Scotland has operated a system of public registration of title to land for almost 400 years. Although the system is, on the whole, invisible to the public, it is nonetheless essential for the economic prosperity of a country that it has a secure and reliable structure for establishing ownership of land and buildings, to allow for transacting with, and financing of property.
Since 1981, with the introduction of the Land Register of Scotland, registration has been moving gradually from a register of property deeds, to a map based system of registration of title to property. This type of system of land registration makes it quicker and easier to find out who owns land, and is backed by a state guarantee, which provides protection to owners and prospective purchasers and lenders.
But it is a slow process: currently only 21% approximately of Scotland’s land mass is registered in the Land Register. In addition, over the past 30 years, it has become increasingly clear that the introductory Act: the Land Registration (Scotland) Act 1979 was poorly drafted and fails to provide guidance on a number of essential elements of the land registration process.
Land registration reform
Following on from a wide-ranging review of the system by the Scottish Law Commission, and an extensive consultation process, the Land Registration etc (Scotland) Bill was introduced to the Scottish Parliament on 1 December 2011 and is currently approaching the end of Stage 1. In the first of a series of articles on the far-reaching proposals in the Bill, the key policy objective of the Bill: completion of the Land Register is considered.
Completion of the Land Register
Despite 30 years of land registration (still referred to by practitioners of a certain vintage as the “new” system) only 55% of titles have moved over from the “old” Register of Sasines into the Land Register, representing approximately 21% of land in Scotland. Once a property has been registered in the Land Register, its previous existence in the Register of Sasine ceases to be relevant. Having two parallel systems indefinitely is perceived as undesirable, and the map based Land Register is designed to provide clearer, easier to understand particulars of property, ownership and other interests, theoretically making the conveyancing process easier and consequently cheaper.
Under the current system, only transfers of property for value (e.g. payment of a price) will initiate a move out of the Register of Sasines and result in a first registration of the property in question in the Land Register, in other words usually, although not always on the occasion of a sale. This means that there are many transactions relating to land: gifts, transfers on inheritance or corporate acquisition where a first registration will not arise. Also, many areas of land and other types of property will not be the subject of any transfer, such as property held by successive trustees, or local authority property or land held by agencies like the Forestry Commission.
To achieve transfer of all land in Scotland into the Land Register within a reasonable timescale, termed “completion of the Land Register” the process has to be accelerated.
Triggers for registration
To speed up the completion of the Land Register, the Bill proposes to introduce additional “triggers” that will cause first registration. This will happen on a phased basis.
To begin with, all transfers of property that is not yet registered in the Land Register, not just those for valuable consideration, will trigger first registration. Many of these types of transfers are not economically driven, being based on transfers after death, or transfers for no consideration among family members, perhaps for reasons of tax efficiency or retirement planning, so any cost consequences that a first registration might have on these transfers needs to be taken into account. Some conveyancing conventions in these types of transaction may also need to be reviewed. For instance it is typical in the case of a transfer by way of gift, for no warrandice to be given by the granter, although the absence of warrandice should not, of itself, pose a problem for the state guarantee of title.
Under the current system it is possible to register your title in the Land Register on a voluntary basis, i.e. when there is no transaction taking place, but for a variety of reasons it is desired to move the property into the Land Register, to achieve both improved clarity of the contents of the title and extent of the property (which will be shown delineated on the Ordnance Survey map after registration has been completed) and acquire the benefit of the state guarantee. A typical example would be land that the owner has decided to develop. Registering that title in the Land Register before individual plots are sold from it will greatly simplify the onward conveyancing process. A recent high profile example of voluntary registration is the title to the Grangemouth Oil refinery, which was voluntarily registered so that the extent of the title could be identified with certainty, required to facilitate inward investment, which was ultimately forthcoming in the form of a joint venture arrangement with PetroChina.
