Back for more

Property law revolutionised. The new land registration regime. National standard missives. All still bedding in. And coming up, the Altis online platform (see last month’s Journal), digitisation at the Registers, ScotLIS and more. Property lawyers must feel they are in a state of constant flux.

Yet the system could work better. Hard cases have occurred; fee income often does not reflect the responsibility; new entrants are not as attracted as they are to other areas of law. Can the profession be persuaded to take initiatives of its own, in addition to all the change already happening?

These were the main issues raised in the Journal’s latest property law round table, sponsored by First Title and chaired by Professor Stewart Brymer. It would be fair to say that most of those present felt the need for a greater say in the direction property law is headed. But how to achieve that?

The 2012 Act: pluses and minuses

First, though, to the 2012 Act regime, now in force for more than a year. Many solicitors, Brymer suggested, did not fully appreciate in advance that it made some quite fundamental changes, such as ending the Keeper’s “Midas touch”. And some have been complaining quite vociferously over their experience of it in practice. What was the Keeper’s view?

“I think from our perspective 2015 was a really interesting year,” Sheenagh Adams replied, calling to mind the proverbial “interesting times”. “It’s been challenging for us; we know it’s been challenging for the profession; but hundreds of thousands of applications have gone through, and gone through with no issues, so the vast majority are fine and in a lot of cases people wouldn’t really have noticed the difference, and may have found it easier.”

Something like 80-90% of “dealing with whole” applications are now processed within two days, and more and more properties will benefit as the Land Register progresses towards completion. “I think there are issues round first registrations and transfers of part where, if we were starting again we wouldn’t ‘start from here’,” Adams continued, “but we are where we are, and we are trying to make improvements and respond to the issues” – including those raised by the Society’s Property Law Committee, with which Registers has “an excellent relationship”.

“However,” she cautioned, “in terms of rejection rates, we are back to where we were with the 1979 Act, and a lot of that is to do with process.” While some solicitors suspect that the Keeper’s rejections policy is a money-making ploy, “I wish we did make money from rejections... I’d be even more delighted if we didn’t have any rejections.”

A lot of them, she maintained, are down to “admin”: “not putting deeds in, ticking the wrong box, all sorts of things that are totally avoidable and should be easy to deal with”. To those who complain that a simple phone call would sort it, “The point I always make is if you apply for a passport, the nice lady at the Passport Office doesn’t phone you and ask for the missing details, and say, ‘I’ll just fill it in for you.’ You don’t expect that from your clients; you don’t sign a form for them and say it’ll be fine – you have your processes and we have ours. The Law Commission was very big about the ‘one shot’ rule; that’s what the legislation is about, we have to enforce it and people should just get it right.

“But for the vast majority of cases it’s going well and I think our view is that it puts solicitors back at the heart of it all. We’re not trying to second-guess you: our staff aren’t lawyers; we shouldn’t be saying, ‘I bet they really meant this,’ and changing things the way we did in the past.”

Ross MacKay suggested that even good property lawyers could find the necessary form filling troublesome, and that they should leave it to others. Iain Doran enthused about the performance of CMS’s Legal Services Unit, whose paralegals are more efficient in carrying out administrative type tasks as well as cheaper than lawyers.

Wearing his Insurance Committee hat, MacKay also noted that since the credit crunch boom in CML Handbook-related Master Policy claims, there is effectively a loading on the premium of firms whose work includes a high proportion of conveyancing.

“That’s interesting,” was Adams’s reply, “because we find that firms that are doing the most conveyancing have the best performance. We have about a third who have no rejections, and another third who have occasional rejections, maybe up to 5%, 8% of their applications. Then we have the other third where frankly some of the rejection percentages are appalling. Solicitors often say it’s the bulk conveyancing firms getting it wrong. Actually no, they’re getting it right. The fact that a third of firms have no rejections shows it can be done.”

Looking for a prop

On the wider question of how well the profession understands its role under the 2012 Act, Robert Rennie feared that it had become too used to relying on the Keeper exercising her judgment, as she could under the 1979 Act. Solicitors had not appreciated the radical difference caused by the Keeper being able to rectify irrespective of possession if there is a material inaccuracy in the register. Trying to explain this in seminars prior to the Act, he was “met with blank faces on the basis that things would be much the same”. He added: “I think (a) the profession has lost the talent, if that’s what it is, of evaluating a title properly, (b) the profession is now frightened and the law of negligence has developed in such a way that it is not a defence just to say that something is what you truly thought.”

