Background

The Land Registration etc (Scotland) Act 2012 (the"2012 Act"), brought into force in December 2014, has significantly affected the process of conveyancing in Scotland. An overriding purpose of the Act is to speed up the completion of the Land Register of Scotland (the"Land Register"), which will result in the ultimate closure of the older General Register of Sasines (the"Sasine Register"). This briefing note is intended to provide an overview of the implications of that purpose for landowners and, specifically, on the pros and cons of seeking to voluntarily register land in the Land Register.

What is the difference between the Sasine Register and the Land Register?

The Sasine Register is the world's oldest public property register, having been established in 1617, and comprises a record of individual title deeds. The title to a large Estate which is still in the Sasine Register (a"Sasine Title") can extend to scores or even hundreds of individual recorded deeds, from Dispositions to Standard Securities (mortgages), Deeds of Servitude, etc, which may or may not contain plans or specific descriptions of the boundaries. Analysing such a Sasine Title can therefore be quite an involved task.

In contrast, the Land Register is an Ordnance Survey map-based public register of plots of land, established in 1979. Registration of land in the Land Register results in the production of a single Title Sheet which includes a definitive boundary plan of the land and may be downloaded online for a small fee so as to quickly access property ownership details. Whilst the Title Sheet for an Estate is technically the only deed which requires to be looked at in order to analyse the title, occasionally it may contain less information than the historic Sasine Register title deeds, making it more difficult to interpret.

Legal ownership of land is currently the same regardless of whether the title to the land is in the Sasine Register or the Land Register, both of which are maintained by the Keeper of the Registers of Scotland (a non-ministerial government department). However, depending on the nature of the Sasine Register title deeds or Land Register Title Sheet for a particular property, the process of analysing the title can be quite different.

What is the relevance of"Voluntary Registration" in the Land Register?

Since the Land Register was created, land in Scotland has gradually been being transferred from the Sasine Register to the Land Register. Once land is registered in the Land Register, it remains so registered and the Title Sheet for the land is simply updated from time to time as transactions take place. The trigger for land being registered in the Land Register for the first time was, until December 2014, essentially the sale of the land (ie excluding gifts or transfers following death).

Current government policy is to accelerate the process of registering land in the Land Register, in order to increase transparency of land ownership in Scotland. Since December 2014, all transfers of land and certain other transactions (eg the grant of a Lease of land for over twenty years) will trigger registration in the Land Register. Secondary legislation is to be brought forward towards the end of 2015 which will result in Standard Securities also triggering registration of the underlying property in the Land Register. The Keeper has a further power under the 2012 Act, known as Keeper-induced Registration ("KIR"), to induce registration of any land without any action on the part of the owner. It is anticipated that the Keeper may exercise KIR in earnest in order to try to meet the government's stated aim of achieving completion of the Land Register within ten years.

It has always been possible to apply to voluntarily register one's land in the Land Register but the Keeper has always had discretion as to whether to accept such an application. It is proposed that the Keeper's discretion be removed, such that the Keeper must accept an application for what is known under the 2012 Act as Voluntary Registration ("VR"). The question therefore for landowners is whether it is worthwhile taking steps to apply for VR, rather than waiting for a transactional trigger or KIR.

Potential Benefits of Voluntary Registration

There are potential benefits of VR but these will vary very greatly according to the nature of any Sasine Title and must be considered against the potential risks, difficulties and costs outlined later in this briefing note.

Being first onto the Land Register

The nature of the Sasine Register means that it is possible for two (or more) neighbouring Sasine Titles to include or at least potentially include the same piece of ground. This is not uncommon and may arise particularly where neighbouring Estate title deeds do not contain plans and, instead, simply contain general descriptions (eg"the Lands and Estate of…") and the neighbouring landowners, both in good faith, consider that they own the same piece of ground. Even when they contain clear plans, title deeds can sometimes simply be wrong.

