Society agrees Registers' settlement solution, with provisos
House purchasers needing to settle their transactions this week as a matter of urgent necessity should be able to do so, after the Law Society of Scotland agreed a temporary solution put forward by Registers of Scotland to get round the closure of its paper applications processing due to the COVID-19 pandemic.
After UK Finance confirmed today that most major lenders are on board, the Society guidance which will support the interim measures.
It emphasised that these measures will apply to a limited number of transactions which do not conflict with the Government restrictions on the public leaving their homes, and that parties to transactions should attempt to reschedule settlements rather than settling during the closure of the application record.
Registers will allow a limited number of emergency registrations, where "extreme adverse consequences" would otherwise result. and details of the circumstances where settlements could happen over the next couple of days follow:
- Where the Covid 19 interim measures announced by the Keeper apply to the particular transaction.
- Where the Keeper's emergency measures are applicable to a particular case. Please refer to the RoS website. Members are asked to understand and advise clients that only a very limited number of high hardship cases could be handled under that and are asked to follow the guidance on the website rather than calling RoS and using up essential resource.
You can download a copy of the guidance here and read the full content below.
Law Society Guidance to support Registers of Scotland interim measures for settlement of conveyancing transactions during Covid-19 restrictions.
Following closure of the Application Record on 25 March, the Law Society of Scotland has been working with Registers of Scotland, UK Finance and other stakeholders on an interim solution which will allow a number of essential transactions to proceed to settlement within the next week or so.
The obvious risk of settling a transaction during the Application Record closure is that, following settlement, the Disposition in favour of the purchaser, and any Standard Security in favour of a lender, will not be capable of registration until such time as the Application Record reopens. This leaves the purchaser’s title and the lender’s security at risk from the insolvency of the granter of either deed.
In the normal course of events, there is protection provided for a period of 35 days from registration of the Advance Notice. The concern at present is that while the Application Record closure is temporary, it is possible - or even likely - that the Application Record will not reopen before the protected period ends and any deed unregistered at that point will be vulnerable to the insolvency of the granter of that deed.
The Covid-19 Interim Measures proposed initially by Registers of Scotland are that the protected period of Advance Notices be extended beyond the period of the Application Record closure. While it is proposed that this be achieved through emergency legislation, as an alternative until amending regulations can be approved, the Keeper proposes to selectively open the Application Record to accept on to the Register extensions of certain Advance Notices. By extending the protected period, the intention is to ensure that a deed for a settled transaction remains protected beyond the period of the Application Record closure so that registration at that point can be effected.
The Property Law Committee (and UK Finance) have carefully assessed these proposals and has worked with Registers of Scotland on the final wording of the Covid-19 Interim Measures and we believe that these do provide a framework that can allow the legal component of transactions to settle.
There are however some essential steps which must be in place before a particular transaction can safely settle:
- First and foremost is the requirement that Advance Notices be registered already. The protection from an Advance Notice is essential so cannot be dispensed with in favour of a Letter of Obligation.
- Where Advance Notices are not yet registered, Registers of Scotland may – on a case-by-case basis – be able to selectively open the Application Record to allow for registration of Advance Notices for imminent transactions. Guidance on the availability of this measure will come from Registers of Scotland.
- There must be delivery of signed deeds. At settlement the Disposition must have been delivered to the purchaser’s solicitor and the Standard Security must have also been delivered to the lender’s solicitor (which in most cases will be the borrower’s solicitor). This could however be constructive delivery by email agreement between solicitors so that the selling solicitor can demonstrate or confirm that the disposition has been validly executed and is being treated as delivered on the basis it will be physically delivered to the Purchaser's solicitor immediately after the Applications Record re-opens.
Given the above requirements, members will note that the interim solution proposed will only be available in some transactions which, given the requirement for there to be registered Advance Notices, are likely in very late stages and close to settlement. While there is the possibility of reopening the Application Record selectively for new Advance Notices to be registered, this is likely not a guaranteed option and members will need to discuss this with Registers of Scotland before confirming to clients that settlement is possible.
While the above is an interim solution to allow some transactions to settle, the strong recommendation from the Property Law Committee remains that, parties to transactions should attempt to reschedule settlements rather than settling during the closure of the Application Record. The above interim solution is designed solely to deal with one particular important legal problem arising from the closure of the Application Record. A conveyancing settlement requires a number of different parties to be able to implement various legal and practical processes, which in the current circumstances are becoming increasingly difficult to achieve. The current restrictions imposed by Government are for the protection of public health during a national and international emergency. This guidance should be read in conjunction with the current – and any future - advice from Government and the safety of members, their staff, clients and the wider public should be the most important factor in deciding whether or not it is appropriate to proceed with settlement of a transaction in present circumstances.
Members should be careful to obtain clear instructions from clients, including lenders, to settle transactions in the above circumstances. Members should also be wary of the vulnerability of clients looking to purchase a home in the present circumstances and be careful to ensure that a client’s informed consent to proceed is adequately obtained.
We have confirmation from UK Finance that the following lenders are agreeable to these proposals:
Lloyds Banking Group (all brands, i.e. Bank of Scotland, Halifax, Halifax Intermediaries, Lloyds, BM Solutions and Scottish Widow Bank)
Nationwide
HSBC
Barclays
Scottish Building Society
RBS (RBS, Natwest, Ulster Bank brands)
We will continue to update this guidance as we have further information from UK Finance.
None of the measures proposed should be in any way used to compel settlement of a transaction where someone is shielding from the virus