Over the finishing line (full version)

Are you ready for 8 December 2014? No? Or not really? Then you are not alone.

While we should all be in no doubt that the system of land registration in Scotland is fundamentally changing, many of the changes are not going to have any significant impact on our day-to-day conveyancing practice. The introduction of the advance notice procedure, and the consequent demise of the letter of obligation, will be one of the biggest cultural changes, but, subject to getting the timing right, obtaining advance notice protection is going to be a simple matter, involving a very straightforward form, and we will very quickly adapt to this new element of conveyancing procedure.

Searches and application forms

Two other key elements of the conveyancing process are the obtaining of searches, and the preparation of the form of application for registration. These elements will continue to be an integral part of the conveyancing landscape, but they are going to be profoundly different in a number of ways. Staff at the Registers have spent a lot of time developing these new documents, and there is a wealth of information and guidance about them, and other aspects of the new regime that the Land Registration etc (Scotland) Act 2012 introduces, on the Registers of Scotland website. But there is no doubt that the profession will need to climb a pretty steep learning curve, as we familiarise ourselves with the new approach.

Legal reports and plans reports

A suite of searches (or reports, as they are now being called) has been produced by the Registers to provide the essential information from the Registers that every conveyancing transaction requires.

Legal searches

Legal reports, which replace the old Forms 10, 11, 12 and 13, are reassuringly familiar, and will perform virtually the same function. The Legal Report – Unregistered Land will be equivalent to the Form 10, and will be the report to obtain in first registration transactions. As well as providing the same information as a Form 10, this report will also disclose any advance notices that have been recorded in the Sasine Register. If, as is usual practice (at least in commercial property transactions), the report is obtained early in the transaction, then it is likely to predate the advance notice application for the transaction. However, a Legal Continuation Report (the equivalent of a Form 11 or Form 13) can be obtained at no additional cost (if requested within six months from the date of the original report). A continuation report obtained immediately before settlement will show the advance notice, meaning that the purchaser knows they can proceed to complete the transaction, safe within the shelter of the advance notice protection.

The Legal Report – Registered Land will perform the same function as a Form 12, with a continuation report also included in the cost.

Plans information

Plans reports have not played a major part in land registration under the 1979 Act. The P16 report, which compares a plan or bounding description with the Ordnance Survey map, while useful, is too often inadequate, or inconclusive. An essential part of the 2012 Act regime will be the requirement to plot the property being conveyed onto the cadastral map. There can be no overlapping titles on the cadastral map, and any application for registration which includes land that is already plotted on the cadastral map will be rejected. So, obtaining detailed plan and mapping information becomes an even more crucial part of the due diligence process, and plans reports have been developed to provide the information that conveyancers will need, to ensure that their application will not compete with any other registered titles and that the property in question can be accurately plotted onto the cadastral map.

There are to be three levels of plans report. Some information about what these will contain, and the costs, are to be found in General Guidance on Reports on the Registers' website. At the time of writing, examples of the reports are not yet available, and the General Guidance is tantalisingly incomplete. From other sources, however, it seems that there will be five components to plans reports, and the level of report you request (level 1, level 2 or level 3) will determine the detail of plans information you receive. The five components of plans reports are to be:

• Part 1 – Suitability of submitted plan and/or bounding description for registration
• Part 2 – A comparison with the Ordnance Survey map (P16 equivalent)
• Part 3 – Details of any existing exclusive registered areas which conflict with the property
• Part 4 – Details of any existing shared registered areas which affect the property
• Part 5 – Any additional registered interests, such as leases affecting the property

All three levels will include part 1 and clarify whether the plan that is to be submitted with your application will meet basic registration requirements. The Registers' "Deed Plan Criteria" is a valuable guide to ensuring that these requirements are met. A positive response at part 1 will reassure the applicant that their proposed plan (or an existing sasine plan or description) will be accepted for land registration purposes.

The level 1 report will also disclose any potential conflicting cadastral units. This information may appear in part 3, 4 or 5 of the report. Having information about any conflicts at the earliest opportunity will allow corrective or remedial action to be taken, and will reduce the risk of rejection of the application.