Prior to December 2014, whichever of the neighbouring landowners in this scenario registered the piece of ground in the Land Register first would, provided he had possession of it, have an unchallengeable title. Under the 2012 Act, that is no longer the case. If a neighbouring landowner's Sasine Title is legally a better title to the piece of ground, they may be able to successfully challenge the Land Register title (although he will be on the back foot in having to take action to do so). However, if the neighbour who has registered the title to the piece of ground in the Land Register sells on the piece of ground to a third party who is buying in good faith, that third party will have an absolutely unchallengeable title provided a year has passed since the title was first registered in the Land Register.

With these considerations in mind, in some cases there could be a benefit to a landowner in applying for VR of his land sooner rather than later.

Enjoying a State-backed Title Warranty

A Title Sheet benefits from a warranty provided by the Keeper, meaning that if the title is successfully challenged by a third party (for example a neighbouring landowner as outlined above), compensation may be claimed from the Keeper. The closest equivalent for a Sasine Title is the warrandice which may have been granted by a seller of the land, which only gives the owner a claim against that seller if they lose possession of the land and which is worthless if the seller is worth nothing or has disappeared.

Simplifying an Estate title and avoiding piecemeal registration

As mentioned above, analysing a Title Sheet is intended to be a much more straightforward process than analysing a Sasine Title, particularly where a large Estate is involved. This in turn can potentially reduce the costs involved in individual transactions involving the Estate or parts of it.

In the absence of an application for VR, a situation may arise where only parts of an Estate are registered in the Land Register by virtue of individual transactions. For example, if a telecom mast site, wind turbine or sub-station lease were entered into, the land leased would be registered in the Land Register with an individual Title Sheet. A Standard Security may then be granted over a different part of the Estate, resulting in a further separate Title Sheet being created for the security subjects. It is possible, therefore, that the title to a single Estate could in fact comprise a number of separate Title Sheets in addition to an underlying Sasine Title, resulting in the overall title being more time consuming to analyse and transaction costs being increased.

Identifying what is owned

In relation to properties where the Sasine Title only contains a general description without a plan, difficulties and uncertainties frequently arise as to whether particular pieces of ground are owned or not and, generally, what the boundaries of the property are. In making an application for VR, it would be necessary to accurately show the boundaries of the property on a plan. Whilst it may take considerable work on the part of the landowner, their solicitors and any factors or land agents to fully analyse a Sasine Title in order to produce such a plan, it may be something which the landowner would find to be of general value. Such a process has been seen on occasion to unearth previously unknown assets.

Avoiding the uncertainties of Keeper-induced Registration

At present, little is known about the possible workings of KIR. A pilot scheme is currently running, whereby the Keeper is working with some landowners (with limited input from their solicitors) to register a number of properties under KIR, with the intention that the pilot scheme will inform a Consultation on KIR in due course. Turcan Connell is involved in that pilot scheme and the experience is not at present pointing to any defined policy on the part of the Keeper.

Notably, the extent to which the Keeper will include or exclude parts of an Estate held on a Sasine Title with a general description, whether the landowner will be permitted to input into this and whether the Keeper will provide the warranty referred to above cannot be known at present. If the landowner is not permitted to input during the process of KIR, the landowner may end up incurring professional expenses in reviewing the Keeper's handiwork and attempting to have any perceived problems corrected. Applying for VR, rather than leaving a property open to the possibility of KIR, might avoid these uncertainties.

Potential Risks, Difficulties and Costs of Voluntary Registration

As noted above, the potential benefits of VR must be considered against the following risks, difficulties and costs.

Risks

Taking significant action towards VR right now risks jumping the gun. A great deal is still unknown about the completion of the Land Register and it is entirely possible that KIR may ultimately provide a reasonable result, with some of the potential benefits of VR but without the same costs (see further below). However, this cannot be sensibly assessed until the pilot scheme and Consultation are completed. The Keeper is also intending to work with stakeholders to explore ways of reducing the costs of VR and to publish proposals later in 2015 for the implementation of appropriate options.

