Land Registration etc (Scotland) Bill: Stage 3

– in the Scottish Parliament on 31st May 2012.

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Photo of Tricia Marwick Tricia Marwick None

The next item of business is stage 3 proceedings on the Land Registration etc (Scotland) Bill. In dealing with the amendments, members should have before them the bill as amended at stage 2, which is SP bill 6A, the marshalled list, which is SP bill 6A-ML, and the groupings, which is SP bill 6A-G.

The division bell will sound and proceedings will be suspended for five minutes for the first division of the morning. The period of voting for the first division will be 30 seconds. Thereafter, I will allow a voting period of one minute for the first division after a debate.

Members who wish to speak in the debate on any group of amendments should press their request-to-speak button as soon as possible after I call the group.

Members should now refer to the marshalled list of amendments.

Section 31A—References to certain entries in the Register of Inhibitions

The Presiding Officer:

Group 1 is on effective registration. Amendment 6, in the name of Murdo Fraser, is the only amendment in the group.

Photo of Murdo Fraser Murdo Fraser Conservative

I start by declaring my interest as a member of the Law Society of Scotland. Amendment 6 and amendment 7, which is also in my name, originate with the Law Society. They do not make any political points but rather seek to address a problem that has arisen because the practice of the keeper of the registers of Scotland is out of step with the established understanding of Scots property law.

As members will be aware, an inhibition is a charge that is registered against a property that means that it cannot be sold without the creditor being repaid. It has always been understood in Scots property law that an inhibition would not be effective if it was registered after the date of completion of missives for the sale. That is because the conclusion of missives is in effect the creation of a contract. The subsequent grant of a disposition of the property by the seller is therefore, in effect, an involuntary act. That understanding of the law is confirmed by Professor George Gretton in his seminal text book, “The Law of Inhibition and Adjudication”.

Unfortunately, some confusion was caused by section 160 of the Bankruptcy and Diligence etc (Scotland) Act 2007, which has led the keeper to have a policy of excluding indemnity in land certificates that have been issued to a purchaser where an inhibition has been registered against the seller after missives have been concluded. That has caused problems for purchasers in that situation and their lenders.

Amendment 6 seeks to clarify that section 160 of the 2007 act does not alter the common-law position. Accordingly, inhibitions registered against the seller after missives are concluded remain ineffective, as the seller is already contractually bound to dispose of the property. That will allow the keeper to change the current policy, which is causing difficulties for purchasers and inaccuracies in the land register.

It is important to stress that no one will lose if amendment 6 is agreed to, as the holders of inhibitions would be in no worse a position than they were previously. However, the purchaser will get a clear land certificate, instead of potentially having to face an application to the Lands Tribunal for Scotland to achieve that result, which is the remedy that is currently available. As well as the support of the Law Society of Scotland, the amendment has the support of the Council of Mortgage Lenders in Scotland.

I have pleasure in moving amendment 6.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I, too, am a member of the Law Society of Scotland, albeit as a non-practising solicitor.

Amendment 6 would have the effect of barring the keeper from reflecting in the title sheet, when registering a disposition, an inhibition dated later than the date on which the missives were concluded.

Murdo Fraser said that the amendment is necessary because of the problem created by section 160 of the 2007 act. The issue is whether section 160 replaces the common-law rule that an inhibition strikes only at voluntary dealings with the inhibited land by a debtor. A sale by a debtor under missives that were concluded before an inhibition was registered is not a voluntary dealing and so is not affected by the inhibition. To be fair, I think that Mr Fraser made that point. However, the amendment does not affect or clarify whether such an inhibition is effective against the disposition. It simply instructs the keeper to act in a certain way, regardless of the underlying legal position.

One of the purposes of the bill is to bring registration law into line with property law by, for example, removing the complex structure of bijuralism created by the Land Registration (Scotland) Act 1979. Bijuralism is the term used by the Scottish Law Commission to describe the simultaneous application of two different systems of law: the special rules of registration of title and the ordinary rules of property law. Instead, the bill tries to simplify the position by requiring the land register, where possible, to reflect the property law position. Requiring the keeper to ignore certain inhibitions is undesirable, as it risks reintroducing the confusing principles of bijuralism that the bill seeks to eliminate.

In addition, I do not believe that amendment 6 will help conveyancers or those who use the land register for other purposes. Indeed, it may well hinder the conveyancing process. An inhibition or other entry in the register of inhibitions will be effective, or ineffective, as a matter of law, whether or not the keeper notes its existence on the title sheet. To make that change would go some way towards undermining one of the main purposes of the land register: that of keeping relevant information about the title on the title sheet where necessary. The place to deal with section 160 of the 2007 act is in a bill about diligence, not this bill.