Ann Stewart agreed. “In a way, we were spoiled and I think the profession became lazy, because we had the Midas touch.” Even if it was not the Keeper’s job to check the conveyancing, a lot of people took the view that if a deed didn’t bounce, everything was fine. “So there’s quite a strong feeling that in some way the 2012 Act has amputated a leg because we no longer have that second bite. I’m not saying this is the correct attitude but it is a prevalent attitude.”

She continued: “Having had that amputation, and now the one-shot rule also, the removal of pre-registration enquiries is kind of having the crutch kicked out from under us as well. On the one hand we’re on our own, and many may say quite right too because we should be knowledgeable and skilful and experienced to make those sorts of judgments, but on the other hand we’re also having to work out registration policy – not the law, but what Registers are going to do as well.”

Doran agreed this was a crucial point. “For those of us who did sasine conveyancing, the 2012 Act is like going home again, I suppose. But the difference is, with sasines, you’d get your deed in the register and if a problem emerged later, you just had to deal with it. I think Ann is absolutely right: not having a pre-registration enquiry facility in order to deal with difficult, complex, unusual situations, coupled with the fact that you’ve got the one-shot rule and no Midas touch, is worse than sasines.”

To which the Keeper responded: “Obviously we’ll be looking at what products we need to provide for customers as a result of the 2012 Act, and we’ve tried to respond positively, so if there are things you want us to do then feed it into the Property Law Committee and we will do what we can.”

Promoting reform

A bigger question still was whether the property transfer process needed to be completely rethought – and the means by which this might be achieved.

“There is no right for lawyers to be involved in the process, we must remember that,” MacKay observed. “We have to give some benefit to our clients for the privilege of acting for them, whether it’s legal expertise, indemnification, interpretation, project management, call it what you will: we have to do something. But good luck in trying to get the consumer lobby to accept that legal fees are too low.”

Lurking in the background to this discussion were the well-known problem cases such as Happy Valley, which, even if due to complex circumstances, still left people who thought they had bought a property left with no title and seemingly no remedy. “In the society we have today I just find it really difficult to accept that these situations can arise and we can all just walk away and say, nothing to do with us,” Brymer commented.

MacKay suggested, and Brymer agreed, that the Society could at least have taken more initiative to propose measures to prevent the same thing happening again. It was possible for an idea to gain momentum – look at what had happened with the ScotLIS information database project, which Brymer hadn’t expected to develop so quickly from the first conference on the concept, only a year ago. “ScotLIS is an example of something that has moved very quickly, and there is no reason why other things couldn’t move as quickly if we actually have the proper public affairs, PR, liaison with Government. Because if we don’t tell them what we think is important to us, they will tell us what they think is important to them. That would be my question to the Society – how important is property law, and our profession’s role in property law, going forward?”

Getting the politicians interested is itself a challenge. Brymer wanted to highlight issues at Revenue Scotland (he had had the “apologetic phone calls”) as a way of demonstrating to ministers that the system isn’t working properly. Deborah Lovell thought that a co-operative approach was better; a more critical standpoint might just be downplayed in response: “There has been a concern in the past that if they heard the same views from someone else it would be given more weight, because we are seen as protecting our patch.”

Outside influence

Does the profession (or the Society) need an outside advocate, then? Brymer and MacKay are very impressed with what Danish property lawyers have achieved over the past decade. When their Government ended their conveyancing monopoly, they responded by forming a separate, voluntary association – funded by a percentage of members’ turnover, giving them a large marketing budget which they deployed to good effect. They won over the previously hostile consumer body by inviting it to draw up their complaints and appeal procedures, and successfully positioned themselves as the voice of the consumer in property issues. “They weren’t being seen as the lawyers’ lobby but as the person who represents the average homebuyer and seller, and therefore the people to go to for press and TV,” MacKay explained.

He believed there was scope for some such association in Scotland, “something that would be standing alone, probably under the umbrella of the Society but distinct from it”.

Paul Carnan disagreed. “I think we’ve already got that trade body in the Society. The high street is paying about £2.5 million in fees to the Society for representation and regulation; it should be out there pushing the boat for us. We’re a very small country.”

