Wednesday, 11 February 2015

Land Registration (Scotland) Act 2012: what is a "suitable" examination of title?

Because our Land Register hasn’t been running for as long, there’s a lot more unregistered land in Scotland – 42% of properties covering 74% of the land mass [1] – than in England so it’s important to know what the rule for a good legal title to it is.

It is that you have a good title to unregistered land if you have possessed it, openly and without judicial challenge, for at least ten years and that possession followed the recording in the Register of Sasines of a disposition (Scottish word for a deed of conveyance) of the property to you. If, as is common, there have been changes of ownership more frequently than ten years, the rule is satisfied once a succession of owners builds up an aggregate of ten years’ continuous possession between them and the possession of each follows a recorded disposition to him. This is called “prescriptive possession” and needs an example to explain it:- 

Prescriptive possession in action: Rose Cottage 

Rose Cottage belongs to Martin who bought it in 1971 except in 2002, whether by cock-up or conspiracy, John dispones (Scottish word for “conveys”) it to Frank. In 2007, Frank dispones the cottage to Mary who, in 2009, dispones it on to Bruce. Dispositions to Frank, Mary and Bruce were all duly recorded in the Register of Sasines immediately following the respective transfers to them. Provided Frank, Mary and Bruce all openly possessed the cottage subsequent to the conveyances in their favour without judicial challenge from Martin (or anyone else), Bruce is now the undoubted owner of it, even though it wasn’t John’s in 2002 to sell and even if Frank, Mary and Bruce all knew that: in 2012, Martin’s right reclaim his property was cut off by the intervening ten years possession by Frank, Mary and Bruce following the recorded dispositions to them respectively. [2]

When you’re buying a house or land, one of the things your solicitor does is a due diligence exercise to verify that the seller has a good title to pass on to you. This is called “examination of title”. Thus, suppose you’re buying unregistered Rose Cottage from Bruce: your solicitor will take its title deeds (which basically consist of a bunch of dispositions of it from one owner to the next since it was first owned separately from any larger surrounding property), look for the first one recorded in the Register of Sasines more than ten years ago (this is called the “foundation writ”: in the case of Rose Cottage, it’s the Disposition by John to Frank in 2002) and then look for an unbroken series of Dispositions (called the “prescriptive progress”), all duly recorded in Sasines, linking the disponee in the foundation writ (Frank) with the seller (Bruce). He also searches the Register of Sasines to check there are no conflicting dispositions to any third party.

Assuming there are none, that all proves Bruce has a good title, right? Wrong. Bruce does not have a good title to sell to you unless he and Mary and Frank before him have all actually possessed Rose Cottage since 2002. But verifying that is not something a solicitor can do as a desk top exercise: to go into the historical facts of its possession each time a property was sold would be awesomely expensive and time consuming and bring the property market to a halt. Thus, in practice, the industry standard norm is that purchasers’ solicitors’ due diligence is restricted to the half of the equation for a good title to unregistered land (the desk top examination of the prescriptive progress of dispositions and search) that is feasible at reasonable cost and timescale.

Search of the Register of Sasines - Dornoch History Links
Land registration

Registration of land in Scotland was introduced by the Land Registration (Scotland) Act 1979. The new Land Register was phased in gradually, county by county, beginning with Renfrewshire in 1981 and the last counties becoming “operational” in 2003. Whenever a property was sold for the first time after the county it was in became operational, that triggered its registration in the Land Register. Since 8 December 2014, all transfers (i.e. not just sales but also transfers by inheritance, gift or for any other reason) of unregistered property now trigger registration.

