Land Registration under the Land Registration Etc (Scotland) Act 2012
Statutory Duty of Care to Keeper
Under s.111 of The Land Registration etc. (Scotland) Act 2012 ("2012 Act") the Keeper is owed a duty of care.
The duty of care is owed by persons granting deeds which are intended to be registered in the Land Register, persons making an application for registration in the Land Register, and solicitors or legal advisers acting on behalf of each of them. Those persons must take reasonable care to ensure that the Keeper does not inadvertently make the Land Register inaccurate as a result of a change made in consequence of such a grant or application. The Keeper is entitled to be compensated by a person in breach of this duty for loss suffered as a consequence of that breach (s.111 (5)), except where the Keeper's loss is too remote or could have been avoided by the Keeper taking reasonable measures (s.111(6))
Restricted or Limited Examination of Title
Background
The land registration application form (“LRAF”) asks the applicant for a first registration “Has there been any limitation or restriction on the examination of title?” For dealings of whole and transfers of part, no such question is asked but if there has been a limitation or restriction on the examination of title, this must be disclosed in the "Further Information" box on the LRAF.
The purpose of this question is to establish whether or not an examination of title, according to the usual standard of care expected of a solicitor for the type of transaction involved, has been carried out. The information is important for two reasons:
under s.21(2) of the 2012 Act, the Keeper can only register a deed to the extent that the Keeper is satisfied that, at the date of the application, the general and specific registration application conditions are met (one of which being that the deed is "valid"); and
the Keeper's so-called "tell me don't show me" policy (and registration process) is based upon the “usual” examination of title having been carried out prior to the application being submitted. If the "usual" examination of title has not been carried out, the Keeper wants to know, so that the Keeper can evaluate the position and assess the risk.
Solicitors are not expected to underwrite or guarantee good title to the Keeper but they and their clients do owe the Keeper a duty of care under s.111 of the 2012 Act. See Duty of Care above for more information.
When no disclosure is required
If the "usual" examination of title has taken place, there is no need to mention any limitation or restriction on examination which is standard for the type of transaction involved (i.e. there is no need to specify that the "usual restrictions" apply).
If the title was examined by a solicitor who is not the applicant’s solicitor but has certified the title to the applicant, this does not constitute a limitation or restriction on the examination of title, and so there is no need to disclose it on the LRAF.
When disclosure is required
If the examination of title has been limited or restricted, applicants must disclose this and can use the Further Information box in the LRAF to explain (for example, what has been examined and the reason why). Examples include:
in a portfolio purchase, a client may want their solicitor to review only a selection of the titles, not all of them. This restriction or limitation on the "usual" examination of title should be disclosed; and
a client may ask their solicitor not to examine title, but just to draft the disposition (i.e. an "execution only" instruction). Again, this restriction or limitation on the "usual" examination of title should be disclosed.
Effect of disclosure
Disclosing that there has been a limited or restricted examination of title will influence how the Keeper processes the application and allows the Keeper to make an informed judgment as to the level of warranty to be provided. It will not lead to automatic rejection of the application but may indirectly lead to rejection if the Keeper discovers something fatal to the validity of the deed. Each case will depend upon the circumstances.
Advising clients
When advising their clients, solicitors should bear in mind (i) the effect of disclosure; (ii) the statutory duty of care owed by them and their clients; and (iii) that the application for registration must comply with the general application conditions and particular conditions of registration. If a solicitor is instructed not to examine title, or to carry out a restricted title examination, they should advise their client about the resultant legal and commercial risks. For example, using the same portfolio and "execution only" instruction examples:
when a client wants their solicitor to review only a selection of the titles in the portfolio, not all of them, if the portfolio contains any Sasine titles, it would be prudent to include those in the sample checked. For those titles which are excluded from the sample checked, the solicitor may need to explain to the client that in order to ensure the disposition is valid some basic title checks are necessary.
when a client asks their solicitor not to examine title, but just to draft the disposition, it may be necessary to explain to the client that some basic title checks are necessary to ensure that the disposition is valid and, where the application induces first registration, that it contains all the relevant information (e.g. copy burdens writs) which the Keeper needs to accept it for registration.
