Leading Title Insurance

FIRST COMMENT01

IN THIS ISSUE:• HOW CAN TITLE INSURANCE HELP WHEN THE KEEPER’S MIDAS

TOUCH/WARRANTY CANNOT BE RELIED UPON?• WHAT IS SCOTLIS?

SPRING 2016 ISSUE

Like any good spring clean, we have applied the “Out with the old, in with the new” mantra to our quarterly newsletters. Our decision to move to this format was not only to refresh the look and feel of the newsletter itself but, also to provide a better user experience for an increasing number of our subscribers who read our newsletter when out of the office. Our new platform is fully optimized for both desktop and mobile devices and newsletters can also be downloaded as PDFs to enable viewing without an internet connection. We believe that the content is still as compelling as always with contributions this quarter from First Title’s Laura Lapsley, who considers the terms of the new registration as well as our regular feature from Professor Stewart Brymer who offers an insight into the Scottish Land Information Service.

We hope that you like our new style. As always, if you have any comments or suggestions, please feel free to drop us a line at marketing@firsttitle.eu

More than a year after the introduction of the Land Registration (Scotland) Act 2012 (“the 2012 Act”), solicitors are adjusting to the various changes implemented. However, the 2012 Act is still relatively new and so there are bound to be teething problems and many property practitioners may still be finding their feet when it comes to changing their traditional ways of working. Some parts of the 2012 Act are still untested and it may take some time and some trial and error before precedents are set and it is known how certain sections operate in practice.

The Keeper’s Midas Touch

One of the most significant changes resulting

from the Land Registration (Scotland) Act

2012 (“the 2012 Act”) was the weakening

of the Keeper’s ‘Midas Touch’. Under the

previous Land Registration (Scotland) Act

1979 (“the 1979 Act”) the effect of registration

was to grant a title which was immune

to rectification. All that was required was

the registration of a title deed along with

possession of the land in question (section

3(1)(a) of the 1979 Act). This system provided

a great deal of certainty as to ownership of

registered land, as there was no need to ‘look

behind the register,’ however, the problem

with this practice was that it was vulnerable

to fraud and error. For example, a purchaser

could register a deed, and provided they had

possession of the land, would become the

registered proprietor on the Land Certificate,

even if they were not the true owner. The

effect of this was that true owners of land

could be deprived of ownership. This practice

was an example of bijuralism – where there

was an inconsistency between registration

law and property law – and is one of the

issues that the 2012 Act sought to rectify.

How can Title Insurance help when the Keeper’s Midas Touch / Warranty cannot be relied upon?

FIRST COMMENT

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By Laura LapsleyAssistant Commercial Underwriter

Realignment

The 2012 Act still does contain protection for

registered proprietors known as ‘Realignment,’

which is similar to the previous Midas Touch, but is

not as instantaneous and a number of boxes must be

ticked before this protection applies. Section 86 of

the 2012 Act sets out the conditions which must now

be met for the disponee to achieve a valid title where

a person who is not the proprietor of a registered

plot of land but (A) is entered in the proprietorship

section of the title sheet as proprietor, and (B) is in

possession of the land, purports to dispone the land:

1. the land has been in the possession, openly,

peaceably and without judicial interruption—

(i) of (A) for a continuous period of at least one

year, or

(ii) of (A) and then of (B) for periods which

together constitute such a period,

2. at no time during that period did the Keeper

become aware that the register was inaccurate

as a result of (A) or (B) not being the proprietor,

3. B is in good faith,

4. the disposition would have conferred ownership

on (B) had (A) been proprietor when the land

was disponed,

5. at no time during the period mentioned in

paragraph (A)—

(i) was the title sheet subject, by virtue of

section 67, to a caveat relevant to the

acquisition by (B),

(ii) did the title sheet contain a statement under

section 30(5), and

6. the Keeper warrants (or is to be taken to

warrant) (A’s) title.

This section raises the bar and requires that more

criteria be met before title to a piece of land can be

said to be valid. After the year period has passed

and all of the other criteria have been met, the

registration cannot be reversed and so if a true

owner came forward at that point, they could only

seek compensation from the Keeper.

How can Title Insurance help?

One point of concern to some solicitors, is the new

requirement contained in Section 86 of the 2012

Act, which states that the land must be possessed

openly, peaceably and without judicial interruption

for a continuous period of one year. This gap

represents a potential year of uncertainty, where the

title is open to challenge and rectification. Wherever

there is uncertainty or a potential gap in title, title

insurance can be invaluable in providing comfort

and protection.

First Title can consider providing a bespoke policy

which will cover the purchaser of land against a

challenge by a third party against the title to the

land because of a lack of title in terms of s.86 of the

2012 Act. Our policy lasts in perpetuity and passes to

successors in title, so the solicitor can rest assured

that their client is provided with an extensive level

of cover. The interest of mortgagees is also covered

and so this policy can provide comfort to lenders

and assist in getting your transaction over the line.

Another change introduced by the 2012 Act

involved the level of responsibility which rests on

the shoulders of the solicitor. Under the 2012 Act,

there is an express statutory duty of care owed

by the solicitor, not to cause the Land Register to

become inaccurate. There may be occasions where

the solicitor feels unable to fully certify the title to

the Keeper because of missing deed plans or poor

property descriptions and may seek additional

comfort elsewhere, in the form of a title indemnity

policy, to ensure that their client is fully protected.

