Summer '16 Scotland

SUMMER 2016 ISSUE

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FIRST COMMENT IN THIS ISSUE: • PLANS REPORTS – HOW TITLE INSURANCE CAN HELP • THE WIND OF CHANGE BLOWETH • CLAIMS CASE STUDY: ACCESS

Leading Title Insurance

Welcome to the summer edition of our newsletter.

Firstly, we would like to thank you once again to those of you who to responded to our recent customer satisfaction survey; your feedback is greatly appreciated. Congratulations go to Amy Jones of Pinsent Masons LLP, who was the lucky winner of our ÂŁ500 experience day voucher.

This issue sees contributions from Professor Stewart Brymer, who considers the ever-changing conveyancing landscape. Our staff contribution this quarter is from underwriter Elizabeth Vyner, who discusses the practical application of Title Insurance in relation to plans reports. Lastly, we give an insight into how we deal with claims with a brief case study regarding a recent access claim.

We do hope that you are enjoying the new format of our newsletter. Should you have any feedback, suggestions or comments, please don’t hesitate to send them to us at marketing@firsttitle.eu

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FIRST COMMENT

Plans Reports – How Title Insurance Can Help Elizabeth Vyner Trainee assistant underwriter, First Title Insurance

Why Plans Reports?

The Land Registration (Scotland) Act 2012 (“the Act�) introduced a change from the Land Register using the Ordnance Survey Map to the new Cadastral Map in order to produce registered titles. As the Cadastral Map is made up of so-called cadastral units, any deed inducing registration is required to describe the land sufficiently, with a suitable plan included where appropriate, to enable the Keeper to delineate the purported boundaries on the Cadastral Map. If these requirements are not met then, the application for registration will be rejected.

Where previously, P16 reports would be obtained by practitioners to check the property description and boundaries against the Ordnance Survey Map, the new regime under the Act involves obtaining Plans Reports. These Reports check that there is no title overlap between the proposed property boundary (whether Sasine registered or

registered in accordance with the Land Registration (Scotland) Act 1979 in terms of the Ordnance Survey Map) and the new Cadastral Map. There are three levels of Plans Report available: (i) Level 1 is a competition report (i.e. comparison with Cadastral Map to identify any competing interests.) (ii) Level 2 is a comparison with the Ordnance Survey Map (and also confirms any competing registered interest.) (iii) Level 3 is a comparison with the Ordnance Survey Map and the Cadastral Map (this is more detailed and identifies burdens as well as identifying competing interests.)

Obtaining a Plans Report, therefore, helps identify if there are any potential title defects with the property and the corresponding boundaries.

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Some of the most common results disclosed in a Plans Report to date are as follows:• The plan or description submitted does not meet the Keeper’s requirements for registration.

• A conflict with another cadastral unit.

• The extent of the subjects does not correspond with the relevant features as defined on the Ordnance Map. • The occupied extent does not correspond with the legal title.

• The property is a floating shape which cannot be mapped.

How can title insurance help?

Where unexpected results are produced by a Plans Report, this can lead to a significant delay in completing matters or in some cases result in a price chip or the parties withdrawing entirely from a transaction.

Title insurance can, therefore, be considered in certain circumstances to help combat an unwanted Plans Report result. Circumstances where cover may be provided are as follows:-

Dispossession This type of cover can be considered where the Plans Report indicates that the owner of the property is occupying a larger extent than that to which they have legal title to. The owner can rely on this type of policy for occupation purposes. This is a useful alternative to attempting to obtain a legal title either by corrective conveyancing or by making a prescriptive claimant application. The risk insured would be a claim by the legal title owner which results in the dispossession of the insured from the area in question.

Inadequacy of Description This type of cover can be considered where the Plans Report indicates that it has not been possible to plot the subjects on the Cadastral Map based 4

on the current deed plan and/or conveyancing description, i.e. the property is a floating shape. This type of cover can also be used where there are no plans available, or there are vague descriptions in prior titles (e.g. in the situation where rural land is shifting from the old Sasine Register to the Land Register). This policy covers a challenge by a third party against the registered title to the property because of any or all of the following:inadequacy of the descriptions in titles prior to the disposition in favour of the Insured; inadequate or unavailable plans referred to in prior titles; and the inability to compare the description of the property with descriptions contained in previous split-off writs.

Lack of Title If notwithstanding the result of a Plans Report, the Keeper registers an application successfully she may still exclude her warranty. This is possible if for example, a prescriptive claimant application is successful or if other issues with the title are flagged.

Title Insurance can, therefore, be used to plug this gap with cover provided for the risk that a challenge by a third party is raised against the registered title to the property as a result of the Keeper’s exclusion of warranty.