The Keeper currently has complete discretion whether or not to accept an application for voluntary registration, but under the provisions of the Bill, that discretion will be considerably reduced, and all voluntary applications must be accepted, provided of course that they otherwise comply with the requirements for registration. The Keeper’s discretion continues to the extent that she requires to be satisfied that it is expedient to register the property in question, but that element of discretion may also be removed in the future.
Registration of security and other subordinate transactions
Not all transactions relating to property involve a transfer of the title to the property. Granting a security over property that the granter already owns, to secure a loan for example, is quite commonplace. Granting a new lease or sublease creates a new right in favour of the tenant or subtenant. In the drive to complete the completion of the Land Register, it is proposed that such transactions will also induce a first registration, where the title to the Property is still in the Register of Sasines. During the consultation stage, it was indicated that these arrangements would not apply immediately after commencement, but would be brought into force sometime after the mandatory transfer arrangements had been introduced.
From a commercial point of view, processing security applications swiftly, and ensuring that the interest of the heritable creditor is put safely and speedily on the register is crucial. Tenants of long leases of more than 20 years only obtain an unchallengeable real right on registration, so a rapid transition onto the register is similarly an essential component of those transactions. Accordingly, the timing of introduction of this phase will be important to ensure that the procedures are by then well established and that there is adequate resourcing available to process additional applications without delay.
Closure of the Register of Sasines
At some point it will no longer be possible anyway to register any deed in the Register of Sasines, which will mean that all documents, no matter how minor, will need to appear on the Land Register. It is early days for any programme of completion to have been set out, and to make too prescriptive a timescale would be a mistake. It is not possible to predict what properties will come to the Land Register for registration of some transactional document, or when, and experience shows that such timetables are something of a hostage to fortune. The original timetable for the whole of Scotland becoming operational for land registration was nine years from commencement of the Land Register in 1981. In reality the final County did not become operational until 2003, more than twice the original timescale.
But there will come a point when sufficient critical mass has been achieved in the Land Register for the Register of Sasines to be closed to new applications and provided this is also done on a sensible, possibly phased basis, with due regard for resourcing issues, then this is an inevitable outcome of the process of completion of the Land Register. The closed Register of Sasines will become an historical record, and one which we would exhort the Government to make open, available and accessible for research, historical and title related purposes, and manned with suitable resource personnel to assist with queries.
The difficulty in accelerating the completion of the Land Register through transactional means alone is, of course, that you cannot compel land owners to transact if they do not want or need to. In theory, and in many case, in actual practice, land can remain in one ownership without any form of transactional activity for many years. Land owned by local authorities and government departments are classic examples. Some land may never come to the Land Register as a consequence.
To address this issue, the Keeper is to be given the power to put whatever property she chooses on to the Register in “Keeper-induced” registrations. The detail of how this will operate is, at present, scant. As currently drafted, the Bill allows the Keeper to register unregistered land “irrespective of whether the proprietor or any other person consents”. More detail is needed, particularly in the matter of who will meet the costs that will inevitably be incurred by owners when this happens. It seems likely that part of the process of Keeper-induced registrations will include intimation to the owner of the land that registration has been effected. Most owners to whom this happens will want clarification or reassurance and may well want their own solicitor to check that their title has been registered correctly, and if not, have any errors corrected. There can be a whole host of issues that need to be resolved: gaps, discrepancies, adverse possession for example, before the title is fit to be submitted to the Land Register. How, indeed, if the resultant costs to the landowners are to be compensated has not yet been addressed.
The commercial benefits
It is to the benefit of all owners of land, prospective purchasers and lenders, whether of residential or commercial property, and the public generally, to be able to obtain ready access to clear, transparent and easily understandable information about ownership and other interests in property and land in Scotland. The process must be set up and managed in a way that has regard to the requirements and perceptions of all applicants, owners, lenders, tenants and investors. While completion of the Land Register is stated to be “the most important policy aim of the Bill”, it is vital that due regard is given to ensure that the processing of transaction applications is not compromised, and that the interests and sensibilities of affected owners are handled fairly, openly and with due regard.