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Leading Title Insurance

Welcome to the winter edition of our newsletter. In this issue, our resident contributor, Stewart Brymer, discusses common areas in residential housing. Additionally, assistant commercial underwriter, Laura Lapsley, focuses on how title insurance can assist in relation to the often challenging area of minerals rights. Finally, we would like to take this opportunity to thank you for your continued support of First Title throughout 2016 and we wish you a Merry Christmas and a happy, healthy and prosperous 2017.



Common areas : Recent decisions and the impact for conveyancers By Professor Stewart Brymer Brymer Legal Ltd

Background A lot has been written about the matter of common areas in residential housing estates since the decisions of PMP Plus Ltd v Keeper of the Registers of Scotland 2009 SLT (Lands Tr) 2; Lundin Homes Ltd v Keeper of the Registers of Scotland 2013 SLT (Lands Tr) 73; and Miller Homes v Keeper of the Registers of Scotland (LTS/LR/2013/06, 24 March 2014. There have also been articles in the Journal of The Law Society of Scotland analysing the issues as the authors see them – the most recent can be found in 2016 JLSS pp26/27.

The Keeper has also issued various pieces of guidance over the years, the most recent in 2015 (updated 2016). See their unmappable common

areas guidance. ( assets/pdf_file/0004/19777/cadastral-mappingcommon-areas-v3.pdf) See also 2016 JLSS (September) for a letter from Registers of Scotland confirming their stance on the matter. The Keeper’s position is now clear. However, what does that mean for purchasers, sellers, lenders and solicitors for the various parties? Answers to this question are mooted in the article in the November issue of the Journal to which the reader is referred.

What Next First of all, I should like to make it clear that contrary to popular expectation; the Keeper does not possess a magic wand – at least not to my knowledge. By this, I mean that it is simply not practical for practitioners


to turn to the Keeper every time there is a problem in conveyancing practice and expect her to have the answer. Dare I say that some problems are of our own making? As has been stated, the issue becomes one of risk management and informing one’s clients of what their title position is in any given case. That, of course, is as it has always been. The position now is simply highlighted for all solicitors engaged in residential property conveyancing. Lenders, in particular, must be advised. A meeting with the Council of Mortgage Lenders has been held, and the matter was on the agenda for discussion. We shall require to await developments in this regard. It is to be hoped that there might be some form of legislative solution to this problem. The reality is, however, that this might be some years away. A proposal has been made to the Scottish Government’s Civil Law Division that the time might be right for a “sweep up” piece of legislation on Property law matters whereby various matters could be resolved. This used to be the case in Law Reform Miscellaneous Provisions legislation before the Scottish Parliament came into existence. In the meantime, it is suggested that a practical solution would be to seek a title indemnity policy. There are other possible solutions pending completion of the Land Register, but it is suggested that this


is the most economically feasible solution for practitioners. Why take the risk of being held responsible for failure to report the situation? Title insurance may be seen as the most pragmatic and cost-efficient option in these circumstances as a policy can be provided for a proprietor covering dispossession of the common property within a residential development. Such a policy will cover all costs incurred pursuant to a court order or negotiated settlement and the legal expenses for any claim which might help appease a client’s concerns. This may also give a lender the comfort required as the policy will apply to both lenders and successors in title, meaning that the lender will have protection should they repossess the property in the future. Certain factors will, of course, have to be taken into account by the insurers, e.g. (i) if the development has been completed, (ii) the period for which the proprietor has occupied the land and (iii) that there has been no approach made to a third party in respect of the known risk. By providing them with as much information as possible as soon as the issue comes to light will serve all parties well in addressing this type of risk.


Minerals - How can Title Insurance assist? By Laura Lapsley Assistant Commercial Underwriter Last year, in First Title’s newsletter, Professor Stewart Brymer highlighted the importance of keeping an eye out for minerals reservations in titles and provided an insight into how this can be dealt with as part of the conveyancing process. I would like to provide an underwriter’s perspective on this issue and expand on how we would assess this type of risk, and how title insurance can provide invaluable comfort to developers, purchasers and lenders. As a general rule, a conveyance of land will (in the absence of any express provision to the contrary) carry the minerals under the principle that ownership of the land is presumed to be a coelo, usque ad centrum (from the heavens to the centre of the earth). However, in practice, it is hard to know where the title to minerals lies - this is because minerals are capable of being owned as a separate tenement and it is also common for the grantor of a deed to reserve the minerals. It is not uncommon to see minerals reservations contained within title deeds or noted on Land Certificates and not only in traditional mining areas in Scotland. Often, a solicitor may be satisfied that, after undertaking their own due diligence and investigations, the minerals reservation is unlikely to cause any future problems taking into account the future use of the land. For example, if the transaction involves a single residential dwelling which has been in place for many years, in a well-

