Here comes 2012

Professional Practice column: an update on the 2012 Land Registration (Scotland) Act, which comes into force in December

16th June 2014 | Alison Mackay

The Society’s Property Law Committee, which is supported by the Professional Practice Team, has set up a RoS Liaison Working Party which has been meeting fortnightly with the Registers of Scotland consultation team to assist the Keeper in formulating guidance on the Land Registration etc (Scotland) Act 2012. The designated day, on which most provisions come into force, has now been set at 8 December 2014.

Although it is outwith the remit of the Professional Practice team to give advice on matters of law, the team keeps up to date with legal developments and how they will impact on the profession in practice. Some of the main changes under the Act include:

Advance notices

Letters of obligation are to be replaced by “advance notices”. Placed on the application record of the Land Register or recorded in the Sasine Register, an advance notice will provide a protected 35 day period for receipt of a deed which is to be presented for registration. It protects an intended deed (not a transaction) between two or more parties against competing deeds registered within the 35 day period. The period starts on the day after the advance notice is placed on the relevant register. The Keeper has proposed that an advance notice will cost £10.

There will be four different types of notice: first registration advance notice; advance notice of whole; advance notice of part; and discharge of an advance notice. You can find 10 worked examples on the Registers of Scotland website: www.ros.gov.uk

In some cases, a letter of obligation will still be necessary, for example, leases of a duration that cannot be registered in the Land Register. The Society will be issuing guidance summarising the situations in which letters of obligation will still be necessary.

New Land Register application form

A single registration application form will be used for all applications after the designated day, Instead of the existing Forms 1, 2 and 3. There will be no separate Form 4 inventory, but an optional inventory of writs may be included as an annex to the application form which will mirror the layout of the existing Form 4.

One-shot rule

The basic principle of the “one-shot rule” is that applications for registration need to be right the first time, because the Keeper will reject defective applications. If the application is not acceptable at the date of application, there will no longer be any scope to make requisitions to the Keeper except in very limited circumstances.

Land and charge certificates

The Keeper will no longer issue land and charge certificates. Instead, she is obliged to notify the applicant and granter of the deed once registration is complete. The Keeper intends to provide a PDF version of the updated title sheet as part of the notification.

Pre-registration reports

There will be a new pre-registration reports service for first registration applications. The various types of reports will reflect the different levels and depths of information required, depending on the type and complexity of the application. The reports will be categorised into basic, standard, detailed and abridged, and comprise five individual parts. The basic report should be used where the solicitor is confident with the boundaries, plan and/or bounding description of the property. The detailed report will be more extensive than the existing P16 report, providing a detailed view of all aspects of the property including all registered interests. We do not know what the reports will be called yet.

Automatic plot registration

To accelerate Land Register coverage, the Act introduces additional triggers for first registration. This includes “automatic plot registration”, under which certain deeds automatically trigger first registration of the plot of land, for example a grant of a long lease, a sublease or an assignation of an unregistered lease.

Compensation

Under the Act, the Keeper is obliged to pay compensation under five distinct areas: (1) for loss incurred as a result of a breach of warranty; (2) for loss sustained by a person as a result of an inaccuracy being rectified; (3) where it is not possible to rectify the register because realignment has occurred; (4) for any loss suffered as a result of any document lodged with the Keeper being lost, damaged or destroyed under the Keeper’s care; and (5) claims under transitional provisions.

Duty of care

Section 111 of the Act introduces a new statutory duty owed to the Keeper by people who grant deeds which are intended to be registered, people making an application for registration and their solicitors or legal advisers. The duty is to take reasonable care to ensure that information supplied on an application form or as supplementary to the application does not induce the Keeper inadvertently to make the register inaccurate. The duty endures until the Keeper has made the registration decision. Accordingly, it covers any issues or information that the solicitor becomes aware of after the application is submitted. The Keeper will not be liable to pay compensation for loss incurred as a result of a breach in warranty in so far as the inaccuracy which gave rise to the claim is attributable to a failure on behalf of an applicant or their legal adviser to comply with the duty of care. The Keeper can recover any loss she may suffer as a consequence of the failure of the granter, applicant or solicitor acting for either to take reasonable care.

Transitional provisions

Two classes of transitional provisions are set out in sched 4 to the Act: those which deal with the general transitioning of 1979 Act title sheets to 2012 Act title sheets, and more specialist provisions covering certain areas such as common property. It should also be noted that the Act largely sweeps away the concept of overriding interests. As such, overriding interests disclosed on title sheets will require to be removed. Although the 1979 Act provides for a large number of possible overriding interests, the most relevant are notes in respect of occupancy rights, floating charges and crofting tenure. In respect of occupancy rights the Keeper intends to remove these when a property is next sold. In respect of floating charges the Keeper intends to address these when processing a dealing which affects the securities section of the title sheet.

Criminal offence

Section 112 is one of the most controversial sections of the Act. It introduces a new criminal offence if a solicitor or their client, either (1) intentionally or recklessly provides false or misleading statements in an application form submitted to the Land Register, or (2) intentionally or recklessly fails to disclose all material information in relation to an application. The purpose of the offence is to disrupt serious organised crime and deter fraudulent behaviour by solicitors who knowingly act on behalf of criminals. It should not impact on solicitors who complete registration applications diligently and in good faith. Concerns were raised by consultees on the inclusion of the test of “recklessness”, which suggests that mere negligence could lead to criminal culpability. On conviction, the maximum penalty for committing the new offence would be two years’ imprisonment plus an unlimited fine.

Professional practice tips

As the Act introduces a number of substantial changes in property law and will lend statutory strength to much of the Keeper’s current practice, it is important that solicitors are well prepared in advance of it coming into force. Registers of Scotland are planning to run 15 events across Scotland summarising the main changes and the impact on the profession. Practitioners are urged to attend these events and also keep an eye on the Registers and Society websites for updates and guidance.