When a disposition is sent for recording in Sasines, Registers of Scotland (RoS – the equivalent in Scotland of HM Land Registry and sometimes also known after the office held by its chief executive as “the Keeper”) stamps it with the date of receipt and sends it back to the disponee (person to whom the land is thereby conveyed, whether by purchase, inheritance, gift or otherwise). But although it’s a sine qua non for legally transferring the property to the disponee, the recorded disposition is not a certificate of good title – that only comes from the facts of ten years prescriptive possession as described above. But when a disponee applies for registration in the Land Register, RoS issues him with a document called a Land Certificate and that is a certificate of good title. Before issuing one, therefore, RoS used to conduct the same examination of title that purchasers’ solicitors did when buying unregistered property. And like them, did not enquire into the history of possession beyond asking the applicant for registration (i.e. disponee) to respond in the negative to a question on the application form:

Is there any person in possession or occupation of the subjects [i.e. property being sold] adversely to the interest of the applicant?

If you’ve been following me, you'll realise that’s the wrong question: it should really be something more like: “Is there any reason to believe the disponer (and/or, as the case may be, his predecessors in title) have not possessed the subjects for at least the last ten years?” But that’s largely academic now because, since the Land Registration (Scotland) Act 2012 came into force in December 2014, RoS no longer examine title themselves and, instead, rely on the disponee (in practice, his solicitor) to certify the title to them in terms of a new statutory application form.[3] And this self certification is underpinned by new statutory offences of making false statements or failing to disclose material facts in connection with applications for registration and an explicit statement of civil liability to RoS. [4]

Apparently reflecting realities, the new application form [5] no longer asks about possession at all but instead now concentrates on the desktop exercise, asking:- 

"Has there been any limitation or restriction on the examination of title?

This immediately raises the question of what RoS considers an “unlimited” or “unrestricted” examination of title to be.

It’s generally understood amongst the conveyancing profession that, in relation to unregistered property, it involves looking at all the dispositions in the prescriptive progress: there could be little doubt that looking at fewer than these (for example just the disposition to the seller if it was recorded less than 10 years ago) would be regarded as a “restricted” examination of title. But practice varies, for example, as regards how far back you search the Register of Sasines for any conflicting deeds: many solicitors (most, I would say) regard 40 years back as the industry norm while others (a minority, I think, but including RoS) think it necessary only to go back as far as the foundation writ. In view of the lack of uniformity of practice [6], therefore, it’s curious that, while RoS's guidance notes for the application form are detailed enough to explain that “Agent’s telephone number” means “The full telephone number of the presenting party should be entered (direct dial where appropriate)”, they don’t explain what’s meant by an “unlimited” or “unrestricted” examination of title beyond the rather unhelpful statement (page 14) that it must be “suitable to the application”. [7]

Of course, to keep himself in the clear, a solicitor always has the option of erring on the side of caution and looking at the whole of the prescriptive progress and a 40 year search but even that's trumped by the declaration at the end of the form:- 

"I/We apply for registration of the [disposition to the disponee] and certify that this application complies with the general application conditions in section 22 [of the Land Registration (Scotland) Act 2012] and the particular applicable conditions mentioned in section 21(2). [Emphasis added]

Amongst the s.21(2) particular applicable conditions is that the disposition to the applicant (disponee) is “valid”. That’s defined (s.113(2)) as meaning that “by the registration applied for, a right would be acquired, varied or extinguished [by the disposition]”. And that’s a long winded way of saying that the disponer has a good title (because if he doesn’t, then no right could be acquired by it).

So, purchasers’ solicitors are expected to certify that a seller of unregistered land has a good title which (at the risk of labouring the point) is something no solicitor can do without enquiring into the history of possession of the property, something they do not do and never have done. [8] 

The Death Star - RoS's HQ at Meadowbank House, Edinburgh- picture credit Dave Henniker

Now, as I type this, I realise that solicitors routinely certify good titles to lending institutions without investigating possession. But these certificates would probably be construed to mean “… a good title in so far as that can be ascertained from the sort of title investigation carried out by the averagely competent solicitor which does not involve any enquiry into possession”. [9] The certificate on the registration application form, on the other hand, refers to the words of a statute which are in explicitly defined terms and don’t really admit of much leeway in interpretation.