Part 4 of the bill, on advance notices, already provides a practical solution to the issue that Murdo Fraser raises. As a result of section 58B, an advance notice will protect a named deed from, among other things, inhibitions entered in the register of inhibitions during the protected period. An advance notice granted on the conclusion of missives, or a day or two before, will protect the grantee from an inhibition registered before registration of the disposition for 35 days. A further advance notice may be used if the protected period is coming to an end. As such, the grantee of such a disposition will be protected by the advance notice without the uncertainty introduced by amendment 6.

However, I say to Mr Fraser that the Government will continue to monitor the issue. I respect the fact that the Law Society has raised the issue. I have given the technical arguments for why we do not think that amendment 6 is the correct way to deal with it and outlined how we believe that it can be dealt with through another route.

Photo of Annabel Goldie Annabel Goldie Conservative

I would like to put the issue beyond doubt. Is the minister confirming that, in the absence of amendment 6 being agreed to, innocent purchasers will continue to be in doubt—even after the conclusion of their missives—about whether and when they can get a clear title?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I think that Annabel Goldie is asking me to speculate on what is in the mind of purchasers. I am not sure how I can answer that question. However, I can say that the law, as I have set out, is fairly clear that an inhibition after the conclusion of missives would not vitiate the transaction, because inhibitions affect only voluntary grants, and therefore an inhibition after the conclusion of missives would not be effective. However, I cannot be expected to know what is in the mind of purchasers.

We will continue to work with the Law Society of Scotland. If it becomes clear that there is a continuing problem and that advance notices have not in practice removed any difficulties in this area, the Scottish Government will, as is appropriate, look for an opportunity to consider making appropriate provision in the law in this area in other legislation. Amending the bill is not the appropriate means of so doing.

For the reasons that I have outlined, I cannot support amendment 6 and ask Mr Fraser to withdraw it.

Photo of Murdo Fraser Murdo Fraser Conservative

I am grateful to the minister for his detailed response. He rather argued against himself, because he accepted and, I think, understood the point in law that I made about inhibitions being ineffective after the date of conclusion of missives, but he did not justify why the keeper’s practice does not reflect that understanding of Scots law.

Having said that, I welcome the minister’s assurance that he will work with the Law Society of Scotland to try to find a solution to the problems. In drafting the amendment, the Law Society took academic opinion from Professor Robert Rennie, who I am sure the minister will know is an expert on such matters.

In view of the minister’s assurance that he will try to find a way forward, and given that the amendment does not have the Government’s support, I ask to withdraw my amendment.

Amendment 6, by agreement, withdrawn.

Section 111—Land register rules

The Presiding Officer:

Group 2 is on proprietorship section of title sheet: additional information. Amendment 1, in the name of Rhoda Grant, is the only amendment in the group.

Photo of Rhoda Grant Rhoda Grant Labour

In speaking to my amendment, I make it clear that I believe that all land ownership in Scotland should be open and transparent. Knowledge of land ownership and beneficial ownership should be in the public domain.

I heard with interest what the Government said about my stage 2 amendments on the issue. The Government did not agree with those amendments because it was concerned about bureaucracy and increased staffing and cost requirements. Rather than amend the bill in the way that I previously proposed, I now seek to amend it in a practical way that I hope would deal with the problems that the lack of transparency causes.

Land in Scotland can be owned by offshore companies or trusts. That in itself does not cause a problem, unless such a landowner acts irresponsibly and refuses to enter into discussion with tenants and crofters. I have dealt with cases in which crofters and tenants wished to develop projects that would lead to jobs and an economic boost in their areas, but such projects fell because permission could not be obtained from landowners.

My amendment 1 would allow the Government to make regulations that would permit tenants and crofters to discover the true identity of landowners. The amendment is narrowly drawn, as not all landowners would be required to provide the information that is referred to.

If a company were publicly floated, it would be impossible to identify every shareholder. However, the names of the organisation’s decision makers would be publicly available and the company would be required to hold an annual general meeting. Those are mechanisms that a tenant could use to make contact. It would be allowable and desirable not to require such companies to give the information mentioned in the amendment.

The beneficial owners that I wish to be identified are those who abuse their position and hide behind offshore companies. The amendment is so narrowly drawn that it does not include all offshore companies and the like; it would cover only those in relation to which someone with an interest, such as a tenant, had applied to the keeper for information.

