7.21 Matrimonial Homes Note
The Matrimonial Homes (Family Protection) (Scotland) Act 1981 gave spouses certain rights in their matrimonial home. In terms of rule 5(j) the Keeper is required to insert
’a statement that there are in respect of the interest in land no subsisting occupancy rights, in terms of the Matrimonial Homes (Family Protection) (Scotland) Act 1981, of spouses of persons who were formerly entitled to the interest in land, if the Keeper is satisfied that there are no subsisting rights’.
The Matrimonial Homes Act is discussed at Matrimonial Homes (Family Protection) (Scotland) Act 1981.
7.22 Search in the Register of Inhibitions and Adjudications
A search in the ROI requires to be undertaken as part of the completion of the proprietorship section. The ROI is covered in detail in Register of Inhibitions and Adjudications
7.23 Exclusion notes in the Proprietorship section
The proprietorship section may also reflect details of any exclusion of indemnity relating to validity of prior title. Indemnity should never be excluded without the approval of a senior team leader and without the knowledge of the submitting agent. Only if the applicant is unable or unwilling to remedy the defect should the officer proceed with the exclusion. Registration officers should endeavour to maintain a standard form of entry whenever this is possible and examples can be found in the appropriate chapters of this manual.
Introduction
This chapter deals with the title problems associated with partnerships. The term ‘partnership’ covers the situation where two or more persons agree to conduct a business on the basis of dividing the profits and sharing the losses between them. This therefore excludes businesses operated by a sole proprietor, and it also excludes businesses operated by a corporate body such as a limited company. Normally the partnership is constituted by a written contract between the partners, setting out the trading name of the firm; the nature of the business; what each partner will put into the business; how the profits will be shared etc.. Businesses such as farms or shops are often operated by partnerships, and in many of the professions (e.g. law and medicine) a partnership is the almost invariable method of providing general practice to clients.
A partnership has the status of a legal persona in Scots law. This enables the partnership to enter into contracts in its own name, but it also means that a partnership can be sued or sequestrated. However, the general rule is that a partnership cannot own heritable property in its own name. The heritable property of a partnership is therefore normally held on behalf of the firm by trustees.
There are two exceptions to this general rule:
On the ‘appointed day’ under the Abolition of Feudal Tenure (Scotland) Act 2000, it will become permissible for partnerships to hold title in their own name. Further instructions on the implications of the Abolition Act will be disseminated once the date of the ‘appointed day’ is known.
7.25 Deeds in favour of the trustees
Property being acquired by the partnership should be conveyed by the granter to the trustees for the firm. Normally the whole partners of the firm at the time will be the trustees, but in principle the firm could nominate only some of its partners (or indeed persons who are not partners at all) to be the trustees. A typical dispositive clause will run in the following style:
… do hereby dispone to and in favour of A (designed), B (designed) and C (designed), the partners of the firm of D & Co. (designed) as trustees for the said firm, and the survivors and survivor of them as trustees and trustee aforesaid
However, more complicated styles of destination are not unknown – e.g. the destination might be to the partners ‘present and future and their successors in office’ as trustees. Registration officers should therefore ensure that the entry in the proprietorship section of the title sheet accurately reflects the deed, rather than slavishly following set styles of entry. No material words should be omitted even where there appears to be repetition, as this might inadvertently change the meaning of the destination.
The same principle applies where the trustees acquire on the firm’s behalf an interest of a different type (e.g. where the firm is the creditor under a standard security).
7.26 Deeds granted by the trustees
Conveyances and other deeds should be granted by the trustees on behalf of the firm. The partnership itself should not grant the deed. Where the partners and the trustees are the same individuals, the operative clause of the deed must make it clear that they grant the deed in their capacity as trustees.
The normal rules of authentication apply to deeds granted by the trustees. In other words, the deed should be signed by all the trustees together in the presence of one witness, or the trustees may each sign separately in the presence of their respective witnesses. The witnesses must also sign the deed and be named and designed. Section 7 of the Trusts (Scotland) Act 1921 makes a general provision for trusts of all types, to allow a majority and quorum of the trustees to sign a deed running in the name of all the trustees, if a minority of the trustees is not available to sign. However, the interpretation of section 7 has been a matter of some academic debate, and any deed which is not signed by all the named trustees should therefore be referred to a senior team leader.
In some cases, the partnership itself, and/or any partners who are not trustees, may also be parties to the deed. This is common where trustees for a firm grant a standard security; the firm itself and the partners may well grant the personal obligation, since the firm is able to contract in its own name to acquire the debt. In such cases, the operative clause should be worded in such a way that the conveyance or grant is by the trustees, and the basis on which the firm or partners are parties should be explained. Any additional partners should sign the deed in the presence of a witness (or their respective witnesses). The firm’s name may well also be ‘signed’ by one of the partners in the presence of a witness, but this is not a statutory essential.