No doubt when it happens that RoS pay out under the state indemnity implied by land registration because someone didn’t have as good a title as it looked on paper due to an absence of the requisite possession they will not seek to recover from the solicitor who signed the application and the Procurator Fiscal will not consider it to be in the public interest to prosecute when all he did was follow the universal practice of his profession and not enquire into the history of possession. But such a “Don’t worry, because that's what will happen in practice” approach seems unsatisfactory considering that a large part of the Land Registration (Scotland) Act 2012 was to give statutory force (or in some cases to put an end) to the practices developed to supplement the gaps in the original very short 1979 Act. [10] 

The fault doesn’t lie in the 2012 Act itself but rather in its implementation through the statutory instruments prescribing the new application form. I think the issue I’m highlighting here could be remedied by RoS publishing more meaningful guidance on what they mean by an “unlimited” or “unrestricted” (or “suitable”) examination of title and confirming that that means no enquiries into possession are required. The certificate on the application form should then be reworded to something like:-
I/We apply for registration ... and certify that this application complies with the general application conditions in section 22, and, insofar as may be ascertained from the title investigation carried out, the particular applicable conditions mentioned in section 21(2).

Disposition of unregistered land - Dornoch History Links
[1] - according to Registers of Scotland here
[2] - There are those who imagine prescriptive possession to be a thief’s charter but in practice it doesn’t work like that. Principally because the circumstances in which someone would sit back and do nothing to reclaim property being wrongly occupied by third parties for ten years are very rare.

[3] - This change to self certification is not a cost cutting measure to finance a diversion of RoS's resources into a politically motivated push to complete coverage of the Land Register at the risk of its integrity as has been claimed in some quarters (e.g. here). Rather, it's entirely consistent with conceptual changes to the Register being brought about by the 2012 Act.      
[4] - Land Registration (Scotland) Act 2012, sections 111 & 112    
[5] - see it here
[6] - Another example is when the original deeds have been lost. Some solicitors insisted on extracts from the Register of Sasines (which by statute have the same evidential status as the originals) of the prescriptive progress whilst others (the majority, I think) were content with “quick copies”. I was in the latter category but I can imagine that, with concerns over fraud having grown in the last nine years since I retired, a stricter line may since have come to prevail.
[7] - I wrote to RoS asking them if they had any definition of what they regarded as a “suitable” examination of title and got back the following rather surprising reply: 

I’m sorry but it is not for the Keeper to advise on what type of title check constitutes a reasonable check, or what length of time the check should be for. That is a legal matter, and it is for the applicants or their agents to decide what title investigation is required.” 

The reply did however contain more detail on the contents of the new “Legal Report – Unregistered Land” as follows (and maybe this is the answer to the question):-

The report over unregistered subjects with a title held in the General Register of Sasine comprises 5 sections:
  • Section 1 : Prescriptive Progress of Titles
  • Section 2 : Outstanding Securities
  • Section 3 : Discharges
  • Section 4 : Miscellaneous Deeds that affect
  • Section 5:  Advance Notices
The report will check the Sasine Register for prescriptive period:
  • 10 year period
  • 20 year period for leases
  • 40 year for Securities recorded on the Sasine Register
  • 5 years for Discharges on the Sasine Register
  • 40 years for miscellaneous deeds that affect
  • Disclose an Advance Notices that affect the subjects
[8] - except for asking the wrong question about whether there is anyone presently in adverse occupation.
[9] - In this respect, Part 1 of the Council of Mortgage Lenders’ Handbook (the standard instructions to solicitors engaged by lenders who are members of the CML) is silent about whether enquiries into the history of possession of the property are required. But it does say (para. 1.4): “The standard of care which we expect of you is that of a reasonably competent solicitor”.
[10] - “Pumping concrete into the foundations” was how the Scottish Law Commission described this in their report (2010, Report No. 222) which gave rise to the 2012 Act. See paras. 3.5 & 3.6.

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