Examination of title
3.11 Deeds granted by beneficiary or person entitled to succeed
A beneficiary or person entitled to succeed to the heritable property of the deceased can dispose of the property by using the confirmation (or certificate of confirmation) with a docket endorsed as a link in title. The docket acts as the conveyance of the property to the beneficiary or person entitled to succeed. In any such transaction the registration officer will require to examine both the confirmation (or certificate of confirmation) and the docket.
The provisions of the Succession (Scotland) Act 1964 came into effect on 10 September 1964. On any death occurring after that date the executors of the deceased confirm to the whole estate both heritable and moveable. Thus, in any deed transferring the heritable property of a person who dies after that date the deduction of title should proceed on the confirmation of the executors or, where appropriate the certificate of confirmation and docket annexed thereto (see Trusts and trustees - deeds granted by trustees). The method in use prior to the 1964 Act by which a legatee could convey the deceased’s property using the will as the link in title was never expressly ruled incompetent by the 1964 Act. When referred to the then four Professors of Conveyancing in 1966, they failed to resolve the question. Two formed the view that it was incompetent to use the will whilst two opined that it was still competent but recommended that confirmation be used instead.
As a result of this uncertainty, the Keeper cannot insist that confirmation be used as the link in title. The Keeper will accept the use of the will as an alternative link in title in conveyances granted by executors. Where a beneficiary is making up title and the deduction of title proceeds on a will, the registration officer should raise no objection provided the will contains a clear and unambiguous conveyance of the subjects to that beneficiary and if evidence is produced as outlined below. In the absence of confirmation, the officer should be satisfied that there is no risk of challenge to the title before proceeding on the will and issuing a title with no exclusion of indemnity in that respect. The evidence required depends on the individual circumstances of the transaction, but in every case the will itself and the death certificate of the deceased must be submitted along with an assurance that the will is the last will and testament of the deceased and had not been subsequently revoked. In addition, the terms of the will must clearly and unambiguously support the legatee’s claimed entitlement. For example, a will which bequeaths the deceased’s house to the eldest daughter would not, without further evidence of the identity of the eldest daughter, be sufficient for the Keeper.
If an application is received to register the interest of a beneficiary in terms of a will or certificate of confirmation with a docket annexed the proprietorship section should be updated in the same way as if a conveyance had been received. The consideration should be shown as “Conveyance to Beneficiary” or “Implementation of Will”, as appropriate. A date of entry will only be shown if this is provided by the agent, otherwise the entry date will be left blank. In the latter instance a note should be added in the B section in the following terms “The Date of Entry field in entry xx is intentionally blank."
3.13 Deeds granted by the survivor under a special destination.
The registration officer must ensure that the destination in the prior title has not been evacuated by inter vivos or mortis causa deed prior to registration. For example where, in the deed presented for registration, A purports to dispone the subjects on the strength of a destination ‘in favour of A and B equally between them and the survivor of them’, evidence must be produced to show that this special destination has operated, and that A alone is the proper person to dispose of the whole subjects. The evidence required will normally comprise the death certificate of B along with either an affidavit by the seller, a written assurance from the applicant's solicitor that the destination has not been evacuated or a declaration in the DIR that the destination has not been evacuated. The production of the will is not in itself sufficient evidence without an affidavit or written assurance. (Please also see Evacuation/non-evacuation of a special destination)
Similar evidence is required when application is made to register a Death Certificate as a dealing (under section 2(4)(c) of the 1979 Act). Where an apparently unevacuated special destination occurs further back in the prescriptive progress, the case should be referred to a senior team leader for further instructions.
Some destinations are contractual and cannot be evacuated. There is, however, a considerable amount of case law about when destinations are and are not contractual. The registration officer should not investigate the revocability of a destination but simply seek assurances as discussed above.
3.14 Deeds granted by or to companies
Application Forms 1, 2 and 3 contain questions pertaining to whether a company has been wound up or is a charity.
3.14.1 Question on the application form regarding receivership or winding up of a company registered under the Companies Acts
If the application form does not contain satisfactory answers to the question relating to the winding up or receivership of a company or other corporate body, the agent should be contacted for more information.
If a satisfactory reply is forthcoming, registration with full indemnity may proceed. If not, the case should be referred to a senior team leader, who will decide whether or not an exclusion of indemnity is appropriate. Only occasionally will enquiry need to be made in respect of a company which is not a party to the current transaction but which appears earlier in the prescriptive progress.
3.14.2 Question on the application form regarding whether the Company is a charity or is the transaction affected by section 322A of the Companies Act
The Companies Act 1989 inserts new sections 35 and 35A of the Companies Act 1995 and abolishes the ultra vires doctrine in so far as it was capable of affecting a third party.
