with no plan or with a badly prepared plan or conflicting plans and no clarity in break-off descriptions.
• The new housing estate where boundary fences do not correspond exactly to the title plans.
• The property which has been altered or extended without due reference to the boundaries.
• The existence of ransom strips retained by developers on the boundaries of sites.
• The problem of occupation of publicly owned land.

Risk management

Dealing with such problems is a risk management issue for solicitors. The first point to note is that the land registration system does provide a number of important tools in this regard.

The P16 report – as a matter of practice, these should always be commissioned in the case of a first registration.

The land certificate – for registered titles, it is, in theory at least, not possible to purchase land where the occupational extent differs from the boundaries delineated in the land certificate.

Rectification of the register under section 9 of the 1979 Act.

The Keeper’s indemnity under section 12 of the 1979 Act – provides indemnification to the party sustaining a loss where rectification of the register is or possibly is not granted.

Section 19 agreements – neighbouring proprietors can agree a common boundary and register an agreed plan.

Care and communication

There will never be an answer to every boundary problem and the vital rule is to ensure that problems are not only identified, but also clearly communicated to the client who will be able to make an objective decision in the light of that information. Some simple procedures need to be followed.

• If acting for the seller, what the seller is marketing or wants to market should be checked against the title and if there is any doubt at all about inconsistencies, this should be drawn to the seller’s attention. The P16 report is critical in this regard.
• Ask the seller to confirm if there have been any alterations affecting the boundaries.
• If acting for the purchaser, check what the purchaser thinks is being acquired against the title plan/ description. Draw any uncertainties to the purchaser’s attention.
• If there have been alterations, draw these expressly to the purchaser’s attention.
• Make a record of all conversations and meetings and preferably copy these to the client or write to the client confirming what has been said.

What not to do

Risk management is of course as much about what not to do as what to do, and however anxious the solicitor is to overcome problems, there is a line to be drawn.

• Visiting properties is dangerous and might give rise to a higher presumption of knowledge regarding the property.
• Detailed analysis of plans is dangerous – anything beyond the straightforward is really the job of a surveyor and a recommendation should be made to involve a surveyor.

Dealing with problems

However good the risk management, there will always be situations where problems arise after missives are concluded or entry is taken. Dealing with these when they arise is also an aspect of good risk management.

• The first question to ask is whether there is any argument that you have been at fault in failing to identify or advise the client on the problem prior to conclusion of missives. If so, the circumstance should be intimated to insurers and it will be their decision whether you are able to continue acting or not.

If this is not the case, or if it is but the insurers’ consent, thought can be given to how the problem might be resolved.

• Is there a simple solution? Will the Keeper rectify the register or can a section 19 agreement as to a common boundary be negotiated?
• Can a deal be done with the other party or with a third party if appropriate?
• Can title indemnity insurance assist?
• If a sale has fallen through, can the property be remarketed immediately?
• If you are clearly responsible, you should consider restricting or writing off fees – this may be the most cost-effective solution.
• Any agreement reached with the client should involve the discharge of any claims or complaints.

Brokers and insurers are there to assist, so as with other areas of risk management, it is not necessary to suffer in silence.

Tim Edward is a partner in Maclay Murray & Spens’ Commercial Litigation and Advocacy department, heading the professional indemnity insurance unit which handles all types of professional negligence claims. He is a founder member of the Law Society of Scotland’s Pursuers’ Panel, established to assist members of the public (and, where appropriate, their solicitors), in advice about negligence claims against other solicitors.e: Tim.Edward@mms.co.uk

CASE STUDIES AND COMMENTS

This year’s Risk Management Roadshow group discussion material commenced with a series of case studies illustrating examples of errors and omissions in routine aspects of property transactions. Some of these related to situations where clients acquired title to less than they had purchased or believed they had purchased, or where more was conveyed away than the client intended.

These situations continue to be features of the Master Policy claims experience. In some cases, even though the discrepancy is minor, the impact may be very significant. It may result in denial of access to the client’s property or other interference with their enjoyment or intended use of the property.

The following case studies are based on problems which solicitors have intimated to the Master Policy insurers as claims or potential claims:

Firm A dealt with the purchase of a house. When the client came to sell the house, it emerged that a garage and bedroom extension added by the client’s predecessor had been built on ground owned in common with neighbouring properties.

Firm B acted in the purchase of a hotel. On resale, a major discrepancy in the title was identified. Most of the public bar and all of the car park were outwith the client’s title.

Firm C acted for a client in the purchase of a plot of ground. It emerged at the time of resale that an incorrect plan had been annexed to the disposition in the client’s favour. The consequence was that the client had title to less than she ought to have had. The previous owner was prepared to convey the omitted ground but expected payment.

Firm D acted for a client in the purchase of a tenement property for redevelopment. Following completion, as the client was making preparations for the redevelopment, it emerged that the title excluded ground at the rear of the tenement. The client had expected this ground to be included and considered it critical to the success of the development.

Firm E acted for clients in the sale of their property. The clients had been occupying on an informal basis an area of additional land adjoining their property to which they had no title. The sale was concluded and a conveyance granted as if the clients had title to all that they occupied. It was possible to procure a conveyance of the additional land but at a cost.

Tim Edward must be right in his assessment that the causes of this type of problem all arise either from lack of clarity or ambiguity in delineation of boundaries, or from a mis-match between the expectations of the client and the reality of the boundaries.

While all these case studies have some similarities, each illustrates an aspect of risk and risk management identified by Tim Edward. It appears that the causes of the problems may have included:

• failure to identify error in missive/title plans or descriptions;
• failure to reconcile plans and missive/title descriptions;
• failure to reconcile the clients’ understanding/expectations with the title;
• misunderstanding between solicitor and client as to the critical importance of plans and descriptions.

In some of the case studies the client may have been the author of his own misfortune. In these and other cases, there may be a basis for successfully defending any claim but, as ever, the objective of risk management is ideally to minimise the risk of the problem arising at all.

Define

Don’t extend your liability by attempting to undertake the role of a site surveyor. Consider defining (the limitations on) your duties with regard to plans?

Research the title/boundary properly

Don’t be afraid to re-check descriptions and plans with clients.

Record

Make a note of what the client wants to achieve, how this is to be achieved, problems that may have to be resolved and problems that cannot be resolved, along with the client’s further instructions in light of all of this.

Review

As the transaction progresses, make sure the property actually being conveyed continues to measure up to the client’s expectations.

Report

Make sure the client is kept informed – if there are problems, explain what these are and spell out in writing what the effect(s) may be on the transaction.

Take care with plans

Ask the client to check plans/descriptions and get the client to sign the plan to signify approval. Beware when plans are photocopied. Photocopying can distort the scale of a plan and result in colouring errors.

React

If there is a problem, consider what can be done to rectify this swiftly, perhaps with the assistance and guidance of insurers at an early stage.