developed area, there is perhaps little chance of the minerals owner coming forward to assert their rights, and less likely still that the Local Authority would grant them planning permission to work the minerals. However, when dealing with a large-scale development, for example, a housing development where high-value investment is at stake, the solicitor may wish to obtain additional comfort in the form of a title insurance policy. Even if it is unlikely that the minerals owner would be able to secure planning permission to work the minerals, they may still see this as an opportunity to hold the developer/ purchaser to ransom and request payment for damages, causing additional expenditure and inconvenience. Our policies cover a claim by a third party exercising mining/minerals rights as contained in the relevant deed or disposition. We can also offer trespass cover which is triggered when the Insured is prevented from pursuing its intended development because the foundations of the buildings (to be constructed) trespass into the mines and minerals situated under the land. When underwriting this particular risk, we carry out our own investigations, as well as relying on information provided by the solicitor. It is useful to view Coal Authority Reports (which have often already been obtained by the solicitor as part of the planning process) to find out whether the land has been worked in the past, or whether there are any plans to work the land in future. 5

We also carry out British Geological Searches and review borehole data to ascertain what exactly is lurking underneath the surface, and we also review any planning permission obtained to ensure that no third parties who may have the benefit of the minerals reservation have objected. It is also useful to utilise online mapping tools to get a feel for the surrounding area, i.e. how well developed the area is etc. and ensure that there is no extraction of minerals being carried out in the immediate vicinity. The date of the deed containing the minerals reservation and the identity of the party with the benefit of the minerals is also taken into account. If the deed is relatively historic and the benefiting party is not known to be active, then this will provide an indication as to the likelihood of this party coming out of the woodwork to raise a challenge. However, the benefit of the minerals reservation may have subsequently been sold on to another unknown party, and so often there is only so much digging that can be done before investigations come to a dead end. Alternatively, it may be that the benefiting party is particularly active in respect of minerals extraction or is known to own land in the vicinity which may cause concern. Our policies are also dependent on the assumption that there has been no contact or approach with or by the party with the benefit of the minerals reservation, and that the title to the minerals is not registered at the Land Register. If this were the case, the risk would be significantly increased as it would suggest that someone is actively asserting their rights over the

minerals and any development of the land is likely to draw their attention. The identity of the entitled party is also significant as this helps assess the likelihood of any possible extraction / working of the minerals. Despite carrying out these searches and investigations, of course, it is impossible to know what the future holds or whether an issue may arise with respect to the minerals. This is precisely why an insurance policy can be vital and can provide comfort should the worst happen. A third party coming forward to exercise their minerals rights could have a catastrophic impact on a development and even if the issue could be resolved this could result in delays and additional expenditure in the form of legal costs etc. Having a title insurance policy could provide reassurance that in the event of a claim First Title would step in and resolve the issue as efficiently as possible in order to get your client and their development back on track. Also, our policies pass to successors in title and last in perpetuity, so this comfort can extend to future purchasers as well, which will help with the marketability of any properties on the land. Although I have focussed on the example of a large scale housing development, we can offer title indemnity in any transaction, from a single residential house to a renewable energy project. Wherever you or your client feel that there is uncertainty or a gap in the title, First Title can offer assistance.


Legal & Claims Case Study:

Services Issue Background Our Insured owned property in a semi-rural location and given that it was some distance from the main sewer network, it operated by way of a typical septic system which drained on to adjoining land. When purchasing the property, the solicitor acting recommended that a title insurance policy be purchased to protect the owner in the event that their land did not have a legal right to drainage and/or water supply over said land.

Claim An adjacent landowner placed a cap on the pipe in order to prevent the tank draining onto his land as he believed it was causing pollution. This capping caused the tank to backfill and our Insured subsequently raised a claim with us under the title insurance Policy. It appears the owner of the land had lied about the affect the septic tank soakaway was having on

his land and in fact wanted it removed as he was intent on building on the land. The Environment Agency wrote to the neighbour advising that the capping of the pipe was illegal and he removed it immediately. A drainage specialist contractor was instructed to investigate the feasibility of installing a new drainage field to the existing septic tank.

Solution We examined various options, the costs of which were paid under the terms of the Policy. We then corresponded with neighbours and reached an agreement with another neighbour to re-route the soakaway pipe to their pipe for a fee of ÂŁ5,000. While these negotiations were taking place, we made payment under the Policy for emptying the septic tank several times to prevent the need to access the existing soakaway. A Deed of Servitude was drafted and finally agreed by all parties. The fee for the Deed of Servitude and all other associated legal expenses were covered by the Policy.


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Winter '16 Scotland  
Winter '16 Scotland