The third party is now presumed to be dealing in good faith. There are two situations, however, in which a third party is not fully protected; where the company is a charity, or where the transaction is one to which directors or their associates are parties (section 322A applies in the latter case).
In the event that either
(b)(i) or (ii) is branch of the relevant question on the application form is
answered in the affirmative, the registration officer will require confirmation
from the agent that the charity or company is acting intra vires, that is within
its powers. Before contacting the agent directly, the officer should check any
further details provided in the relevant box. If there is any doubt the matter
should be referred to the registration officer’s team leader.
3.14.3 Deeds granted by company in liquidation
Companies may be liquidated in two ways: (a) by voluntary winding up either by members or by creditors and (b) by compulsory winding up by the court. Once a liquidator is appointed the directors are no longer entitled to exercise any of their powers. The assets remain vested in the company but the powers of the directors are taken over by the liquidator. The Insolvency Act 1986 makes provisions regarding the powers of a liquidator.
A deed granted by a company in liquidation runs in the name of the company, but the narrative refers to the fact that the company is in liquidation. The liquidator executes the deed in place of the directors. Where a company in liquidation is conveying subjects, the registration officer will require to examine evidence of the appointment of the liquidator. Where a company is in voluntary liquidation, the resolution passed to wind-up the company will comprise the appropriate link in title. In cases of compulsory winding-up the court order should be submitted. It is possible for a voluntary winding-up to be converted to a winding up by the court upon application by a creditor or contributory (i.e. a person liable to contribute to the assets of a company in the event of its being wound up). The effect of liquidation upon prior inhibitions is discussed in paragraph Inhibitions and company liquidations.
3.15 Deeds granted by receivers
Where a company has granted a floating charge, the creditor, or the court, may appoint a receiver. On the appointment of a receiver, the floating charge crystallises, i.e. it attaches to the property then owned by the company, and the receiver has statutory powers to sell or lease the property.
Where a progress of title includes a deed granted by a receiver it is essential that there be submitted in support of the application for registration, and examined by the registration officer, not only the instrument of appointment of the receiver but also the floating charge itself. Examination of the floating charge is necessary in order to determine that it is sufficient in its terms to charge Scottish heritable property and has been validly constituted. Unless these requirements are satisfied any deed granted by a receiver would be invalid.
See Also Sections 5.11 and 5.13.
The House of Lords decision in the case of Sharp v. Thomson 1997 SCLR 328 and 1997 SLT 636 has prompted the Keeper to consider the risk to his indemnity in sales by receivers. One of the implications of the decision is that once a disposition of heritable property by a company has been delivered to a purchaser, a floating charge over the company’s property and undertaking cannot attach to that heritable property. (For further details on floating charges, please see Ranking of fixed and floating charges).
It is possible that, if a company grants and delivers a disposition to a purchaser, the purchaser (for whatever reason) will not record it in Sasines or apply for registration in the Land Register as the case may be. It is also possible that, later on, after the company’s floating charge crystallises, the receiver may not learn about the earlier disposition and go on to sell the property to someone else. The second purchaser is then at risk of having his or her title defeated by the first purchaser, who holds on the delivered but unrecorded/unregistered disposition. That risk may well pass to the Keeper if he then proceeds to register the second purchaser’s title without an exclusion of indemnity.
However, the Keeper considers that the risk to his indemnity is too remote to justify a blanket exclusion of indemnity in all sales by receivers. A purchaser acting in good faith will be expected to have made appropriate enquiries of the receiver. If the receiver’s responses are less than satisfactory, the purchaser’s agent should seek the advice of the Pre-Registration Enquiries Section, in which case a decision concerning indemnity may be made at that time.
In an application for registration on behalf of a purchaser from a receiver, the registration officer should take note of any copy correspondence between the agent and the Pre-Registration Enquiries Section. If no such copy correspondence is enclosed with the application, the officer must pay special attention to the answer to the question on the application form, which asks whether there is any person in possession or occupation of the property adverse to the interest of the applicant.
If
(a) that question is answered in the negative,
(b) there is no other documentation in the application to suggest a prior disposition of the property by the company and
(c) the required documentation concerning the appointment and actings of the receiver is submitted,
the officer may proceed to register the title without an exclusion of indemnity on this matter. If any part of the application is unsatisfactory in respect of the above requirements, the case should be referred to a senior team leader.