Difficulties

Whilst a Sasine Title might in some cases comprise of only a few title deeds with clear plans and no competing neighbouring titles (in which case, some of the potential benefits of VR will not apply anyway), there are significant legal challenges in applying for VR of an Estate held on a Sasine Title with only a general description and a very large number of title deeds.

The extent of an Estate held on such a title will in principle be determined by the possession of the Estate by the owner, rather than from the title deeds alone. In an application for VR, the applicant is subject to a duty to take reasonable care to ensure that the Keeper does not inadvertently make the Land Register inaccurate. The Estate owner cannot therefore simply draw a line on a plan around what they think they own and/or try to register a title to any areas of uncertainty.

Where the owner very clearly possesses parts of the Estate (by actively using areas for specific purposes (eg farming) or by granting to third parties rights in respect of them (eg letting parts of the Estate)) and is prepared to swear a formal oath to that effect, there should be little difficulty in applying for VR in respect of those parts. Where miscellaneous areas of ground which the Estate owner does not actively possess are surrounded by or otherwise clearly held as ancillary to areas the owner actively possesses (eg the verge lying between a farmed field and a public road), and do not appear to be held on any other Sasine Title or Title Sheet, it might also be safe enough to include them in an application for VR of the Estate.

However, where miscellaneous areas of ground are not adjacent to other areas the owner actively possesses (eg strips of ground in the vicinity of properties long since sold off and far from what now comprises the body of the Estate), even if they do not appear to be held on any other Sasine Title or Title Sheet, it would likely be necessary to disclose the lack of possession to the Keeper if they were to be included in an application for VR of the Estate. It is not known what impact this would have on the Title Sheet produced by the Keeper, both in terms of whether such areas of ground would be included in the Title Sheet and, if so, whether the Keeper would provide the warranty referred to above. It might be an alternative to exclude such areas of ground from the application for VR and to apply for VR only of areas of the Estate where there is certainty of possession. The Estate owner would then rely on the Estate's Sasine Title for ownership of such areas of ground and the possibility of the Keeper registering them as part of the Estate under KIR in future. This however leaves the Estate owner open to the risks of the workings of KIR being unknown, someone else registering title to the areas of ground in the meantime and piecemeal registration of the Estate.

Costs

The costs of applying for VR may be significant and must be the primary consideration for any landowner wishing to consider the benefits of VR.

Professional fees for solicitors' and land agents' work in preparing a plan and submitting the application for VR will vary according to the complexity of the Sasine Title. Some Sasine Titles (particularly those containing only general descriptions and made up of a large number of title deeds) may require a very substantial level of work in order to ensure that the application for VR does not risk breaching the duty to take reasonable care to ensure that the Keeper does not make the Land Register inaccurate.

Registration dues will be payable to the Keeper and will be based on the value of the land subject to the application for VR, according to the following table:-

Value (£)

Fee (£)

Value (£)

Fee (£)

Value (£)

Fee (£)

Value (£)

Fee (£)

<50k

60

≥150k – 200k

360

≥500k – 700k

720

≥2m – 3m

3,000

≥50k – 100k

120

≥200k – 300k

480

≥700k – 1m

840

≥3m – 5m

5,000

≥100k – 150k

240

≥300k – 500k

600

≥1m – 2m

1,000

>5m

7,500

From later in 2015 it is proposed that the Keeper discounts the registration dues for VR applications by 25% for a period of 2 years. However, registration dues are likely to form a much less significant proportion of the overall cost of applying for VR than the necessary professional fees.

It is extremely difficult to try to predict at present whether the potential costs of applying for VR might be recouped, in whole or only in part, through the potential benefits of completing VR and obtaining a Title Sheet for a property, or indeed avoided by waiting for now until more is known about how the Keeper might engage with solicitors in respect of VR and how KIR is likely to work.

What next?

The answer to the question whether VR is a good idea for a particular property will depend on a number of factors that will be specific to the property and to its title deeds. If you are considering an application for VR then please get in touch with your regular contact at Turcan Connell, who will be able to advise in more detail, or send an email to enquiries@turcanconnell.com.