Specialist Topics

Overriding Interests

21.1 Introduction

There have always been a number of rights in, or restrictions over, heritable property in Scotland which did not require the recording of a deed in the Sasine Register to make them real rights, or, where real right is not a strictly correct description, to make them run with the lands. The most obvious example is that of a servitude, which can be created by possession for the 20 year prescriptive period. Although, ‘overriding interest’ is not a term of art familiar to the Scottish conveyancer, the use of the term in the context of registration of title is not introducing any new concept into Scottish conveyancing; the expression is merely a convenient label for those ‘real’ rights or restrictions which may affect a given property but which, under present procedures, a search in the Sasine Register may not disclose. Section 3(1) of the Land Registration (Scotland) Act 1979 (‘the 1979 Act’), therefore, by providing that the effect of registration in the Land Register is to vest a real right in the registered proprietor ‘subject only to ... any overriding interest whether noted under that section (section 6) or not’’ is doing no more than stating for registered land what is the present position for land held on a Sasine title.

21.2 Definition of overriding interest

The expression ‘overriding interest’ is defined in section 28(1) of the Act. It lists fourteen types of overriding interest. Overriding interest means, subject to sections 6(4) and 9(4) of the Act, ‘in relation to any interest in land, the right or interest over it of

1. the lessee under a lease which is not a long lease;
   
2. the lessee under a long lease who, prior to the commencement of the Act, has acquired a real right to the subjects of the lease by virtue of possession of them;
   
3. a crofter or cottar within the meaning of section 3 or 28(4) respectively of the Crofters (Scotland) Act 1955 or a landholder or statutory small tenant within the meaning of section 2(2) or 32(1) respectively of the Small Landholders (Scotland) Act 1911;
   
4. the proprietor of the dominant tenement in a servitude;
   
5. the Crown or any government or other public department, or any public or local authority under any enactment or rule of law, other than an enactment or rule of law authorising or requiring the recording of a deed in the Register of Sasines or registration in order to complete the right or interest;
   
6. the operator having a right conferred in accordance with paragraph 2, 3 or 5 of Schedule 2 to the Telecommunications Act 1984 (agreements for execution of works, obstruction of access, etc.);
   
7. a licence holder within the meaning of Part 1 of the Electricity Act 1989 having such a wayleave as is mentioned in paragraph 6 of schedule 4 to that Act (wayleaves for electric lines), whether granted under that paragraph or by agreement between the parties;
   
8. a licence holder within the meaning of Part 1 of the Electricity Act 1989 who is authorised by virtue of paragraph 1 of Schedule 5 to that Act to abstract, divert and use water for a generating station wholly or mainly driven by water;
   
9. insofar as it is an interest vesting by virtue of section 7(3) of the Coal Industry Act 1994, the Coal Authority;
   
10. the holder of a floating charge whether or not the charge has attached to the interest;
    
11. a member of the public in respect of any public right of way or in respect of any right held inalienably by the Crown in trust for the public;
    
12. the non-entitled spouse within the meaning of section 6 of the Matrimonial Homes (Family Protection) (Scotland) Act 1981;
    
13. any person, being a right which has been made real, otherwise than by the recording of a deed in the Register of Sasines or by registration; or
    
14. any other person under any rule of law relating to common interest or joint or common property, not being a right or interest constituting a real right, burden or condition entered in the title sheet of the interest in land under section 6(1)(e) of the Act or having effect by virtue of a deed recorded in the Register of Sasines,

but does not include any subsisting burden or condition enforceable against the interest in land and entered in its title sheet under section 6(1) of the Act.’

21.3 Right of a lessee under a long lease

The right of a lessee under a long lease, who has acquired a real right by possession prior to the commencement of registration of title in the area in which the leasehold property is situated, is an overriding interest insofar as the landlord’s title is concerned. It is subject to the noting provisions in section 6(4) of the 1979 Act (see below). Such an interest is also an interest in land and is, once the area becomes an operational area, subject to the provisions for registration following a registrable transaction under section 2(1)(a)(v). In those circumstances, therefore, where the tenant’s interest is assigned, whether or not for value, the assignee will obtain a real right only by registering their interest in the Land Register.

If in an application for first registration an unrecorded lease is disclosed in the warrandice clause, the registration officer should enquire whether it is, in fact, a long lease capable of being noted as an overriding interest and, if so, invite the agent to furnish the appropriate details. If the lease is noted:

a schedule of leases should be added to the property section of the title, (where only part of the subjects in the title is affected by a lease, the relevant part should be identified, normally by a reference on the title plan.) and

an entry in the following style should be added to the burdens section:

21.4 Common law rights in tenement property

Common law rights in tenement property are overriding interests unless they have been altered by the agreement of the parties concerned. Three possible scenarios can arise:

• Rights and maintenance burdens have not been imposed in any of the respective titles of those individual flats comprising the tenement. In such circumstances the common law of the tenement will affect the titles of those flats without the necessity of any reference thereto in the title sheet of each individual flat.

• Rights and maintenance burdens relating to the tenement have been comprehensively imposed in all of the respective titles of those individual flats comprising the tenement. The rights and obligations will be entered into the title sheet upon registration of each flat and will bind the registered proprietor accordingly.

