The shape of things to come

The Scottish Law Commission’s Report on Land Registration was submitted to the Scottish Ministers at the end of December 2009 and has now been published. It contains a draft bill which, if enacted, would repeal and replace the Land Registration (Scotland) Act 1979. But this would be evolution, not revolution. The revolution happened under the 1979 Act.

The revolution has not been painless. It gradually became apparent that the 1979 Act needed at the very least to be thoroughly overhauled. That view has been a widespread one, and in fact it was the Keeper of the day who originally approached the SLC with the suggestion that it should undertake the task. Successive Keepers have been supportive of the project, and seconded to the SLC successively two staff members, first Martin Corbett and later John Glover. Their contribution to the project has been of the greatest value. Indeed, without such support the project would have been difficult to carry through. (Recently a similar exercise happened south of the border: a joint project between the Law Commission and HM Land Registry, culminating in the Land Registration Act 2002.)

Evolution, not revolution. Nobody would have the appetite for a new land registration system anyway, and the SLC report suggests no such thing. The 1979 Act, for all its faults, introduced a system that is much better than the old one. One analogy for what the report seeks to do is that of taking the engine out of a car, rebuilding it, and putting it back again. For the driver not much appears to change. The controls are the same. But the engine should perform better and break down less often. In the same way, for conveyancers the changeover should not be a traumatic event. Title sheets with their four sections will continue. Titles will still be guaranteed by the Keeper. ARTL will continue to operate.

So what will change? The full answer would take hundreds of pages. (That’s the report.) Here are some highlights.

Electronic deeds and missives

At present, deeds can be in electronic form, but only if used within the ARTL system, which excludes many types of deed. In the new scheme all conveyancing documents would be capable of being electronic. Not only deeds, but also missives would be covered. Any deed could be submitted for registration in the Land Register in electronic form, even if not within the ARTL system. The same would be true for the Register of Sasines, in those cases where that register is still relevant. Electronic deeds would be also capable of registration in the Books of Council and Session. There would be no compulsion to move to electronic deeds: in the future paper deeds would remain competent, as they are today.

Completion of the Land Register

At present nearly 60% of titles are in the Land Register. So Scotland is like an uncompleted jigsaw. Although the percentage increases year by year, completing the jigsaw would take centuries. That is because properties switch into the Land Register on sale, and some properties can go unsold for generations. There are some properties that have yet to make their first appearance in the Register of Sasines, which was established in 1617. Unless something is done, in 400 years from now Scotland will still be an uncompleted jigsaw.

The draft bill has several measures aimed at speeding up first registrations and aiming to get 100% coverage within a few decades. Three of these will be mentioned. First, any disposition of unregistered property would trigger first registration, not just dispositions on sale. (So for examples dispositions by way of gift, and dispositions by executors or trustees to beneficiaries, would be covered.) Secondly, the Keeper’s right to reject voluntary first registration would be removed. Thirdly, the Keeper would acquire the power to register unregistered properties, without needing the owner’s consent.

Maximum in-tray period

It is a familiar complaint that registration can take too long: many months, and sometimes even years. The draft bill would allow maximum periods to be set by the Scottish Ministers. “Periods” in the plural because different periods might be set for different types of case. For example, for dealings with whole the maximum could be shorter than for transfers of part. At the same time the draft bill would remove some of the current causes of delay.

Advance notices and letters of obligation

Nobody likes letters of obligation. The draft bill would make them unnecessary. It would introduce a system of “advance notices”. Some other countries have such a system, and the SLC made a particular study of the English and the German systems. The seller would grant the notice in favour of the buyer and it would enter the Land Register. (It could be done in paper form but in practice most notices would, no doubt, be electronic.) The notice would create a “protected period” of 35 days. Provided that the “protected deed” were registered within that time, the buyer would have nothing to fear from adverse entries in that period, either in the Land Register or in the Register of Inhibitions.

Advance notices should make letters of obligation unnecessary, at least in ordinary cases. One qualification is where the discharge of the seller’s standard security is for some reason not available at the time of settlement. In that case it would no doubt still be necessary for the seller’s solicitor to undertake to deliver the discharge. In England, where letters of obligation in our sense are unknown, that is what happens if the discharge of the mortgage is unavailable at completion.

