A change to the law in Scotland means hidden costs for some property owners looking to re-mortgage.
Re-mortgaging your property can save hundreds – sometimes thousands – of pounds each year, particularly if your property value has increased; your current mortgage is about expire; or you can negotiate a better interest rate. The cost savings of re-mortgaging, however, have to be measured against the exit costs and fees associated with leaving your current mortgage. A forthcoming change to Scottish property law means that some property owners could be hit with increased fees when re‑mortgaging. In some cases these increased fees could negate the benefit of re‑mortgaging or even make it unaffordable to do so. It is therefore important for property owners to be aware of these potential hidden costs when considering whether to re-mortgage.
Scotland currently has two land registers in which all property in Scotland is registered: the older General Register of Sasines (established in 1617) and the newer Land Register of Scotland (established in 1979). As at today’s date, approximately 40% of all properties in Scotland are still registered in the Sasine Register. Some estimates suggest that this could translate to as many as 1.2m homes.
The newer Land Register is intended to replace the older Sasine Register, with all property in Scotland eventually being registered only in the newer Land Register. The benefits of this are clear – with the Land Register being more efficient, quicker and easier to use – and allow for digitalisation of title deeds and title plans and maps. A number of years ago Registers of Scotland (the government agency which operates the system of land registration in Scotland) began the process of transferring property in the Sasine Register into the Land Register. This process has, however, been slow and in 2012 new legislation gave extra powers to accelerate the process.
After1 April 2016, it isl no longer be possible to register security for a mortgage loan in the Sasine Register. In other words, anyone who owns a property which is still registered in the Sasine Register will not be able to take out a mortgage loan with a new lender without having to re-register their property in the Land Register.
Registers of Scotland have issued guidance on what will be required as part of this process1. In addition to submitting the security deed (called a standard security) for registration, property owners will also have to instruct solicitors to review their property title and submit an additional registration form, as well as existing title deeds and plans, to confirm the title to their property. This could involve a significant amount of additional work.
If your property is currently registered in the Sasine Register and you want to re-mortgage, you might have to pay increased legal fees to re-register your property in the Land Register in addition to any product fees payable to your new lender under the mortgage itself. This could amount to anything from an extra £400 to £800 or more (depending on the size and complexity of your property title).
In response to pressure from legal commentators, Registers of Scotland have recently said:
“The 1.2m property owners not on the Land Register will face no sudden or extra costs – they will only pay registration fees if and when they are transacting on their property.”
However this ignores the real practical cost to property owners of having to instruct solicitors to review their property title and submit title deeds and plans when re-mortgaging.
The forthcoming changes will only affect those properties registered on the older Sasine Register. But how do you know if your property is in the Sasine Register or not? Well, as a very rough guide, if you have owned your property for 15 to 20 years or more, there is a good chance it will be registered in the Sasine Register (unless you live in the Glasgow area, where most properties are now in the Land Register). If in doubt, and it isn’t clear from your property title deeds, your solicitor will be able to confirm for you.
What about commercial properties? In theory the changes also apply to commercial property because no differential is made between types of affected property. However in practice much less commercial property is registered on the older Sasine Register and therefore the impact on Scottish businesses and investors is likely to be less. Farmers, agricultural landowners and estate owners where the property has remained in family or single ownership for a number of years are most likely to be affected here.
The benefits of having a simple, modern, digital Land Register for commerce in Scotland are clear. Nonetheless the cost to some home-owners of achieving this could be a legal bill running to hundreds of pounds. If you are re-mortgaging - or considering doing so - checking whether your property is affected by the forthcoming changes should be a priority.
1 https://www.ros.gov.uk/about-us/land-register-completion/closure-of-the-grs-to-securities-guidance