Where the trustees who grant a deed are the same individuals as the trustees who became infeft, registration officers should assume (in the absence of contradictory evidence) that there has been no change in the membership of the trust. Difficulties arise where some of the infeft trustees have left the firm and are not granting the deed, and/or additional persons not named in the title grant the deed as trustees. In such cases, the appropriate links in title will require to be examined.
In the normal case where the trustees have taken title with a destination to the ‘survivors and survivor’, on the death of one of the trustees the trust continues to be administered by the remaining trustees. Production of the extract death certificate is sufficient authority for the Keeper to accept a deed granted by the surviving trustees; there is no need for the registration officer to requisition an assurance that the destination has not been evacuated.
If a sole trustee (or last surviving trustee) dies, the result is a lapsed trust. New trustees may then be appointed by way of petition to the court under section 22 of the Trusts (Scotland) Act 1921. For the Keeper’s purposes the resulting court order is sufficient evidence of the appointment of the trustees.
7.27.2 Incapacity or bankruptcy of a trustee
Medical incapacity (e.g. insanity) does not terminate the trustee’s infeftment, but it does prevent him or her from dealing with trust estate. Equally, an insane person cannot validly resign as a trustee, and a curator bonis or attorney will not normally be able to act for him or her with regard to the trust property. Section 23 of the Trusts (Scotland) Act 1921 therefore provides for incapax trustees to be removed from office by way of petition to the court.
Bankruptcy does not, however, prevent a trustee from continuing to act in a trust capacity. If a trustee who is also a partner of the firm is sequestrated, this may well mean that he ceases to be a partner, but he should still be the granter of a future deed dealing with the trust property. His trustee in sequestration has no involvement in the trusteeship of the firm.
7.27.3 Resignation of a trustee
An outgoing partner will normally record his or her resignation from the firm in writing. This may take the form of a formal deed or merely a letter. However, resignation as a partner does not necessarily entail resignation as a trustee. In order to resign as a trustee, the partner must sign a deed of resignation following the style in schedule A to the Trusts (Scotland) Act 1921, which is as follows:
I, AB (designed), do hereby resign the office of trustee under [specify the trust deed] granted by … dated the … day of … [if recorded, specify register and date of recording] [if the trustee was assumed add] and to which office of trustee I was assumed by deed of assumption granted by … dated … [etc.]
(To be attested)
The style (which is not designed expressly for partnership trusts) will normally require some modification to suit the circumstances – e.g. the ‘deed of trust’ will normally be the disposition to the firm’s trustees. However, it is important that the style is followed as closely as possible. If it is not clear that the outgoing partner has resigned as a trustee, that individual should be presumed to have remained a trustee and will require to sign future deeds granted by the trustees, even if he or she is no longer a partner or actively involved in the running of the firm.
Unfortunately, experience shows that firms frequently do not arrange for outgoing partners to sign a formal deed in the necessary style for resignation as a trustee. This can lead to difficulties at a later stage, where one or more of the infeft trustees has left the firm and may perhaps no longer be on good terms with the remaining partners. Any situation where one or more of the infeft trustees is not a party to the deed, and insufficient documentary evidence of resignation is available, should be referred to a senior team leader.
7.27.4 Assumption of a new trustee
Just as an outgoing partner does not necessarily cease to be a trustee of the firm, so an incoming partner does not necessarily become a trustee. When a new partner joins the firm, he or she will only become a trustee if the infeft trustees grant a formal deed of assumption and conveyance. There is a style for such a deed in schedule B to the Trusts (Scotland) Act 1921. Alternatively, however, it may be less cumbersome for the infeft trustees to grant a disposition of the firm’s heritage in favour of themselves and the incoming trustee.
7.28 Limited liability partnerships
Introduction
The Limited Liability Partnerships Act 2000 (hereinafter referred to as ‘the Act’) came into force on 6 April 2001. It introduced a new type of legal entity known as the Limited Liability Partnership (hereinafter referred to as ‘LLP’). The LLP is, as its name suggests, a combination of both a partnership and a company. Its main purpose is to ‘enable two or more persons associated for carrying on a lawful business with a view to profit’ to limit their liability whilst trading in partnership mode. This limited liability is possible because an LLP is a legal person separate from its members.
To achieve the status of LLP it is necessary to register with the Registrar of Companies. The Registrar of Companies issues a Certificate of Incorporation stating inter alia the LLP’s trading name and the date of incorporation. In return for being allowed to trade with limited liability, LLPs have to disclose more information about themselves than is the case with traditional partnerships. They do this by filing annual reports, accounts and details of their composition and constitution etc. with the Registrar of Companies.
