Common currency

In an article which appeared in the Journal in July 2003, I illustrated one of the cardinal precepts of the PSG by using the analogy of each of the constituent PSG firms cashing in their deutschmarks, francs and lire for euros. Where each firm had its own pet form of a standard document, there was a very strong argument for standardising that document, thereby avoiding time spent on arid discussions about form, when what really mattered was the commercial content of the document. This was, and is, seen by the PSG as delivering a significant benefit to both clients and lawyers alike. Nowhere perhaps can that need for a uniform “currency” be seen more clearly than with the certificate of title.

The starting point for the PSG exercise was the City of London Law Society certificate. This is widely used by English law firms practising in the area of commercial property as an oven-ready form of documentation available from the CLLS website, and indeed probably now merits the tag of “industry standard”. The current version of the CLLS certificate is the fifth edition and this has formed the template for the PSG exercise. The CLLS is currently working on a sixth edition, but it may be a little while before that edition appears. The PSG is, however, tracking progress on that, as it is working closely with the CLLS generally on this matter, and a PSG version of the sixth edition will therefore roll off the stocks quickly when the English form has been settled.

Cross-border co-operation

The PSG certificate is available for use as a stand-alone certificate in relation to Scottish properties. It works equally well, though, in relation to cross-border transactions, where the instruction from the English agents is to replicate what they are doing in the south. I hope that English colleagues will not take it amiss if I say that on occasion Scottish law firms find themselves being instructed in such matters slightly later in the day than need be, with the result that the Scottish solicitor is instructed to agree a detailed certificate of title with another firm, possibly for a number of properties, within a wincingly tight timescale. That being so, there is no benefit to client or lawyer if a significant amount of valuable time is spent by the two law firms trying to settle the form of the certificate that they will use, rather than its detail. Hence the decision to produce a standardised PSG version of the certificate, based on the CLLS form. The CLLS has confirmed that it welcomes this approach and fully supports the project.

This article does not purport to be a detailed treatise on the purpose and structure of certificates of title, but a few pointers may be helpful. All of this is dealt with more fully in the guidance notes published with the certificate of title on the PSG website www.psglegal.co.uk.

The ideal and the reality

There are two distinct elements to any such certificate. There is the basic certification, the text of which is (subject only to minor tinkering to fit the transaction) sacrosanct. That will conventionally be contained in the first part of the certificate – colloquially referred to as the “front end” – and also in the template of the schedules to the certificate which list detailed matters to be addressed. The second part of the certificate then is disclosure, in which the solicitor inserts the answers to the various questions/ headings in the schedules to the certificate, supplied either by the client or directly by the lawyers, depending on the nature of the enquiry. It is vitally important for the purpose of understanding the certificate that the certification part of the document is left untouched: it states the ideal position in relation to all relevant matters, incorporating confirmation that the title is valid and that the position in respect of all other ancillary matters is as one would want it to be. The disclosure sections then provide further information on detail and, most importantly, the opportunity to make necessary qualifications that identify departures from that ideal certified position. For example, if there is a title issue, the certification section should still state that the title is valid and marketable, but the issue in question should then be highlighted in the disclosure section.

As a general rule, subject to very few exceptions, the certificate should stand on its own without reference to, or there being attached to it, any other form of documentation other than, as required, a plan of the property. The firm giving the certificate should examine and report on all relevant documentation: it is not sufficient to say “see attached” and then append a title deed or some other document. That is not what the exercise is about.

A dual purpose model

The PSG certificate can be utilised either in the case of a purchase or a loan transaction. If the transaction is not a loan transaction, there are various references to banks, creditors, loan documents etc which require to be deleted and these are all square-bracketed in the certificate for ease of reference. In rather rarer circumstances, the certificate may be granted by a seller for the benefit of a purchaser’s lender: in that event the certificate will require to be adapted, and that issue is not addressed specifically in the certificate as currently drafted.

The identity of those to whom the certificate is to be addressed requires careful consideration, given the exposure to liability that follows from that. This is particularly relevant in the case of, say, certificates to be granted to a syndicate of banks or a certificate granted in circumstances where a special purpose vehicle is used for the acquisition, but detailed consideration of that topic is outwith the scope of this article.

The certificate deals with a variety of property types, including those held in outright ownership, those held on lease and those subject to leases, as also those in the Land Register and those (rare beasts) in the Sasine Register. There are also distinctively Scottish provisions, including confirmation of an adequate conveyancing description for the purposes of any standard security to be granted in connection with the certificate. The core title provisions are of course themselves necessarily different from the CLLS form of certificate.

The client’s role

In so far as the certificate requires the client to provide any information or confirmation, that can be obtained from the client by a questionnaire, a suggested form of which is also on the PSG website.

The certificate also contains confirmation that a final draft has been sent to, and approved by, the client company. It will be appropriate in most cases therefore to draft a form of confirmation letter to be granted by the client before the final certificate is issued.

Schedule of many parts

Part 1 of the schedule to the certificate contains the basic details of the property, including those rights from which it benefits. It is important in relation to such benefits that these are succinctly and accurately stated in the certificate, and likewise with burdens affecting the property. A mere regurgitation of title provisions should be avoided, so that, in determining whether there is a material burden affecting the property, it is not appropriate to list all burdens in full, including (say) the prohibition on keeping pigs set out in a deed of 1795.

Part 2 of the schedule lists the various searches and enquiries which it is assumed that the certifier has obtained, and it allows for such searches to be obtained from the Keeper where appropriate or from recognised professional searchers.

Part 3 contains the main certified statements in relation to the property, against which disclosure is to be made in part 7 of the schedule.

Part 4 of the schedule deals with insurance matters.

Part 5 is appropriate where the property is held on lease and prescribes details of the lease, against which again disclosure is made in part 7.

Part 6 deals with leases subject to which the property is held, and again disclosures appear in part 7.

Part 7 of the schedule is therefore a key element of the certificate in that it contains the central disclosures to be made against the central certification.

Part 8 deals with any liquor, gaming or other licences affecting the property.

Finally, there is an appendix which may be used when dealing with, say, a certificate in relation to a shopping centre, where one sets out a template set of details in relation to a standard example of a lease and then indicates divergences from that template by way of exception reporting. That is merely a micro-version of the exception reporting which is at the heart of the certificate of title as such: the whole process is based on disclosure against an assumed template.

Credits – and an invitation

As ever, the PSG is indebted to its consultee firms for their comments on the final draft of the certificate, which in virtually all cases improved it. In particular, thanks are due to Susan Lindgren of Tods Murray, who has vast experience in this area and was accordingly co-opted on to the core PSG group for the purposes of producing the certificate. The PSG is delighted to receive comments on its documents and suggestions for further documents that might form the basis of future projects. There is also a survey form on the PSG website which we would encourage you to use for that purpose.

Contact details for the members of the PSG remain:

Iain Macniven of Maclay Murray & Spens – iain.macniven@mms.co.uk

Douglas Hunter of Dundas & Wilson – douglas.hunter@dundas-wilson.com

Rachel Oliphant of McGrigors – rachel.oliphant@mcgrigors.com

Ann Stewart of Shepherd+ Wedderburn – ann.stewart@shepwedd.co.uk

Iain Macniven, Maclay Murray & Spens