What the takeup of advance notices would be can only be a matter of speculation at this stage. One factor would be cost. In England & Wales (where use of the equivalent system is routine), the equivalent is bought as a single package together with a search, and the total cost in a standard case is £4. For various reasons it is likely that the cost of an advance notice would be significantly higher than that, at least in the early years, but nevertheless the SLC thinks it likely that advance notices would prove attractive.

The protection would be superior, from the client’s point of view, to the protection afforded by a letter of obligation. In the first place, what the buyer wants is a good title and wants it on registration. A letter of obligation does not ensure that there will be a good title on registration. It ensures that eventually (but not necessarily on registration) there may be a good title, and that if there is not then there will be compensation. From the client’s standpoint that is good, but by no means best. In the second place, the way a letter of obligation is worded can sometimes provide a basis for disputing liability on the part of the seller’s solicitors.

Designation

The current legislation has no rules about designation, apart from the simple requirement that there be a designation. The SLC takes the view that some tightening up is desirable, not least to bring Scots law up to the best international practice.

In the case of registered companies, the older practice was to give name and registered address. The modern practice is to add the registered number, which makes sense because the name and the address can change, and only the number is a unique identifier. Companies can not only change their address and also their name: they can swap names with each other so that X Ltd takes the name Y Ltd and at the same time Y Ltd takes the name X Ltd. (For a disturbing illustration see F J Neale (Glasgow) Ltd v Vickery 1973 SLT (Sh Ct) 88.) The draft bill provides that the Keeper must include the number as part of the designation.

That change in the law would not be a major change in practice, because modern practice is already generally in line with that requirement. Where there would be a significant change is in the designation of natural persons – i.e. individuals. The older practice was to give name, address and occupation. The modern practice is to omit occupation. In everyday life, identification by date of birth has long been a requirement – examples include loans, passports, tax matters and so on. Many countries require date of birth as part of the designation in conveyancing matters too. The draft bill would require the Keeper to include the date of birth in the designation. These new requirements would be about what appears in the title sheet, not about what appears in deeds. But since the Keeper would need this information the most convenient way of providing it would probably be to include it in the deed.

Inaccuracies

Inaccuracies cannot be wholly avoided: we live in an imperfect world. But as and when inaccuracies happen there needs to be a reasonable way of dealing with them, and it is an objection to the current law that it fails to do that. Section 9 of the 1979 Act says that in many cases the register must remain inaccurate. Anyone who has tried explaining that to a non-lawyer will have found the task difficult, if not impossible. The SLC recommends that inaccuracies should be rectifiable in all cases, but that in some types of case what was at first an inaccuracy should be capable of becoming an accuracy – i.e. that in some types of case the rights of the parties should be “realigned” with what the register says they are. The details cannot be gone into here, but in a nutshell, if the register is inaccurate but before it is rectified there is a disposition, by a seller in possession, to a buyer who acts in good faith, the inaccuracy would be washed out.

The guarantee of title

An important feature of the system introduced by the 1979 Act is that titles are (usually) guaranteed. The SLC recommends that the system of title guarantee should continue. There would be changes in the detail, but the overall result would be broadly comparable to the current system. The most important change of detail concerns the “mud/money” balance.

A title guarantee can take two forms. (i) If the grantee’s title turns out to be defective, the grantee is compensated by the Keeper. In other words, the grantee takes the “money” but does not keep the “mud”. (ii) If the grantee’s title turns out to be defective, it is protected from challenge. Accordingly, there is no need to compensate the grantee. But the Keeper must then compensate the other party whose rights are thereby infringed.

The 1979 Act has a mix of the two forms of guarantee. The SLC recommends that there should continue to be a mix in the future.

But it recommends a shift in the balance: in the new scheme the shift would be somewhat towards (i) and away from (ii). The SLC thinks that this would produce fairer results than the present system.

Uncompleted titles

The SLC recommends two minor changes to the way uncompleted titles are dealt with. The first change is a simplification. The second is a (minor) complication.

(i) Under current law, a disposition by an uninfeft proprietor that induces a first registration must contain a clause of deduction of title. The SLC recommends that the requirement for such a clause should be abolished.