3.15.2 Application to court by receiver for authority to sell subjects free of a security or diligence
Section 61(1) of the Insolvency Act 1986 makes provision when a receiver wishes to sell or dispose of any property or interest in property of the company which is subject to the floating charge by which the receiver was appointed and either (a) that property is subject to any security or interest of, or burden or encumbrance in favour of, a creditor the ranking of which is prior to, pari passu with or postponed to the floating charge; or (b) that property is affected by a diligence. Where the receiver cannot get the consent of the creditor or the person executing the diligence, the receiver can apply to the court for authority to sell free of the security or diligence.
Where a receiver has applied to the court under section 61 of the Insolvency Act 1986 for authority to sell subjects free of a particular security, or diligence, a copy of the court’s authorisation must be examined by the registration officer before the relevant security or diligence can be omitted from the title sheet.
3.16 Deeds granted by trustee in sequestration
Although a heritable proprietor who has been sequestrated remains infeft in the property, the trustee in sequestration becomes personally vest in the property as the debtor/bankrupt’s successor, by virtue of the act and warrant issued by the court confirming the trustee’s appointment or election. Should the trustee either complete title to or sell the bankrupt’s heritable estate, the registration officer will need to examine the act and warrant.
The topic of bankruptcy and its effect on inhibitions is covered in detail in Insolvency, Receivership andLiquidation .
3.17 Deeds granted by or in favour of a trustee for a limited company
In conveyancing terms, a disposition in favour of an individual as trustee for a limited company is unexceptionable and must be accepted for recording in the Register of Sasines. It is unclear, however, in terms of company law, what the precise effect of such a disposition would be if the company went into liquidation or was put into receivership by the holder of a floating charge. In the context of registration of title the situation created by such a disposition is fraught with doubts and potential difficulties. Any registration officer, therefore, who encounters an application for registration of a title which is granted by or in favour of a trustee for a limited company should refer the case to Legal Services.
3.18 Feu writs and leases granted by uninfeft proprietors
Sections 3(6) and 15(3) of the 1979 Act make notices of title and deductions of title unnecessary in relation to a registered interest, provided sufficient links in title are produced to the Keeper. These sections do not, however, apply where the granter of a feu or a lease is uninfeft. It is still necessary at common law for the granter of a feu or lease to be infeft whether or not the subjects are registered. If an uninfeft proprietor grants a feu writ to a vassal who subsequently records it, the result is that even though the vassal has a recorded title he has no valid real right to the subjects. As it is incompetent to include a deduction of title in a feu writ, a clause of deduction does not provide a remedy. However, accretion operates to validate the feu writ retrospectively when the superior completes title in his own name.
No feu or lease or subsequent title to the interest created by it may be registered without exclusion of indemnity, unless the granter was infeft at the time of granting the feu or lease, or accretion has operated on the subsequent infeftment of the granter. Production of the unrecorded links is not by itself sufficient in such a case. In the case of a first registration the granter must have a recorded title in the Register of Sasines, and likewise in the case of a transfer of part the unrecorded links must be accompanied by an application for registration in order for the granter to become infeft.
For example, A grants a feu to B who records it in March, A being uninfeft. In September A records a notice of title in his own name. The later infeftment of A operates to give B a real right in the feu as of the date of the recording of the feu in March.
Under registration of title this means that if the DIR is a feu writ granted by an uninfeft proprietor, the Keeper should exclude indemnity in respect of the lack of infeftment. As with all exclusions of indemnity the registration officer should inform the agent, who should be given the opportunity to rectify matters. This will normally mean that the superior should complete title by recording a deed in the Sasine Register, or by submitting a Form 2 application with the appropriate links in title to update the title sheet for the superiority interest.
The application for registration of the feu deed should be completed as far as possible and then placed in standover until such time as the agent notifies the Keeper that the superior has completed title in the Sasine Register. It should be noted that the onus is on the agent to advise the Keeper when this has been done and submit the deed. When the agent notifies the Keeper of the recording, or registration, of the deed completing the superior's title, and there is no indication of any defect, the registration officer can issue a title to the feu without exclusion of indemnity. Although the original date of registration is retained, the title sheet and land certificate should be updated to the date of the recording, or registration of the deed completing the superior's title. This will, of course, entail additional searches in the Register of Inhibitions and of the application record.
If, however, the applicant does not wish to proceed as above, the registration officer should issue a title containing an exclusion of indemnity in respect of the granter's lack of title to feu.
Similar considerations apply in the case of a lease granted by a landlord who is uninfeft, and the same procedure should be applied.
3.19 The granter of a prior deed in the prescriptive progress is uninfeft
Whether or not there is a deduction of title or a subsequent notice of title the links in title must be produced to the Keeper. If satisfactory links are produced, before or after a requisition, registration with full indemnity may proceed. If the applicant fails to produce satisfactory links in title the case should be referred to a senior team leader who should consider the risk involved in registration with full indemnity.