Registering our concerns

While the Society supports the principles of the Land Registration etc (Scotland) Bill, it is pressing for a number of amendments.

As conscientious readers of last month’s Journal will be aware, the Land Registration etc (Scotland) Bill is now on its parliamentary journey. Although the bill is (by modern standards) not particularly lengthy, it involves a fundamental recasting of the technical basis of land registration.

The Society has been fully involved throughout the consultation and drafting process (here I would like to pay tribute to the late John McNeil CBE, who as a member of the Conveyancing Committee for a record breaking period of over 40 years, was involved at various stages of its gestation, and whose depth of experience will be greatly missed).

However, despite the Society’s support of the principles of the bill, we have seen fit, in our evidence to the parliamentary committee, to highlight a number of areas requiring possible amendment, and one particular objection.

Aims for improvement

So far as technical points are concerned, we have made these suggestions:

(a) Section 33 (withdrawal and amendment of application): as presently drafted the Keeper would have unfettered discretion to reject an application in the event of any error or omission, no matter how minor. We have suggested a reasonableness test, and that the Keeper should be obliged to pay compensation in the event of a wrongful rejection.

(b) Section 39 (notification of acceptance, rejection or withdrawal of application): we consider that notice should be given to any other applicant affected by such a rejection or withdrawal. A property may be sold on by a purchaser prior to the issue of a land certificate based on an application for first registration. In commercial transactions, lenders are often represented by different agents. In either case, rejection or withdrawal can have serious consequences for parties other than the original applicant, and we consider it important that notice is given to those with an interest.

(c) Sections 55 to 61 (advance notices): we have warmly welcomed the concept of advance notices, which removes the need for prospective purchasers to rely on an undertaking from the seller’s solicitor, i.e. letters of obligation should become a thing of the past. However, we have suggested clarification as to whether a separate advance notice will be necessary to protect the interest of a purchaser’s lender under standard security.

(d) Section 107 (duties of certain persons): this section imposes, for avoidance of doubt, a duty of care on the applicant and their agent, restating the common law position. However, we have proposed that it would be equitable for the Keeper to be subject to a similar duty of care, which would relate to such matters as errors in P16 reports or substantial delays in entering applications into the application record.

Uncertain offence

The Society’s main concern, however, is in relation to s 108. This creates a new offence in respect of applications for registration. In essence, an offence is committed if a person makes a materially false or misleading statement in relation to an application, “knowing that, or being reckless as to whether, the statement is false or misleading”, or otherwise intentionally fails to disclose material information, or is reckless as to whether all material information is disclosed.

It goes without saying that the Society remains fully committed to the prevention of any acts of fraud or involvement in fraudulent behaviour by our members. However, the creation of this offence, in our view, is unnecessary for two principal reasons: one, the current criminal law both at common law and statute is sufficient to deal with the alleged mischief; and two, the introduction of the offence is disproportionate to the level of threat alleged. Space prevents going into that argument in more detail; I refer members to our written evidence, now available on the parliamentary website.

Our concerns particularly focus on the term “reckless”, which is not settled in Scots law and creates the possibility that this clause will criminalise professional service which, although unsatisfactory, falls short of fraudulent.

As drafted, it would cover solicitors who make a genuine administration error in submitting an application for registration. Equally, the proposed defences lack clarity, simply referring to “reasonable precautions” and the exercise of “due diligence”. No definition of these tests has been provided, meaning that they are arguably subjective, which makes it exceptionally difficult for any practitioner to know what steps to take in order to protect themselves.

Other matters

Finally, we have suggested that a couple of miscellaneous amendments could be dealt with at this stage. First, we have asked for clarification that s 160 of the Bankruptcy and Diligence etc (Scotland) Act 2007 does not alter the common law position that inhibitions registered against the seller after conclusion of missives remain ineffective, as the seller is already contractually bound to dispose of the property. This would remove the uncertainty caused by the Keeper’s current policy of excluding indemnity.

Secondly, we have requested clarification that s 26 of the Conveyancing and Feudal Reform (Scotland) Act 1970 will operate to remove from title sheets any remaining prior ranking or pari passu securities following a sale by repossession, even if the calling-up procedure did not comply with requirements under RBS v Wilson. The practical difficulty is as a result of the Keeper’s policy not to remove such charges from title sheets, notwithstanding s 26. While we have been debating with the Keeper for some time whether her position is correct, this seems a useful opportunity to remove any doubt.

The Society is continuing to engage with the Government with a view to the bill completing its passage perhaps in April or May this year.