(ii) Under current law, once a title is in the Land Register notices of title are unnecessary. The SLC recommends that notices of title be restored. Instead of the several different statutory styles, all complex, in force for the Register of Sasines, the style for the Land Register would be simple:

“Be it known that A.B. [designation] has right as proprietor to all and whole [description] conform to the last completed title and subsequent writ [or writs], which title and writ [or writs] have been examined by me, Y.Z. [designation], Notary Public [or Law Agent].”

Even under the 1979 Act the title and the midcouples have to be checked, so all that changes is that a brief statement has to be signed to confirm that such checking has indeed taken place. The SLC thinks that notices of title of this type would not be a significant burden for practitioners.

Shared plots

Imagine a development of 20 houses, with a common area including parking, a play park etc. Each property has a one-twentieth share. Under current practice the common area is included in each of the 20 title sheets. The SLC recommends that such common areas should have their own title sheets. The draft bill has rules aimed at ensuring that this change would not give rise to conveyancing complexities. The change would not be retrospective: it would apply to new developments.

All conveyancers know about PMP Plus Ltd v Keeper of the Registers of Scotland 2009 SLT (Lands Tr) 2. That decision rests ultimately not on some arbitrary quirk of Scots law, but on the impossibility of transferring in the present something that cannot be identified except in the future. Until someone can invent a time machine, the thing just cannot be done.

There are various tactics that developers can adopt to address the issue. The SLC recommends a new one, called the “provisional shared plot title sheet”. It would be purely optional, and, like the other methods that developers can use, it would not be perfect. The details are complex, but the broad idea is simple. The developer would request the Keeper to set up a provisional shared plot title sheet for the proposed common area. On completion of the development the developer would lodge with the Keeper an “ascertainment plan” showing the common area. At that point in time a pro indiviso share in the common area would vest as a pertinent in all the individual properties.

Prescriptive titles

Under current law no rules exist as to whether (if at all) the Keeper should accept applications based on a non domino deeds. In the early years of registration of title, the Keeper had a virtually open-door policy. Around the mid-1990s the door was nearly, but not quite, closed, and that remains the position to this day. It is unsatisfactory that such an important issue should rest on practice, not law, and the SLC recommends a set of rules as to when applications based on a non domino deeds should be accepted and when they should be rejected.

In a nutshell, such an application should be accepted if both (i) the true owner has not been in possession for seven years, and (ii) the applicant (or the applicant’s predecessor) has been in possession for at least one year. If either condition is not satisfied, the application should be rejected. These periods are separate from the 10 years needed for a prescriptive title, for the prescriptive clock starts to tick only once there has been registration.

Although the rules just mentioned are not about the law of prescription as such, the SLC does also make recommendations for one or two changes to the law of prescription. The most important of these is that positive prescription should be capable of running on any registered title, just as it is capable of running on any recorded title in the Register of Sasines. Under current law, by contrast, the rule – a most unsatisfactory rule – is that positive prescription does not run on registered titles, except in those cases where the Keeper has excluded indemnity. (So titles without exclusion of indemnity are in this respect worse than titles where indemnity has been excluded.)

Some new terminology

Lastly, there is, inevitably, some new terminology – not a great deal, but some. The new system of “advance notices” gives rise to some new terms. So does the new system of “provisional shared plots”. Both have been mentioned above. One or two others are worth mentioning.

One is that in the current system there is some uncertainty about whether one can correctly speak of “registering a deed” in the Land Register. In the new scheme it will not be incorrect to speak of registering in the Land Register a disposition or standard security or whatever.

Next, when the Keeper accepts an application, the title would normally be “warranted”, i.e. it would come with the Keeper’s warranty. That would correspond roughly to indemnity in the current law. Occasionally the warranty would be excluded, corresponding to exclusion of indemnity under current law.

A minor change would be that the C section, currently called the charges section, would be renamed the securities section.

Lastly, a foreign-sounding term: “cadastral map”. Although the 1979 Act contemplated each title sheet with its own plan, so that the completed register would consist of more than 2,000,000 separate plans, the reality is that there is only one megaplan, an electronic plan of the whole of Scotland showing registered properties and their boundaries. The plan attached to a land certificate is just an extract from that single megaplan or map of Scotland. It does not exist as a paper map, of course, but it exists nonetheless. The new scheme would recognise the reality, and a name is needed. “Cadastral map” is an unfamiliar term to most Scots lawyers at present, but it is an international term, and we think it would send the right message.

• Professor George L Gretton was the lead commissioner on the land registration project