A level 2 report will provide all the information that a level 1 report provides, and will provide a comparison with the Ordnance Survey map (P16 equivalent) at part 2.

In addition to providing all the information found in a level 2 report, a level 3 report will provide extracts showing the extent of any competing cadastral units, as well as providing other information about the extent of servitudes and burdens and any mineral interests affecting the land.

A plans continuation report will also be available.

When will you need a plans report?

All three levels of plans report are suitable for applications for first registration. Which level you opt for will depend to some extent on the complexity of the title, and the type of property. The difference in cost between level 1 and level 2 is only £10, but, other than the OS map comparison, neither one, it seems, will provide you with an illustration showing where any conflicts lie. Only a level 3 report will provide that information, so for higher value or complicated titles, the modest additional cost of a level 3 report would appear to be justified.

Will you need a plans report for registered property?

The immediate answer would appear to be no, but on reflection, possibly. If you are dealing with a property registered under the 1979 Act, although reasonably rare, there is anecdotal evidence of competing title extents, and mapping errors cannot be ruled out. There may be a gap between "adjoining" cadastral units, or neighbouring land may have registered a prescriptive servitude since the date of the title sheet for the property you are dealing with. While you would expect this latter event to be disclosed by a legal report, a plans report would be a quick and easy way to establish the extent.

When acquiring part of a registered title, a plans report will be able to confirm that there is no conflict with any other part of the larger title that has been conveyed (although note that if the larger area is a development that has the benefit of development plan approval, then there should be no boundary conflicts between plots in that development). And there will be other examples that haven't occurred to me yet!

Private searching organisations will also provide the new reports.

Having accurate plans confirmation, and comfort that there are no conflicts with other registered interests, is going to become increasingly important in the process of applying for registration, as we are about to find out.

Applications for registration

A central aspect of the 2012 Act is that applications have to be right first time, and that if there is any defect in an application, it should be rejected. The Keeper's requisition policy will cease (other than in very rare circumstances). This is being described as the “one-shot rule”. To be clear, however, this does not mean that you only have one opportunity to get it right. If the application is faulty in any way, it will be rejected, but you will then be able to correct it and resubmit. The difference from current practice is that any amendments or corrections have to be done away from the Register, and the Registers' practice of putting an application in "standover" while the changes are dealt with, or any issue is resolved, will cease. When the amended application is resubmitted, it will be given a new date of registration.

And the staff at the Registers will no longer conduct any title examination. Instead, they will rely on the certification made by the applicant and the applicant's presenting agent at the time of submission, which is that "(I/We)… certify that this application complies with the general application conditions in section 22, and the particular applicable conditions mentioned in section 21(2)". This certification is underpinned by the duty of care provisions in s 111 of the 2012 Act, which means that applicants and granters, and their solicitors, have a duty to take reasonable care to ensure that the Keeper does not inadvertently make the Land Register inaccurate. The Keeper is entitled to compensation for any loss incurred as a result of a breach of that duty. So if the Keeper has to pay compensation for a breach of her warranty as a result of having to rectify a manifest inaccuracy in the Register, there is clearly the potential for this to be offset by her entitlement to be compensated if the duty of care is breached.

The onus is therefore on the applicant (and the applicant's solicitor), not only to satisfy the Keeper that at the date of application the conditions for acceptance of an application for registration have been met, but also to conduct an investigation of title that is sufficiently rigorous to ensure that no inaccuracy appears on the Register.

All applications must comply with the general application conditions which are set out in s 22 of the 2012 Act, and also with any particular conditions of registration (set out in ss 23, 25, 26 and 28 respectively of the 2012 Act) that relate to the type of application, i.e. a first registration, automatic plot registration, registration of a registered plot, and voluntary registration. If the relevant conditions are not met, as at the date of application, the application will be rejected.

General application conditions

The general application conditions relate to the application itself, whereas the particular conditions of registration relate to the deed or plot being registered.