The President, Christine McLintock, who had joined us by this point, also wanted to avoid splitting up into separate interests: “I really think it would be a bad thing for us to start dividing amongst ourselves. For me, it would be a plus to keep it within the Society, albeit perhaps in a directed way. That actually fits very neatly into the new strategy, because we are looking at how we can better serve different parts of the profession. I would prefer to have the conversation within the confines of our professional body, because looking at what’s happening in England & Wales just now, they are under attack again by the Government, by the Competition & Markets Authority, and it just feels as if the solicitor profession is being dismantled.”

For Lovell the difficulty was “trying to galvanise people”. “I feel we are on the cusp here of changes in the way we do business. We talk about the profession: that is us, it’s not someone else. Everybody getting interested and getting involved, that’s been the challenge.”

Panellists acknowledged that often the biggest resistance to change comes from within. Stewart wondered if there was too much focus on criticisms and complaints – letters to the Journal being one example. “Nobody thinks to accentuate the positive, and yet if we are to enthuse the profession it’s not about trying to eliminate the negative, it’s saying what’s good.” But change needed to be fundamental and not just “a sort of happy layer on top of what we’ve got at present”.

The President accepted that the Society’s Law Reform team, small as it is, has to focus on legislation already proposed or in progress, and “I actually think the purpose of committees needs to change to become more proactive, more outward looking.”

Who will act?

Doran, who currently chairs representative body the British Council of Shopping Centres in Scotland, recommended forming alliances with other interested parties, such as the Scottish Property Federation and Revenue Scotland. It seems that the Society now enjoys very good relations with RICS as well as with Registers, and improved relations with CML and other bodies, so maybe that can be put to advantage.

But Rennie will not forget how taking part in constructive dialogue with others on the single survey and property questionnaire led to being “pilloried by the profession”, though he believed these developments were coming anyway. Just like ABS, McLintock remarked – another issue where trying to anticipate a policy shift caused huge controversy.

Brymer argued that the Society should actively try to recruit to its committees those who disagreed with a position, to make for better debate; and Adams pointed to the potential from involving younger members: “In the last year I’ve spoken at some TANQ events and the feel there has just been so different. They have been so positive, so enthusiastic, really keen, up for change, up for challenge.”

Lovell agreed, citing her experience judging student teams at Napier University who were set the challenge of coming up with innovative legal services (see Journal, January 2016, 38): “They had taken something we had been trying to do and taken it about eight steps further. So we are looking at working with them. They have a completely different view of what we are doing.”

“I think what we should take forward is that we should take the initiative more,” Rennie proposed on being asked for his concluding thoughts. His days on Society committees predated the Scottish Parliament, and there had been little chance of securing any proposed legislation through Westminster, “but that situation doesn’t pertain now”.

He added, provocatively: “Frankly, the disappointment I suppose of my half century is that when people like Stewart and I put our heads above the parapet and say such-and-such is a good idea, and you’d better watch what will happen if we don’t move forward, the people that paste us are not the consumers, they are our own people who regard us as interfering and just making things worse. But I think it’s more important to take consumer groups and politicians with us than our own profession. That I know is a scandalous thing to say, but I think that’s right.”

Brymer followed up: “I think the idea of a shopping list of legislation is good, but to do that I would like to take as many people with us, as many of those who would shoot us down as possible, but if that is not possible, that shouldn’t be a reason for not doing it. I think we’ve got excellent dialogue with other bodies; I think we just need to seize the opportunity, and as long as we have got the people to take it forward, that is really healthy. If we don’t we will just become disillusioned. We need different perspectives. No one is saying we should have change just for the sake of it, but if we sit back there will be others who put that change on us, and I think that has to be of concern.”

Online extra

On the CML:

Paul Carnan: “The lenders have always had it their way, and they will want it more and more their way. Will we see the development of a part 3 for Scotland, for sep rep? That remains to be seen. Will we just have to keep in line with everything that England does, the way that England does it? Because there are differences between the two handbooks, and at this stage it favours us, the situation in Scotland.”

Ross MacKay: “I think there has always been a risk that due to the size of the markets we won't have a huge input, but it's odd, a lot of the initiatives that we have put in place over the last couple of years, in England & Wales they are behind the pace. The feedback from the CML is that these are great, we fully endorse these changes, we just wish that we could do something in England like this, for example e-discharges, but there's a reluctance to get involved because it's like trying to get the proverbial oil tanker to change course and with the big lenders it doesn't work. But we do have contact which is good.”

