One month on from the designated day, we are still coming to grips with the land registration changes brought in under the 2012 Act. Hardly a day goes by without us receiving another update from Registers with new or amended guidance. Keeping on top of it all, and then finding the relevant guidance, is a significant part of the battle.
One area where I consider the profession has been mis-guided is the professorial opinion as to whether solicitors acting for both borrower and lender in the same transaction should be applying for an advance notice in relation to the lender's standard security. This appears in Update 34, issued by Registers of Scotland by email on 17 December 2014, where the conveyancing professors opine that "in the normal case we consider that there is no need to request an advance notice in a dual representation scenario when the solicitor is acting for both borrower and lender". In brief, the rationale given is that advance notices were designed to replace letters of obligation; the classic letter of obligation did not previously protect the lender's standard security; therefore no need for an advance notice in relation to the standard security.
This opinion ignores the fact that an advance notice for the standard security will ensure that neither an inhibition against the borrower nor a competing charge granted by the borrower (via another solicitor), nor for that matter a disposal of the property by the borrower (via another solicitor) will prejudice the security being granted to the lender – and so would ensure that none of these deeds could result in the solicitor having to pay out to the lender for the lender's loss.
The professorial analysis ignores the fact that the purchaser/borrower's solicitor has effectively been indemnifying the lender against these risks from his own pocket, or via his PI cover, for as long as we can all remember. With the introduction of advance notices, why should the solicitor be expected to continue to provide an indemnity in this way when he could get protection from an advance notice in relation to the standard security? This is not about the hassle factor of applying for the advance notice, and ensuring you have the seller's consent to do so; it is about the new system offering a protection for the solicitor against a potential liability to the lender which he/she could, and in my view should, lay off against the cost of an advance notice.
If the profession were to apply for advance notices for standard securities, I expect that the number of claims against the Master Policy would fall, and therefore the premiums that we all pay should reduce over time. That appears to me to be a logical conclusion.
The practice on this point will no doubt crystallise once the CML updates the Lenders' Handbook for Scotland to reflect the 2012 Act changes.John Lunn, Morton Fraser LLP, Edinburgh