Usually, the solution will be to find the most cost-effective way of following the client's wishes as far as possible, whilst at the same time checking that the title meets the validity requirements.
Solicitors should always bear in mind that they must provide an adequate professional service.
Criminal Offence
Under s.112 of the 2012 Act, persons making an application for registration in the Land Register and solicitors or legal advisers acting on behalf of them commit an offence if, in relation to the application, they:
make a materially false or misleading statement knowing that (or are reckless as to whether) the statement is false or misleading; or
intentionally fail to disclose material information or are reckless as to whether all material information is disclosed.
It is a defence (under s.112 (3) of the 2012 Act) that the person took all reasonable precautions and exercised all due diligence to avoid committing the offence. In certain circumstances (see s.112 (6) and (8)), the defence can be established if the person acted in reliance on information supplied by another person and didn't know (or have reason to suppose) that the information was false or misleading or that all material information had not been disclosed. This is not the only way the defence can be established.
On conviction, a person is liable to imprisonment or a fine, or both. See s.112 (9) of the 2012 Act for more details.
The offence is said to be designed to act as a deterrent to solicitors who would otherwise knowingly or recklessly mislead the Keeper in order to facilitate criminal activities, such as money laundering.
Acknowledgements, Notifications, ScotLIS, and Plans Reports
Under s.106(1)(b) of the 2012 Act a person is entitled to be compensated by the Keeper for loss suffered as a consequence of them having been given incorrect information as to the contents of the Land Register.
The sources of information covered by s. 106(1)(b) include:
email acknowledgement of receipt of an application to register a deed in the Land Register;
email notification of acceptance (or rejection) of such an application; and
ScotLIS;
Any claimant under s. 106(1)(b) will require to provide the necessary evidence of error or omission, so copies of information should always be retained by solicitors.
Plans reports are not covered by s. 106(1)(b) because these are commercial services provided under s. 108 of the 2012 Act. Instead they are covered by Registers of Scotland's terms and conditions for plans reports.
Loss suffered as a consequence of:-
extracts and certified copies not being true extracts/copies is covered by s. 106(1)(a); and
loss, damage or destruction of a document while it is lodged with the Keeper is covered by s.106(1)(c).
The Keeper's liability under s. 106(1) is subject to certain exclusions under s. 106(2).
Adjusting Land Registration Application Forms
It is not usual practice for land registration application forms to be adjusted between parties’ solicitors. This is because of the interplay among (i) the s.111 duty of care to the Keeper (see above), (ii) the reliance the Keeper places upon the certification made by the applicant’s solicitor in the land registration application form (“LRAF”), and (iii) the following (using a sale transaction as an example):
(a) the purchaser’s solicitor examines title; the seller’s solicitor does not (so the seller’s solicitor’s knowledge of the title is or may be limited);
(b) it is for the purchaser’s solicitor (and not the seller’s solicitor) to certify the matters stated on the LRAF;
(c) missives will usually oblige a purchaser to satisfy itself on title. If a seller’s solicitor were to “check” the contents of the buyer’s solicitor’s LRAF, that would potentially cut across the missives;
(d) although the purchaser’s solicitor will have to obtain certain information from the seller’s solicitor in order to complete the LRAF (e.g. the seller’s solicitor’s email address), this does not necessarily mean that the LRAF needs to be adjusted between the parties’ solicitors. The purchaser’s solicitor can ask the seller’s solicitor for the required details.
An exception is that a landlord’s solicitor may wish to adjust/approve the LRAF to be submitted by the tenant’s, sub-tenant’s or assignee’s solicitor where automatic plot registration is triggered (see sections 21(2) (b), 24, 25 and 30 of the 2012 Act), because the answers given in the LRAF will affect the landlord’s title. Similarly, a lender’s solicitor may wish to adjust/approve the LRAF to be submitted by the borrower’s solicitor where the borrower’s Sasine title is being voluntarily registered in the Land Register (see sections 27, 28 and 30 of the 2012 Act), to enable the grant of a standard security over that title, because the answers given in the LRAF for that voluntary registration will affect the lender’s security.