Stewart Brymer: “If I can pick on one issue, the change proposed along the lines of our reports on title incorporating a provision to the effect that the borrower has accepted the loan conditions, how do we see that playing out in practice? From our perspective there is possibly a breach of contract or negligence perspective.”

Ross MacKay: “I think the view of Paul and myself, because we were involved in it, is that this was coming from a European consumer protection perspective whereby in light of the tightening for financial contracts they were wanting to write in a cooling-off period, which was just not going to be practical bearing in mind the reality that the mortgage offer comes through days if not hours before completion is anticipated. And therefore the practical compromise is being proposed to this effect, that when you effectively utilise the funds, the client is accepting the offer of loan.”

Robert Rennie: “Is it necessary to have the clause, because I would have thought that the legal implication of using the funds was that you accepted the offer?”

Ross MacKay: “That was our view.”

Robert Rennie: “The problem we discussed was whether that clause imposes a duty on the solicitor to go over the commercial terms of the loan with the borrower before submitting the report on title which will tie the borrower to these conditions.”

Paul Carnan: “Is there an obligation at the moment to say to the borrowing client, do you accept the financial terms before I requisition the loan funds?”

Robert Rennie: “If I was put in the witness box as an expert witness on those terms I would say no.”

Paul Carnan: “I would say I do; once I get the loan papers I would say to the client are you happy with the financial terms, then we'll go ahead, and if you're not happy with the financial terms I'll not put in my report on title.”

Taking part in the round table were:

• Sheenagh Adams - Keeper of the Registers of Scotland
• Professor Stewart Brymer - Brymer Legal Ltd & University of Dundee
• Paul Carnan - partner, Blaney Carnan, Glasgow
• Liana Di Ciacca - senior underwriter, First Title
• Iain Doran - partner, CMS Cameron McKenna, Glasgow
• Deborah Lovell - partner, Anderson Strathern, Edinburgh
• Ross MacKay - partner, HBJ Gateley, Edinburgh
• Christine McLintock - President, Law Society of Scotland
• Peter Nicholson - editor, the Journal
• Professor Robert Rennie - partner, Harper Macleod, Glasgow
• Ann Stewart - senior professional support lawyer, Shepherd & Wedderburn

Title insurance: What level of solution?

Intertwined with the discussions on the effect of the 2012 Act, and the level of training that property lawyers now receive, was the role of title insurance and how readily it can fill any gaps.

“I’m a great fan of it,” Iain Doran affirmed, “because in my experience, particularly in larger commercial transactions, if you try to sort out a problem, say with a mineral report, you can be at it for months, and people are screaming at you, millions of pounds are at stake, whereas you can get a title policy for really a very small premium, and if the music stops and the insurer is holding the parcel at that point, everyone is happy.”

Stewart Brymer suggested that commercial property lawyers were used to carrying out a full title analysis, with title insurance playing its part where needed, but “All of a sudden we’ve got a litigious society and everything is crystallising in the residential property market where the paradox is that fees are unbelievably low.”

But with pressures driving down fees and costs in residential transactions, will title insurance continue to gain ground, despite solicitors not wanting to spend time ironing out technical issues?

Ann Stewart wondered whether the profession had already gone down a route that meant it had to turn to title insurance because solicitors no longer have the skills to sort out problems themselves, “and so we should just insure it. Is that what we’re suggesting?”

“I think some firms have made that decision consciously,” Deborah Lovell responded. “They have actually said, 99 times out of 100 it will be fine, and the way we can do this in bulk is simply to rely either on insurance or the Master Policy or a checklist process however that is expressed.” But if that gave rise to a greater number of claims on the Master Policy, what level of cover would the insurers allow in future?

“Title insurance is the norm in some countries,” Robert Rennie observed.

Paul Carnan suggested that solicitors here carry out many more functions in property transactions than they do elsewhere.

Ross MacKay agreed that title insurance certainly had a role to fill, but thought some clients would question why it was necessary.

As to whether title insurance can solve problems at present, Ann Stewart commented: “You need the skill and knowledge to recognise there is a problem there in the first place.”