Of course, there are obvious benefits to this change

in legislation, such as the realignment of property

law and registration law, which provides more

protection for the true owner of land. However, there

is less certainty for the good faith purchaser, who

may not be able to rely on the register as confidently

as they previously could. In their circumstances, title

insurance is there to back up their title and mitigate

their loss should the worst happen.

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FIRST COMMENT

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ScotLIS is an acronym for the Scottish Land Information Service. It will be hosted and operated by Registers of Scotland. In essence, it will provide a one-stop-shop for accessing information about land and property. Registers of Scotland will lead on the development of the new system as part of its digital transformation programme, which is focused on improving our registration and information services.

Why is it required?

Many countries already have such a system. One of

the main benefits is that those seeking information

on land and property only require to go to one

place instead of, as at present, instructing numerous

searches or trawling numerous disparate web-sites

and databases. It should be the “Go to” place for

all such information. As a result, there should be

significant efficiency improvements to searching

for information about land and property and

there should be less risk of information not being

discovered about a property.

How will ScotLIS be accessed?

The objective is for information to be delivered on

a digital basis through ScotLIS. It will be able to be

accessed by anyone be they a member of the public,

a solicitor, surveyor or a searcher. Information on

land and property is currently held in a number

of disparate sources and it is felt that there will be

economies of scale and increased accuracy from

information being able to be accessed through a

single channel – the information will remain to be

held by the “producing” organisations responsible

for it but made available through a portal or channel.

ScotLIS will ultimately be accessed by a Unique

Property Reference Number (“UPRN”) which will be

allocated to each property.

ScotLIS will provide a single point of access to

land and property information via a portal, which

is likely to be map based, although other searches

e.g. by address could be possible. Where datasets

have been matched to the gazetteer and contain

the URPN, this will enable linking of different

information. Where this matched has not been

completed the linkages will be through location.

What is ScotLIS?By Professor Stewart Brymer

How will the information be collated?

The information that is being talked about here is

largely public data which is currently held in various

silos across central and local government. Much

of this data is held by local authorities. One of the

first goals will be to ensure that all local authority

data is held in the same way across Scotland so

that it may be more easily accessed and analysed.

It is not envisaged that ScotLIS will be a single

point of access to local authority information

which, although forming part of a Property Enquiry

Certificate, could be accessed through a number of

other portals.

Will there be an indemnity in case of error?

ScotLIS is not intended to alter the warranty that

currently applies to certain types of land and

property information. So where information is

currently warranted by a provider, that warranty

would exist in ScotLIS. Much will depend on

the type of information being accessed. So, for

instance, information from the property registers

will be provided on the same footing as is currently

applicable to Registers Direct. It is anticipated

that all the information accessed through ScotLIS

will be covered by a suitable indemnity insurance

“wrapper” the exact terms of which have yet to be

discussed however due, in part, to the quality and

lack of consistency of existing data.

What will be contained within ScotLIS?

ScotLIS will be a cadastral map-based system. When

accessed via a UPRN or other means as mentioned

above, a user will hopefully be able to view the

property and see both the boundaries thereof and

also the route of utilities, servitudes and other

important pertinents of the property. This should

greatly enhance what a prospective purchaser will

know about a property being marketed for sale and,

as such, will be a positive development of the Home

Report. Indeed, a development if the system would

be for Energy Performance Certificates and Home

Reports themselves to be registered in ScotLIS on

a property-specific basis. This would allow repairs

and improvements flagged up in Home Reports to

be logged which, at long last, would meet what was

the principal objective of the Scottish Government’s

Housing Improvement Task Force.

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What is to be done now?

A Project Board has been created to take the

development of ScotLIS forward. This is under the

direction of Registers of Scotland as envisaged in

the report of the Task Force, which considered the

subject. The Project Board will consult broadly with

stakeholders and external IT consultants and will

consider international examples of what is being

proposed. Discussions are already taking place with

local authorities, Ordnance Survey, The Law Society

of Scotland and RICS. A prototype will be developed

and tested. This will be an incremental process with

version 1 likely to be focused on the information

required in a property transaction.

When will it be available?

It is hoped that ScotLIS will be launched by October

2017 which, interestingly, will mark the 400th

anniversary of the creation of the Register of Sasines

which was the world’s first register of property

deeds. Scots Property Law has a long tradition and

is highly regarded across the globe. The creation of

ScotLIS will place Scotland at the forefront of land

and property initiatives and will generate a

significant return on investment for both the public

and private sectors while reducing time, cost, risk

and stress to the citizens of Scotland. It will provide

improved transparency which, in turn, will result in

more certainty and lower costs when buying and

selling property.

What is next?

Current systems are less paper-based than they

were and solicitors have to key data through web

portals into the systems of other agencies they deal

with eg Registers of Scotland, Revenue Scotland et

al. Unfortunately, database formats and fields are

anything but uniform, so the way data is stored in

case management systems does not match the way

the same information is stored in the systems of

other agencies making the uploading of data very

difficult. The objective must be to have data entered

once in a consistent format so that it may be used

many times thereafter. ScotLIS could well be that

single agency collecting such data. This would allow

property lawyers to generate all relevant documents

and forms in a consistent manner. That may well be

what is required in an e-conveyancing system. Only

time will tell.

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FIRST COMMENT

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