In on the Act

The path to registration of title has not always been smooth. The initial timetable for operational areas proved optimistic and had to be modified. By comparison with sasine transactions, first registrations turned out to be slow or very slow. And there was anxiety about the quality of the land certificates which resulted. In truth, the sheer difficulty of the task was underestimated, for to confine within a title sheet an unruly set of deeds relating to an area of land of often uncertain extent requires skill, patience and, above all, time. But much has now been achieved. Already more than 45% of titles have made the perilous journey from Register of Sasines to Land Register. Strenuous efforts have been made to eliminate error. And turnaround times have been transformed and are the subject of ministerial targets. If there is more to be done, we should acknowledge how much has already been accomplished. The introduction of ARTL later on this year will mark a further important stage in the creation of a fast and efficient register.

Yet one serious difficulty remains: the legislation. The Land Registration (Scotland) Act 1979 was rushed through Parliament in the dying days of the Callaghan government. In its inconsistencies and omissions it shows all too clearly the marks of its birth. The Scottish Law Commission is now engaged on a major review of the 1979 Act which, in time, is likely to result in its repeal and replacement by new legislation. The initial fruits of the Commission’s investigation are three discussion papers which were published for consultation in 2004 and 2005. These are Void and Voidable Titles (DP no 125), Registration, Rectification and Indemnity (DP no 128), and Miscellaneous Issues (DP no 130). All are available on the Commission’s website: www.scotlawcom.gov.uk. The Commission would very much welcome the views of practitioners on its proposals, if possible by 31 March 2006.

So what is wrong with the legislation? Three difficulties in particular can be identified, one concerning legal policy and two of a technical nature.

Insecurity of title

The issue of legal policy can be explained in a few words. It is desirable that titles to land should be secure. And it is equally desirable that titles should be acquired as easily and cheaply as possible and with the minimum amount of investigation. The aim, in other words, is to achieve both security of title and facility of transfer. Unfortunately these aims tend to pull in opposite directions, for if an acquirer is to be spared extensive investigation and yet still receive a good title, he or she must sometimes acquire at the expense of an owner who did not consent to the transfer. As the American jurist Thomas Mapp has expressed it, “easy come” in relation to titles leads ineluctably to “easy go”. Take this example. Alice owns land. Brian forges her signature and dispones the land to Colin in Alice’s name. Colin duly registers. Who is owner? A system which values security of title will leave ownership with Alice. One which values facility of transfer will give ownership to Colin.

The sasine system would give ownership to Alice, but registration of title would give it to Colin. A move to registration of title is thus a move in the direction of facility of transfer – and away from security of title. To a considerable extent this result is unavoidable, for it is of the essence of registration of title that an acquirer should be able to rely on the register, right or wrong. Yet the 1979 Act abandons security of title more completely than is necessary for the principle of reliance on the register. In the Scottish Law Commission’s view, any new legislation should seek to leave matters in better balance.

The Midas touch

There are also difficulties of a technical nature. The first concerns what may be described as the “Midas touch”. Under the 1979 Act title flows from the register: like King Midas, everything the Keeper touches turns to gold. At the level of registration law, at least, it no longer matters whether a disposition is good or bad, or indeed whether there is a disposition at all. As long as a person manages to become registered as owner, then that person is owner as a matter of law. Of course by itself such a system is too generous. It gives immediate ownership to forgers, fraudsters, and to acquirers under dispositions granted a non domino; and by giving them ownership it deprives of ownership those who ought to be owner. It can be made to work only if it is capable of being put into reverse. The price of automatic conferral of title – of what is sometimes called a “positive” system of registration – is thus a complex mechanism for rectification of the register. It seems open to question why title was conferred at all.

Uncertainty and incoherence

A second technical difficulty concerns the state of the legislation. At almost every turn the 1979 Act is uncertain and incoherent. Take for example section 9, the provision about rectification. Section 9(1) allows for the rectification of any inaccuracy on the register. But by section 9(3)(a) there can be no rectification to the prejudice of a proprietor in possession except in a limited number of cases, of which the most important is where the inaccuracy is caused by the proprietor’s fraud or carelessness. This provision bristles with difficulty. What is an “inaccuracy”? What is a “proprietor” and when is a proprietor “in possession”? What is “carelessness”? In what sense can a proprietor’s fraud or carelessness be said to have “caused” an entry on the register which was made by the Keeper of his own free will?

Some of these questions have been answered by case law. The “accuracy” of the register is to be measured against the ordinary rules of property law. If those rules would have produced the result now shown by the register, the register is accurate; otherwise it is inaccurate. So in the example given above, the register is inaccurate on the basis that the ordinary rules of property law would have given ownership to Alice and not to Colin. In principle Alice is entitled to rectification. To work section 9, therefore, involves an excursion into bijuralism, i.e. into the application to the same set of facts of two different systems of law (registration law and ordinary property law); and indeed bijuralism is a complicating factor in many aspects of the 1979 Act.

If Colin is a proprietor in possession, Alice’s application for rectification will be refused. Case law teaches that a person who is shown on the register as owner (Colin in the example) is a “proprietor”, and that “possession” includes civil possession. But possession is a precarious basis of title. If Alice breaks into the house and changes the locks, as happened in Kaur v Singh 1999 SC 180, the possessor will be Alice and not Colin, and Alice will be entitled to rectification – unless of course Colin has broken back in and dispossessed Alice. The significance attached by the legislation to taking and re-taking possession is one of its least attractive features. As George Gretton has observed, “a supposedly sophisticated system seems to have revived the priority rules of the Stone Age”.

The integrity principle

The Scottish Law Commission responds to these difficulties with a series of proposals. An acquirer would continue to be able to rely on the register, of course. But this commitment to facility of transfer would be balanced by enhanced security of title. This is achieved by making a distinction between “register error” and “transactional error”. If the register is wrong, an acquirer is protected nonetheless provided that the acquirer is in good faith. That principle is referred to by the Commission as the “integrity principle”. But if the error lies not in the register but in the acquirer’s own transaction, the acquirer is not protected and must settle for indemnity. In the example given earlier, Brian’s forgery is a transactional error and not a register error. Accordingly, Alice’s title would be undisturbed and indemnity would be paid to Colin.

Two related proposals may be mentioned. The “positive” effect of registration would be abandoned, and with it the unnecessary complexities of bijuralism. And the requirement that possession need only be momentary, which disfigures the doctrine of proprietor in possession, would be replaced by a requirement of more sustained possession, for example for a period of one year.

Other proposals

The Scottish Law Commission makes numerous other proposals on points of detail. For example, it is proposed that information on previous owners should be readily available, that a non domino dispositions should be rejected if there is an identifiable owner, that interest should be due on indemnity payments, and that it should be easier to have servitudes noted on the register.

Effect on practice

These proposals are concerned with the law of registration of title and not with the practice. As such their impact on day-to-day conveyancing would be relatively slight. That is as it should be. It would be unacceptable to introduce yet another system of land registration. Nonetheless the proposals are important. Not only is the 1979 Act deficient in matters of policy, but, notoriously, it fails to provide answers even to quite straightforward questions. The proposed new legislation – principled, coherent, and fully integrated with the existing law of property – would do a great deal better than that.

Kenneth G C Reid is Professor of Property Law at the University of Edinburgh and was the Scottish Law Commissioner responsible for the discussion papers on land registration