You may have attended one of our recent Land Registration Roadshows, at which we explained the recent changes in the land registration system and explored the potential benefits of voluntary registration in the Land Register of Scotland of heritable property (which includes not only land, but also buildings on the land and growing trees). The scale, nature and complexity of many rural land titles makes them ideally suited to voluntary land registration, and the certainty and simplicity of a land registered title (where all relevant title information is contained in one document with clear boundaries on the Ordnance Survey plan) can provide significant benefits in the ongoing management of estates, forests or agricultural land.
The Scottish Government target is for all of Scotland to be land-registered by 2025. One of the Government’s strategies in helping to achieve that target is to introduce additional “trigger-points”, whereby a specific type of dealing in heritable property will result in land registration of that property. A sale of heritable property has been a trigger point for registration in some Registration Counties since 1981, and in all of Scotland since 2003. Many sporting estates or farms will, however, have remained in the ownership of the same family for generations and will therefore typically still be registered in the historic Sasines Register.
Prior to 1 April 2016, a Standard Security (mortgage) over heritable property that was registered in the Sasines Register would itself be registered in the Sasines Register. Since that date Standard Securities can no longer be registered in the Sasines Register, and must therefore be registered in the Land Register. As part of that process an application must be made for voluntary registration of the affected heritable property. This change has significant consequences for the rural lending sector and we have been advising agricultural bank managers of the change and the implications. There are also important considerations for landowners who are considering taking a mortgage over (or re-mortgaging) their property. The main issues can be summarised as follows:
1. Timing. Title examination and related due diligence has always been an essential part of completing any Standard Security but with a ‘fair wind’ and commitment on both sides, the process might take three to four weeks where the Standard Security was going into the Sasines Register, or the affected heritable property was already land-registered. The additional requirements of voluntary first land registration mean that this process could easily take twice as long. This can have significant implications for landowners who are relying on swifter completion, to either meet payment obligations or avoid additional fees or charges under an existing loan facility.
2. Additional costs: Voluntary first registration will usually involve instructing preparation of a deed plan, and then obtaining a report to confirm that such a plan is adequate for land-registration. It is also important that all relevant title conditions and servitudes are sufficiently identified on the application for voluntary registration, and perhaps also shown on the plan. This all involves additional work on the part of the landowner’s solicitors and land agents and the funder’s solicitors, and in many situations will result in higher professional fees for the affected landowner.
3. Registration dues: Registration dues for any standard security are currently set at £60, and have been at that level for several years. If an application for voluntary registration of heritable property accompanies an application for registration of a Standard Security over the same land then the voluntary registration application will not attract registration dues. In such circumstances the total registration dues will be £60 only. The consequence is that voluntary registration of heritable property in the context of creating a standard security over the same land will be considerably less expensive (a difference of £5,625 for heritable property worth in excess of £5 million) than it would otherwise have been. This may be of relevance if a landowner has the option of securing all or part of an estate or farm property. The landowner’s intention will usually have been to secure as little as possible, but the recent changes may mean there are circumstances where it will be in the landowner’s interests to secure more land than is strictly needed to meet the lending requirement. Most funders would also welcome an opportunity to increase the security portfolio.
4. Postponed Standard Securities: Often there will be a need to grant “second-ranking” or even “third-ranking” Standard Securities, whether in respect of additional borrowings from the principal or subsidiary funder, or perhaps in connection with a development land option or renewable energy scheme. Any such security will now trigger the need for registration of the affected heritable property in the Land Register, which may not always be anticipated by the affected parties. This will also mean that the priority funder will have to take much more of an interest in this process than has historically been the case, to ensure that the registration of the heritable property secured to it is properly dealt with.