Conclusion Plans Reports are proving to be a helpful method of identifying issues with a purported title extent and flagging to solicitors where a conveyancing description and/or deed plan may have to be reviewed. While in some cases remedial conveyancing may assist in remedying such issues a title indemnity policy may prove to be beneficial as this offers clients a cost efficient alternative and allows them to proceed with transactions as planned. We have experienced an increase in clients obtaining our dispossession and inadequacy of description policies since the Act came into force and we anticipate that, as the legal profession gets to grips with the Act and the new mapping regime, requests for cover will continue to increase as a result of defects identified by Plans Reports.

FIRST COMMENT

The Wind of Change Bloweth

By Professor Stewart Brymer WS Brymer Legal Ltd

Introduction For many years, nothing much seemed to change in the practice of conveyancing. The first signs of change appeared on the horizon in the early 1970s with the enactment of The Conveyancing and Feudal Reform (Scotland) Act 1970 and the Land Tenure Reform (Scotland) Act 1974. Little did we know it but there was much more to come. The end of the decade saw the introduction of registration of title in the form of the Land Registration (Scotland) Act 1979 and there was then a bit of a hiatus during which time the profession had the opportunity of getting to grips with the various changes introduced such as the introduction of standard securities; the compulsory redemption of feu duty on sale; and registration of title itself as a map-based system complete with the Keeper’s “Midas Touch”. If we thought that was change, however, even allowing for the abolition of scale fees in conveyancing, we had no idea what would come our way only some 25 years later. The rest, as they say, is now history.

There has been a proverbial tsunami of legislation affecting Scots property law in recent years. There are some who are of the opinion that there has been too much legislative intervention affecting the conveyancing process. There is, however, another view that it is a great time to be a property lawyer.

Suffice it to say that the jury is still out in that regard although personally I support the latter proposition.

In recent years, the terms E-Conveyancing and E-Registration have been used with increasing frequency and often without thinking what it was exactly that was being described by the term. So what is E-Conveyancing?

The answer is that the term means different things to different people. In essence, however, it is no more than the traditional paper-based conveyancing transaction being undertaken electronically in an increasingly digital society. We may think that it is about the future but, in reality, E-Conveyancing is already with us at various stages of the conveyancing process. The purpose of this short article it simply to state that there is nothing to be feared by the term.

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FIRST COMMENT

Conveyancing Processes It would be difficult to argue against the proposition that process of conveyancing has not changed much over the years. That is a good thing in many respects. Obviously, the increasing legislative involvement in property law and the growing number of cases being considered by the courts and by the Lands Tribunal is resulting in a corresponding growth in the body of jurisprudence surrounding property law.

Once again, that is not a bad thing. All that digital transformation programmes do to the conveyancing process is to make it smarter. Information input on one occasion can be used on multiple occasions thereafter.

There are an increasing number of case management offerings available to property lawyers and estate agents which have had, and will continue to have, a positive effect on the practice of conveyancing. Surely it is not a bad thing to consider how we might better deliver a service to our clients? The use of e-mail has transformed communication – sometimes for the worse it has to be said but generally for the better. Properties can now be marketed using an array of different portals and the only weakness that they all have is a weakness that has always been there namely, they all suffer from the “rubbish in, rubbish out” syndrome.

In a previous article, I wrote about the forthcoming introduction of E-Discharges.

These should be with us by the end of this year bringing Scotland into line with the rest of the United Kingdom. Registers of Scotland are to be congratulated for the work that they have done in this regard as part of their own digital transformation programme.

E-Discharges will make the process of discharging a standard security much more straightforward and with less room for delay.

The only aspect thereof which has still to be agreed if the level of registration fees which will be payable thereon. Elsewhere

in the UK, no fee is payable for an electronic discharge. At present, the fee in Scotland is £60 per discharge – with a £10 reduction if done through ARTL. Any variation of this fee will require to be introduced after consultation on a Fees Order, which will come into force in April 2017. In my opinion, it is too much to expect Registers of Scotland to move from the current charging system to a radical alternative and I would envisage some form of sliding scale of fees reduction over a period of say, five years, might be appropriate.

What other changes might we see?

I would answer this question by asking a question in return, namely: what changes you would (please amend to read would you) like to see? It really is as open as that. Some of the changes in the pipeline include: • I think that the next logical step as far as Registers of Scotland is concerned is the introduction of the electronic registration of standard securities. I would envisage that that process would follow much the same lines as has been the case with E-Discharges. In other words, there will be full consultation with the Council of Mortgage Lenders and with The Law Society of Scotland.

By necessity, however, there will also be broad consultation with practitioners.

You will be consulted and you should offer your views.

• In my article in the Quarter 1 Newsletter, I talked about the introduction of ScotLIS. That will significantly improve our ability to access accurate information on land and property thus making the process more streamlined.