• Rights and maintenance burdens relating to the tenement have been imposed in the titles of some flats but not in all. In reflecting the deeds submitted with the application, some title sheets will contain rights and maintenance burdens affecting the tenement, whereas other title sheets will be silent in this regard. Those flats whose title sheet remains silent will be able to rely on the common law of the tenement, regardless of whether this contradicts what has been stated in the title sheets of other flats within the tenement. For instance, if they do not comprise a top floor flat then, under the common law of the tenement, no liability will exist for maintenance costs in relation to the roof. The other title sheets may narrate that maintenance costs in relation to the roof have to be split equally between all flats in the tenement. However, this is subject to the overriding interest of the other flats to apply the common law of the tenement. The other flats will therefore be free of all maintenance costs concerning the roof whereas those flats whose title sheet is not silent will be required to pay more than just the equal tenemental share specified in the title sheet. Nor will the Keeper be liable to indemnify those proprietors. Section 12(3)(h) of the 1979 Act protects the Keeper against any claim for loss arising in respect of any error or omission in the noting of an overriding interest.

21.5 Overriding interest not registrable

Ideally, the Land Register should disclose all rights, burdens and restrictions which run with the lands. However, it was considered that to require registration of all interests which have been included in the definition of overriding interests, in order to make them run with the lands, would be both impractical and seriously disruptive to the introduction of registration of title into any given area. Section 2 of the 1979 Act therefore provides that overriding interests are not registrable. In addition, section 3(2) stipulates that the provisions regarding the creation of real rights by registration, instead of recording, are without prejudice to any other means of creating real rights.

21.6 Distinction between burdened and benefited proprietors

It is possible to record in the Register of Sasines deeds relating to certain of the interests referred to in Definition of overriding interest The most obvious example is that of a deed of servitude. It might be thought that since section 2 forbids the registration of overriding interests it would not be possible to register a deed of servitude. The reason this is not the case stems from the definition of overriding interest in section 28(1). It provides that an ‘overriding interest means….in relation to any interest in land, the right or interest over it of -…’. The various interests which are listed after these words are therefore overriding interests only in relation to the subjects burdened by them.

Conversely, in relation to the party who has the benefit of them, they are interests in land which may be registrable. Since, however, with the exception of a long lease which is covered by section 3(3), none of the interests in Definition of overriding interest are interests in respect of which a title sheet may be opened in terms of section 5(1)(a), they may only be registered insofar as they affect a registered interest.

This distinction is clearly demonstrated when one takes the example of a servitude. A servitude is an overriding interest in relation to the servient tenement but is a registrable interest in relation to the dominant tenement. As such it can registered against the dominant tenement provided the dominant tenement is itself registered. But if the dominant tenement is not registered the deed of servitude will not induce first registration in terms of section 2(1)(a) and as such cannot be registered.

Noting overriding interests

21.7 Exceptions

Although not registrable, section 6(4) provides for noting the existence of overriding interests, subject to two exceptions, on the title sheet. The exceptions are:

• Short term leases. Although leases not within the definition of long leases (see section 28(1) of the 1979 Act) are overriding interests, they are not, in terms of section 6(4), capable of being noted on the title sheet. Short term leases (i.e. those for 20 years or less with no facility for extension) will not appear in the Land Register under any circumstances.

• The interest of a non-entitled spouse under section 6 of the Matrimonial Homes (Family Protection) (Scotland) Act 1981. Although an overriding interest, it is likewise excluded from noting on the title sheet. However, where the property appears likely to fall within the definition of ‘matrimonial home’, the Keeper will endorse the title sheet with a statement on whether or not he is satisfied that the property is not affected by the occupancy right of the spouse of any previous proprietor within the 5 year prescriptive period under the 1981 Act.

21.8 Interests capable of noting: when to note

The remaining overriding interests are capable of being noted on a title sheet. Section 6(4) of the 1979 Act details the circumstances in which an overriding interest can be noted on the register. These are as follows:

1. An overriding interest must be noted if it is disclosed in any document accompanying an application for registration of the interest which it affects (section 6(4)(a)). For example, if on registration of a heritable security by a limited company, the security deed, in addition to creating a fixed security, contains a floating charge, the existence of the floating charge would have to be noted. This would be done in the charges section of the title sheet. It is noted that the Keeper would not have to trace and then note the charge on any other title sheets of that limited company’s properties, but, as an overriding interest, the charge would still affect those other properties.
   
2. An overriding interest may be noted if application is made to do so (section 6(4)(b)(i)). For example, if a servitude right is granted over a registered interest it is, so far as that interest is concerned, an overriding interest; and either the benefited or burdened proprietor may, by making application on Form 5, request the Keeper to note the servitude on the title sheet of the property burdened by the overriding interest.
   
3. An overriding interest may be noted if it is disclosed in any application for registration (section 6(4)(b)(ii)). For example, if on the grant of servitude mentioned above, application is made by the proprietor of the dominant tenement, for registration of the servitude as a right benefiting that interest, the Keeper may, on processing that application, note the existence of the servitude right on the title sheet relating to the servient tenement.
   
4. An overriding interest may be noted if it otherwise comes to the Keeper’s notice. For example, if two adjoining proprietors jointly grant a servitude right in favour of a third, and one of those proprietors applies to have the overriding interest noted on the title sheet of his or her property, under section 6(4)(b)(iii) the Keeper may also note the overriding interest on the title sheet of the co-granter.

It is not necessary to obtain the consent of the registered proprietor prior to noting an overriding interest on the title sheet thereof. By virtue of section 9(3)(a)(i) rectification of the register is permitted, without the consent of the proprietor in possession, where the purpose is to note an overriding interest or to correct any information relating to an overriding interest. Where there is an element of discretion as to whether the overriding interest will be noted, the legal registration officer should consider the case on its merits and – if necessary – seek advice from her or his team leader.

This topic continues …