The general application conditions are:

• the application must be in the prescribed form;
• the registration fee must be paid at the time of the application, or satisfactory arrangements for payment (such as payment by direct debit) must be in place;
• the application must not relate to a souvenir plot (a plot of negligible size and no practical use);
• the application must not fall to be rejected by s 6 of the Requirements of Writing (Scotland) Act 1995, which makes probativity (self proving status) a requirement for registration in the Land Register;
• the application must not be one that would be rejected as a consequence of a prohibition in any other enactment (e.g. the prohibition on registration under the Finance Act 2003, without SDLT having been paid, or LBTT from 1 April 2015, under the equivalent prohibition in the Land and Buildings Transaction Tax (Scotland) Act 2013); and
• the application must be such that the Keeper is able to comply with her duties under part 1 of the Act. Part 1 sets out the information that the Keeper must enter in the relevant sections of the title sheet: e.g. the property section must contain a description of the plot together with any pertinents; the proprietorship section has to show the name and designation of the proprietor; charges must be disclosed in the securities section, and the burdens section should set out the details of any encumbrances.

It is therefore up to the applicant to provide the Keeper with all the documents and information necessary to comply with these duties, and the omission from the application of any material information will result in rejection.

Particular conditions of registration

Each type of application is also subject to certain particular conditions of registration which apply to the deed or plot being registered, and these are also applicable as at the date of application.

It is a condition of all applications for registration that the deed must be valid. The deed must therefore be properly drawn and executed, the granter of the deed must have both title and capacity to grant it, and the deed must be in such a form that it is competent to achieve its purported effect. A disposition must therefore have dispositive effect, and real burdens must be set out in a deed that is properly constitutive for the purposes of the Title Conditions (Scotland) Act 2003.

In an application for first registration, the description of, and/or plan representing, the plot must be sufficient to enable the Keeper to delineate it on the cadastral map. If there are any encumbrances affecting only part of a plot, these must be so described to allow them to be mapped. Deeds that relate to a registered plot must narrate the title number of each title sheet to which it relates.

Checklists

If you dig around in the 2012 Act long enough, you will be able to discover all the conditions required for registration. Helpfully, however, the Registers have published lists of the requirements for applications for each type of submission. Many of the requirements for each type of application are the same, and the composite checklist that accompanies this article takes and expands on this information, and is designed to help practitioners and their staff to ensure that each application they submit has the best possible chance of avoiding rejection.

In addition, this article offers a checklist of the key components of a valid and registrable deed. No deed will be accepted for registration unless it is authorised by an enactment, and the Registers have produced a comprehensive list of all deeds that they regard as being "registrable deeds". If the deed you propose to register is not on that list, you must provide the Keeper with particulars of the enactment that permits its registration.

Users should feel free to adapt and expand these checklists for their own use.

The application form

Forms 1, 2, 3 and 4 are replaced by a single application form, the online version of which will only present questions that are relevant to the application type. An example of what the form will look like, in pdf format, is on the Registers' website, and it is now possible to access the online version through the Registers' e-services portal. The form contains two parts. In part A, details of the granter, applicant and property are to be given. This part also allows a list of the deeds that accompany the application to be provided (equivalent to the Form 4). Part B contains a list of questions about the title and provides a space for other relevant information to be provided, if required.

The questions in the 2012 Act application form are quite different to the questions in the 1979 Act forms. None of the questions about companies, heritable creditors acting under a power of sale, matrimonial homes etc are asked. Instead the questions are there to elicit confirmation about the terms of the title on which the Keeper will rely, for the purposes of warranting the title, and to map accurately the plot onto the cadastral map. Most of these questions will only have to be answered for first registrations (including automatic plot registration and voluntary registration applications).

The questions relate to plans, common areas, the Register of Inhibitions, land and buildings transaction tax (when it applies from 1 April 2015), title examination, certification as to links in title, servitudes, heritable securities, burdens and any application for an extension of warranty. Again, the Registers have produced detailed guidance on what they are looking for by way of response to each of these questions, which I would suggest is essential reading for all conveyancers, and so this article is limited to some comments on some aspects of these questions.