• The Keeper of the Registers has accepted a remit which will hopefully

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see the whole of Scotland registered on the Land Register by 2024 (or perhaps a few years later).

Considerable work has been done already and the process of applying for voluntary registration of titles has gathered pace. More still has to be done in this regard however and, speaking personally, I feel that there should be a greater incentive in the form of a reduction in registration fees to accelerate the process. I also think that the definition of ”public bodies” should be broadened to include organisations such as the Church of Scotland and other religious organisations who hold considerable landholdings.

• After voluntary registration, of course, comes Keeper Induced Registration (KIR) – a somewhat unfortunate term which brings back memories of anaesthesia for some. The full implications of KIR have still to be worked out and will, no doubt, be further consultation on the subject. Of one thing we can be sure however and that is that the process of transferring title will become simpler.

That will affect the time spent and, therefore, the fees associated with the process. Should this be seen as a negative? No. Other jurisdictions have gone through this process and property lawyers have survived and, indeed, have thrived. A good example is in Denmark. Why can the same not be true here? In my opinion, we have much to learn from colleagues in countries such as Denmark.

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• Allied to completion of the Land Register will be the creation of the oft-referred to, but not widely understood, Cadastral Map. This is, as they say, a work in progress. Good work is already being done using Global Information Systems which will result in better mapping of properties. It is suggested however that part of that process will require an analysis of the issues surrounding the use of a 1:1250 scale for urban properties. Such a scale has a tolerance of 0.23 metres and issues can arise if less than precise plans are produced to Registers of Scotland along with a title for registration. Under the 2012 Act, Registers can maintain an archive record which should include

any detailed plan given at the time of registration.

It is recommended that good quality plans be used on every occasion.

• Registers also plan to launch an API shortly which will facilitate better data capture on one occasion to be used subsequently as a transaction progresses. This will allow E-Forms to be created using existing data and, thereafter, pre-populate other forms. Not before time, some will say.

• In recent years, we have seen an increase in the use of title indemnity insurance. No longer is it associated only with titles that have some form of defect therein. On many occasions, it is used to facilitate conveyancing transactions. Given the responsibilities on solicitors in terms of the 2012 Act, I suspect that there will be more use made of such insurance in the years to come. This may not result in a full private sector-based title insured environment, but I am confident that there will be further developments in this regard.

So is it time to retire or retrain?

No. In Scotland, we are proud of our conveyancing system, and rightly so. 2017 sees the 400th anniversary of the creation of the Register of Sasines. I believe that there will be a number of positive developments in our conveyancing processes before that anniversary is celebrated and there will be more to follow thereafter.

The pace of change is, quite simply, exponential. My message is that there is nothing to be feared and everything to be gained by embracing such change and improving our businesses accordingly. The alternative is to place our heads firmly in the sand and believe that change will pass us by and we can carry on doing things as they have always been done. The problem with that way of thinking is that by the time we stand up to assess where things are, the world will have passed us by.

There are ample opportunities to improve our businesses and secure the place of solicitors in the process of buying and selling heritable property. They simply need to be grasped.

FIRST COMMENT

Claims Case Study:

Access Becky Morgan Claims Team Manager

What was the background to the claim?

How did First Title approach the situation?

The insured’s property had the benefit of a right of access over neighbouring land. This right, however, only existed for two dwellings.

We arranged for the insured’s solicitor to correspond with the neighbour’s solicitor, who responded with a without-prejudice offer to vary the right of access to allow the development of six houses in return for a financial settlement.

In 2011, the insured was granted planning permission to develop a total of six dwellings at the property and obtained a title insurance policy to provide cover for access rights for all six.

The property was also burdened by title conditions limiting development of the property to two dwellings, and the policy also provided cover in this respect.

When the insured began work on the development of the site he was contacted by a solicitor acting for the owner of neighbouring land, who owned the access way used by the property. He raised a number of queries regarding the proposed development, including the use of the access road for six properties rather than two.

The insured duly notified us of a potential claim against the policy.

We then obtained a report from a chartered surveyor, who advised that based upon the valuation of the insured’s property, the financial offer proposed to vary the servitude represented good value.

What was the outcome?

We agreed to the insured entering into a financial settlement with their neighbour, the cost of which was met under the terms of the policy.

In addition, we paid all legal costs incurred by the insured’s solicitor in drafting, agreeing and registering the revised deed of servitude.

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To find out more about our products and services email scotinfo@firsttitle.eu or call +44 (0)141 413 8800

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First Title Insurance plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and1 the Prudential Regulation Authority. First Title Insurance plc is registered in England under company number 01112603.

Registered office: First Title Insurance plc, ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU.