Introduction

The Scottish Law Commission (SLC) published its final Report (which included a draft Bill) on proposed reforms to the system of Land Registration in February 2010 and there followed a period of consultation which ended in November last year.  As the Report had cross-party support it was only a matter of time before a Government Bill was brought forward and this happened on 7 September.  There is therefore every possibility that we will have a new Land Registration Act during the course of 2012.  In anticipation of this the Keeper of the Registers of Scotland (the Keeper) is continuing to engage with various sector groups with a view to acquiring a better understanding of the practical difficulties of the current regulations and the likely impact of the Bill, were it to be enacted, in terms of remedying those difficulties.  Morton Fraser are actively engaged in this process and over the coming months we will keep you updated as to any changes to the Land Registration (Scotland) Act 1979 (the 1979 Act) that may be introduced affecting the owners and managers of rural properties throughout Scotland.

Background

Before commenting on some of the SLC’s main proposals, it is worth bearing in mind the current situation.  At present Scotland operates two systems for registering titles to land: (a) the Register of Sasines (Sasine titles) and (b) the Land Register of Scotland (registered titles).  The Register of Sasines was established in 1617 and is a register of deeds – provided the deed (whether a disposition, lease for more than twenty years, or a standard security) complies with a handful of technical requirements, the Keeper will register the deed in the General Register of Sasines and it will be returned duly recorded within a matter of weeks, thereby perfecting the real right of the person presenting the deed for registration.  However, the General Register of Sasines is not map-based and although modern Sasine titles invariably describe the property by reference to plans/maps based on the Ordnance Survey, older Sasine titles do not.  It can therefore be very difficult to identify with certainty the actual boundaries of certain properties, particularly rural ones, the title to which is still a Sasine title.  The other major drawback of a Sasine title is that it does not come with a “state guarantee” – if your title is defective, your redress is against the granter not the Scottish Government.  On the other hand, the Land Register is map-based and does come with a state guarantee.  However, the Land Register is by no means perfect, hence the SLC’s Report.

Main Provisions

The Land Register was established in 1979, and while circa 60% of the estimated 2.2 million Scottish titles are now in the Land Register, only about 20% of Scotland’s landmass is land registered.  There are a number of reasons for this apparent disparity, not least the fact that the “rural counties” did not become “operational” for the purposes of land registration until much later than the “urban counties”.  However, the fact is that land registration has struggled to cope with certain aspects of rural properties for a variety of reasons including: vague written boundary descriptions; water boundaries; extent of land to be registered (thousands of acres as opposed to fractions of acres); and difficulty of proving exclusive possession of unfenced hill ground.  These difficulties can result in excessive delays in the issuing of Land Certificates, with four, five, or six years being not uncommon.  These delays can result in transactions involving “difficult” titles being structured in such a way that such titles remain in the General Register of Sasines rather than being transferred to the Land Register.  However, if the SLC’s proposals are enacted, the scope for such “structuring” will be done away with and the number and type of transactions which will result in titles being transferred to the Land Register will increase – this is one of the principal aims of the Bill, to accelerate the process of bringing properties into the Land Register with a view to having 100% “coverage” as soon as possible.

At present only conveyances (now really only dispositions) for value and the tenant’s interest under a long lease (a lease for more than twenty years) require to be registered in the Land Register.  However the current proposals provide that:-

1 Any conveyance (whether for value or not) will require to be registered in the Land Register.  An example would be inter-family/trust/company transfers for no consideration, whether as a result of tax/succession planning, which will require to be registered in the Land Register and will almost certainly result in increased conveyancing costs;

2 At present when a landowner is granting a standard security over a Sasine title, the security is recorded in the General Register of Sasines.  However, at some point the Keeper is going to “close” the General Register of Sasines to all new securities.  When this happens not only will the new security require to be registered in the Land Register but also the underlying title.  Again, this will almost certainly result in additional costs for putting the security in place.  At present it is not clear whether the whole Sasine title, or simply the part which is going to be secured, will need to be registered.  Granting a security over a single farm may be relatively straightforward but if the whole estate of which the farm forms part is to be registered this may be a considerably more complex and therefore costly exercise;

3 At present, when a landowner is granting a long lease over a Sasine title, the tenant’s interest under the lease requires to be registered in the Land Register, but not the landlord’s underlying Sasine title to the property.  That will change so that the landlord’s underlying Sasine title will also require to be transferred to the Land Register.  Again this will almost certainly result in increased costs and it is not clear whether it is the landlord’s whole title that requires to be registered or simply the part which will be subject to the lease.  In the rural context, long leases are fairly uncommon – there are problems creating residential tenancies for more than 20 years: a secure 1991 Act agricultural tenancy depends on statutory security of tenure rather than the contractual period of the lease for its longevity; short limited duration tenancies are for less than five years and the minimum period for a limited duration tenancy has now been reduced to ten years.  However, consider sporting, forestry, mineral, tipping and “renewable” leases.  For example, if you are currently entering into an “option to lease” type arrangement, for a wind farm which is dependent on planning permission being obtained, is it likely that the option will be exercised after a new Land Registration Act is passed?  Have you covered the possibility of compulsory registration of the landlord’s underlying Sasine title?

4 One section of the SLC’s draft Bill which has already caused some concern among rural property owners relates to the compulsory first registration by the Keeper, i.e. the Keeper on his own volition decides to transfer a Sasine title to the Land Register.  This provision is contained in one of the shortest sections of the draft Bill and therefore is completely lacking in detail.  However, following discussions with the Keeper it is thought extremely unlikely that such a section, if it were to be enacted, would ever be invoked due to the likely costs and the lack of resources available to the Keeper.