Register of Inhibitions

Applicants should note in particular that most types of deed are capable of being affected by an entry in the Register of Inhibitions, so the correct default response to the first part of this question is "Yes".

Land and buildings transaction tax

There will be no SDLT5 equivalent under the LBTT system. So instead of submitting a receipt with your application, you simply confirm whether there is any liability to LBTT, and if there is, confirm that "arrangements satisfactory" for payment are in place. (See Journal, October 2014, 17.)

Title examination

This question may be something of a time bomb. The question to be answered is whether there has been any limitation or restriction on the examination of title. If there has been, details of the nature of the limitation or restriction have to be given. While in the majority of cases, a full title investigation will have been conducted – and this will of course be necessary to be able to give the certification in the application form – this will however have an impact in circumstances where we are instructed to carry out only a limited or sample examination of title (for example in a portfolio acquisition, or in a family transfer by way of gift, where often our client does not want any title examination carried out and we are instructed just to draft the conveyance).

The Registers' guidance on this particular question would benefit from greater clarification and specificity. At the moment all the guidance tells us is that where there has been a restriction or limitation on the examination of title, this may result in the application being rejected, or the deed being registered, but with the Keeper's warranty being excluded or limited.

We do not know in what particular circumstances an application will be rejected, or what will cause limitation or exclusion of warranty where the title examination question is an issue. The guidance states that the examination of title that is done must be suitable for the application.

Balanced with this concern, of course, has to be an acknowledgment by the certifying solicitor that the application must meet the general application conditions and the particular conditions of registration, and although this question will apply to all types of application for registration, not just first registration, clearly it is more significant if there has been a limitation on examination of the title when it is moving from the Sasine Register to the Land Register. When you are dealing with a first registration, you are likely to be conducting a full examination of the titles, to make sure that your client's title in the Land Register accurately reflects the sasine version that precedes it.

For those family transfer situations, where the granter's title is in the Sasine Register, it may well have to be a case of advising the client that, because the conveyance, even if for no consideration, will trigger first registration, some scrutiny of the titles will be required, to ensure that the application for registration contains all the relevant components to enable the Keeper to accept it for registration, and that the deed of transfer is valid. For sample title examinations in multiple acquisitions, if we could have some clarity about whether that lack of title examination would not necessarily mean rejection, but may attract exclusion of warranty only, that may in certain circumstances be acceptable to the party acquiring the portfolio, perhaps with a title insurance wrapper instead. This is something that needs to be clear at the instruction stage, so that decisions can be taken, not when the application is being made.

Links in title

Actual copies of any links in title no longer have to be submitted with an application for registration. The Registers will not examine any title documents, and instead the applicant must certify that the appropriate links are in place. This is directly linked to the requirement for the deed to be valid.

There will of course be no links where the deed is an a non domino disposition. In these cases, the 2012 Act has other requirements with which the applicant must comply for an a non domino deed to be accepted for registration.

One point to note is that for applications for registration of a deed granted by a person who is not yet, but is about to become, the owner, e.g the purchaser's standard security, the application form must specify the deed by which the applicant will take title. There is a space for this in the declaration section of the form.

Servitudes

It will now be possible to enter the existence of a servitude acquired by prescription, rather than by express grant, on to the title sheet. The certifying applicant must be satisfied that the servitude has been validly constituted in this way, and must submit a plan, where appropriate, showing the servitude, such as a right of access, so that it can be shown on the cadastral map.

Although this question will only appear in forms dealing with first registration, if an applicant wants a prescriptive servitude to be shown on the title sheet of a title that is already registered, details can be provided in the "Further information" section of the form.

Be prepared

There is a vast amount of information to take in, in advance of the designated day. Getting familiar with the content and effect of the reports and forms in advance of that date is a good place to start, and to consider how these will fit into your current processes, and what, if any, adjustments you might need to make to those processes to help you to enjoy a smooth and pain-free transition to the new regime.

Ann Stewart is head of knowledge management and senior professional support lawyer, property and infrastructure, with Shepherd & Wedderburn, and a member of the Property Standardisation Group

To download a pdf of this article and tables Click Here.