Once incorporated, the LLP becomes a body corporate possessing a legal personality separate from that of its members. In addition an LLP has unlimited legal capacity. This means that an LLP can do anything that a natural person can do. It has the ability to hold property in its own name and enter into contracts in its own name. Thus where the LLP is, for example, the disponee in a conveyance the deed will simply narrate the name of the LLP, i.e. ‘do hereby dispone to and in favour of Smith and Jones LLP’. Similarly the subsequent entry in the proprietorship section of the title sheet will simply read ‘Smith and Jones LLP’, followed by its address. This position differs markedly from that of the traditional partnership, in which title is taken on the partnership’s behalf by the partners as trustees thereof. It can be seen therefore that the LLP’s existence as a separate legal entity makes it more closely akin to a company than to a partnership. For the avoidance of doubt, standard securities by limited liability partnerships require to be registered in the Register of Charges.
Part I of the Schedule to the Act provides that an LLP must end its name with the words ’limited liability partnership’ or the abbreviation ’llp’ or ’LLP.’ (There is, in addition, a special provision for LLPs registered in Wales to use the Welsh equivalent of LLP viz.: "partneriaeth atebolrwydd cyfyngedig" or its abbreviation "pac" or "PAC").
See Authentication and Execution — Limited Liability Partnership.
7.28.3 Completion of application Forms 1, 2 & 3
Question 8 in part B of the application Form 1 and questions 4 and 6 in part B of application forms 2 and 3, respectively, will apply to LLPs. Legal settlers should therefore check that these questions have been adequately answered.
7.28.4 Stamp duty – transitional relief
It is anticipated by the Government that a significant number of existing partnerships, particularly professional partnerships of doctors, lawyers, architects, surveyors and the like, will wish to convert to LLP status. In many cases this will involve the transfer of property from the existing partnership to the LLP. Section 12 of the Act provides for relief from stamp duty for such property transfers occurring within one year of the date of incorporation of the LLP, providing certain conditions are met. Essentially these are that the property transferring from the former form of partnership to that of the LLP should be the same, or similar, and that there should be at least one partner of the former partnership who transfers as a member (partner) to the LLP.
By virtue of section 12(6) any deed on which stamp duty exemption is sought will require to be submitted to the Inland Revenue Stamp Office for adjudication. Provided the Stamp Office are satisfied it falls within the exempt category the deed will be stamped with a particular stamp denoting that it is not chargeable with any duty. For transfers occurring more than one year after the date of incorporation of the LLP the normal provisions for calculating stamp duty will apply. It will not always be apparent whether or not the transitional relief provisions apply. For that reason a deed will be acceptable to the Keeper if it has been either denoted or otherwise stamped/adjudicated by the Stamp Office or contains a Finance Act certificate stating that the value of the property being conveyed falls under the stamp duty threshold.
It is stressed that the transitional provisions apply solely to stamp duty. Registration dues will be charged as per the current Fee Order.
7.29 Deeds in favour of the Trustees of a Church of Scotland Congregation or the Church of Scotland General Trustees
Conveyances of properties which will be used in conjunction with the operation of a local Church of Scotland often include a number of conditions which affect the disponees [grantees] and take the form of a trust arrangement between the disponees [grantees] and the internal government of the Church of Scotland.
In particular, such conveyances often include conditions to the effect that the property is to be held for the behoof of the Church of Scotland and in accordance with the constitution of the Church of Scotland, as well as that the management and disposal of the property will be subject to the regulation and direction of the General Assembly of the Church of Scotland.
These conditions are not real burdens as such, nevertheless, in consultation with the Church of Scotland General Trustees, it has been agreed that it is appropriate to draw the attention of a person examining a title sheet that such an arrangement is in place. Therefore, in terms of section 6(g) of the Land Registration (Scotland) Act 1979, whereby the Keeper is given the discretion to enter such information as he considers fit, it has been agreed to make reference to the existence of these conditions, in the Proprietorship Section of a title sheet, as follows.
If the grantees are the trustees ex officio of a local congregation, then the entry for the Proprietor will read as follows-
"A (design), B (design) and C design, respectively Minister, Session Clerk and Finance Convener of X Church of Scotland Congregation and as such Minister, Session Clerk and Finance Convener, Trustees ex officiis for the said Congregation, and by virtue of the Disposition by X to the said A, B and C registered in the Land Register on [ ], for the behoof of the Church of Scotland and the purposes therein specified."
7.30 Deeds in favour of the Free Church of Scotland and its Congregations.
Most Dispositions in favour of the Free Church of Scotland include trust provisions, which run to over a page in length. These are known as Model Trust Deed Provisions, and will refer to a Disposition in favour of John Cadell registered in the Books of Council and Session on 13 November 1844. It has been agreed, in similar terms as with the Church of Scotland above, that a shortened version of the terms will be inserted in the entry in the Proprietorship Section, as follows-
A (design), B (design), C (design) and D (design) as trustees for the Congregation of the xxxx Free Church of Scotland and their successors and assignees whosoever in trust always for the ends, uses and purposes contained in and referred to in the Disposition by X to (said) A, B, C and D registered in the Land Register on dd/mm/yyyy
If there is no reference made within the Disposition to the Model Trust Deed Provisions then the usual details will be entered in the Proprietorship section as normal.
End of Topic