New Statutory Duty of Care to Keeper
Solicitors should be aware that s.111 of The Land Registration etc. (Scotland) Act 2012 ("2012 Act") introduces a statutory duty of care to the Keeper.
The duty of care is owed to the Keeper by persons who grant deeds which are intended to be registered, persons making an application for registration, 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 register inaccurate as a result of a change made in consequence of such a grant or application. For more details see Registers of Scotland's FAQs on Duty of Care. The Keeper is entitled to be compensated by a person in breach of this duty for any loss suffered as a consequence of that breach (s.111 (5)).
Registers of Scotland ("RoS")'s view is that where the duty of care is owed by a person who acts as a solicitor or legal adviser, it is owed by the natural person (i.e. individual) or legal person (i.e. firm) who acted in that capacity. However, RoS have said that in practice they would revert to the submitting firm in the first instance and that it should not be necessary to identify the particular individual who acted in the transaction, as they were acting in the course of business for the firm.
RoS have also confirmed that the new land registration application forms can be signed in the same way as application forms were signed before the 2012 Act designated day (8 December 2014).
RoS's FAQs explain that the duty of care provisions under s.111 stand-alone from the criminal offence provisions in section 112 of the 2012 Act. See 2012 Act – New Criminal Offence below for more details about the offence. This means that a breach of the duty of care under s.111 does not in itself constitute a criminal offence under s.112
New Criminal Offence
Solicitors should be aware that s.112 of The Land Registration etc. (Scotland) Act 2012 ("2012 Act") introduces a statutory criminal offence. The Law Society of Scotland strongly opposed the introduction of this offence, which 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.
The offence can be committed by persons making an application for registration, and solicitors or legal advisers acting on behalf of them. Those persons will commit an offence if they, in relation to an application for registration:
- make a materially false or misleading statement knowing that (or being 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 understood that Registers of Scotland ("RoS") will publish FAQs on the Criminal Offence in the near future.
RoS's view is that the term “in relation to an application” provides some flexibility so that statements made in both the application and in associated deeds and documents are covered by the offence. Their view is that the wording therefore captures anything supplementary to the application itself.
There is a defence (contained in s.112 (3) of the 2012 Act), which is 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 (under s.112 (4) of the 2012 Act) 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 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.
It will be for the Serious and Organised Crime Division of the Crown Office and Procurator Fiscal Service ("COPFS") to make the Keeper aware of activity that they are concerned about. It will be up to COPFS to decide whether to bring a prosecution. RoS consider it unlikely that the Keeper would be in a position to report someone to the police in relation to the offence and it is more likely that the police would utilise the land register archives to investigate whether persons of interest to them had used property transactions as a cover for illegal purposes.
RoS's FAQs on the 2012 Act explain that the duty of care provisions under s.111 of the 2102 Act stand alone from the offence provisions in section 112. This means that a breach of the duty of care under s.111 does not in itself constitute a criminal offence under s.112.
No or Limited Examination of Title
The new land registration application form asks the applicant “Has there been any limitation or restriction on the examination of title?” Registers of Scotland ("RoS") have advised that, in general terms, where the application form includes notification of a limitation or restriction on the examination of title, this may lead the Keeper to either reject the application or to limit or exclude the Keeper's warranty, depending on the circumstances. RoS have advised that they will consider each situation on a case by case basis (for example, RoS have said that the Keeper would reject an application if the seller in the applicant's disposition differed from the registered proprietor on the title sheet, and the applicant had indicated in the application form that no links in title had been examined). Solicitors should bear this in mind when advising their clients. It is anticipated that practice will develop in this area fairly rapidly.
Notification of acceptance (which, under the new terminology, means completion of the registration process, rather than acceptance by the intake section of Registers of Scotland ("RoS")) or rejection of a post- 8 December 2014 application to register in the Land Register of Scotland will be made by RoS by email only. For further details see RoS's FAQs on Notifications. When an application has been accepted onto the Land Register, the notification will include a PDF version of the updated/newly created Title Sheet and updated cadastral map.
RoS have confirmed that s.106 (1) (b) of the Land Registration etc. (Scotland) Act 2012 (entitling a person to compensation from the Keeper in respect of loss suffered) will apply to (i) such notifications and (ii) email acknowledgement of receipt of an application.
Pre-Registration Reports and Registers Direct
Registers of Scotland ("RoS") have confirmed that pre-registration reports and Registers Direct are commercial services provided under section 108 of the Land Registration etc. (Scotland) Act 2012 ("2012 Act"). Therefore, the statutory heads of compensation (under the 2012 Act) do not apply to them. RoS have confirmed that this does not mean that compensation will not be available for loss suffered as a result of errors - only that this will be on a contractual rather than statutory basis, as is the case for other providers of reports, such as the private searching firms. The Keeper is currently considering terms and conditions for her section 108 services. It is anticipated that the compensation limits set will be in line with the searching sector's current industry standards.
Adjusting Land Registration Application Forms
From 8 December 2014 it will no longer be appropriate for land registration application forms to be adjusted between parties’ solicitors. This view has been taken because of the interplay among (i) the new s.111 duty of care to the Keeper (see above), (ii) the reliance the Keeper will place upon the certification made by the applicant’s solicitor in the land registration application form, 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) the wording of the application form is such that it is clear that it is for the purchaser’s solicitor (and not the seller’s solicitor) to certify the matters stated on the form;
(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 land registration application form, 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 application form (e.g. the seller’s solicitor’s email address), this does not necessarily mean that the form needs to be adjusted between the parties’ solicitors. The purchaser’s solicitor can ask the seller’s solicitor for the details (s)he needs.
The above view is reflected in the Property Law Committee’s Guidance on Letters of Obligation.
One exception to the above is that a landlord’s solicitor may wish to adjust/approve the land registration application form 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 Land Registration etc. (Scotland) Act 2012), because the answers given in the application form will affect the landlord’s title.
Letters of Obligation