Amendment 1 is a simple amendment that would solve the problem, although it is a long way short of the amendment that I would have wished to lodge.

I move amendment 1.

Photo of Roderick Campbell Roderick Campbell Scottish National Party

I refer to my registered interest as a member of the Faculty of Advocates.

I have the disadvantage of not being a member of the Economy, Energy and Tourism Committee and not having heard the evidence, but I thought that the bill’s primary aim related to registering title and completing the existing land register. It is, of course, about title to land, not who might have a beneficial or financial interest, which is a much wider issue.

Amendment 1 seeks to amend section 111. I accept that the minister directed members to that section at stage 2, which might be considered a bit of an own goal. I am not convinced that we should tag on to that section something that is a great deal more complicated than Rhoda Grant gives it credit for being.

In the case of a publicly owned company, interests would be likely to change frequently. Foreign companies might have diverse ownership structures, which would raise issues of property taxation and company law that are outwith conveyancing practice. I am not sure what evidence the committee has taken on the issues. Any such regulations may have an impact on the market for land, and proper expert evidence in that respect should be considered.

To my knowledge, there are no such requirements for land registration elsewhere in the United Kingdom, although Andy Wightman made certain critical comments to the committee in that regard.

There may also be unspecified costs on and expense for the keeper. I therefore strongly suggest that much more thought and consideration is required before we agree to such regulations being made, and that provision for them ought not to be part and parcel of the bill at this time. I recommend that we reject amendment 1.

Photo of Patrick Harvie Patrick Harvie Green

The committee took evidence on the issue at stage 1 and considered a number of different options for addressing it at stage 2. Although there is something in what Roderick Campbell says, the recurring theme is that the criticisms of the bill are not so much about what is in it as what is not. The Government has made a policy decision not to address certain wider issues, which is part of the problem that the bill’s critics have with it.

I endorse some of Rhoda Grant’s comments and her amendment, and point out once more that paragraph 219 of the committee’s stage 1 report, which we agreed unanimously, states:

“We consider that the Scottish Government should reflect further on options for ensuring that the land registration system reduces the scope for tax evasion, tax avoidance and the use of tax havens, and that the Government should explain prior to Stage 2 what additional provisions can be included, whether in the Bill or otherwise, to achieve this objective.”

I am not sure that the Government has properly considered those options, and I am concerned that it seems to continue to consider the use of tax havens in particular as unproblematic and as something that it has no responsibility to address. I accept that we cannot control the tax system and define what tax havens are, but we can use other means to create barriers to the exploitation of those immoral loopholes, and I regret that we are not taking the opportunity to do so in the bill.

Photo of Kenneth Macintosh Kenneth Macintosh Labour

I support amendment 1 in the name of my colleague Rhoda Grant, and echo the sentiments that Patrick Harvie expressed. There is no point in pretending that the bill has created widespread excitement among the general public, but the issue of beneficial ownership of land and the concerns about greater transparency around who owns land and property in Scotland have engaged slightly wider interest.

It is clear from the committee’s deliberations and findings in its stage 1 report that there was a lot of sympathy among committee members for the need for further measures to promote the accessibility and transparency of the register. I understand why the committee could not accept Andy Wightman’s suggestions at stage 2, but I believe that Rhoda Grant has come up with an alternative and fairly tightly drawn amendment that would provide further information on proprietors, which I hope the Scottish Government is minded to accept.

Photo of Rob Gibson Rob Gibson Scottish National Party

Amendment 1 aims to reveal the beneficial owners of land, which is a laudable aim if unforeseen consequences are avoided, and if it adds to the effective work of the keeper of the register in carrying out the duties that the bill delivers to him, at an acceptable cost to the country.

Members will be aware of the difficulties in the area of farming payments. The European Union has precluded ministers from revealing the names of individual recipients; only companies can be revealed. There is therefore a problem with revealing who gets such money.

We might want to address that question in another way, and members on all sides of the chamber might wish changes to be made in that regard. That is a fact. However, amendment 1 is more of the heart than the head. The case has not been made for the proposals—indeed, section 111(1) of the bill allows Scottish ministers to make specific land register rules. For example, section 111(1)(e) states that rules can be made

“requiring the Keeper to enter in the title sheet record such information as may be specified in the rules or authorising or requiring the Keeper to enter in that record such rights or obligations as may be so specified”.

Amendment 1 is therefore not necessary. I encourage Rhoda Grant to join us in deciding what the aims of land reform should be, rather than making imperfect amendments to a limited land registration bill that relate to beneficial ownership.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I thank members for their contributions to this debate on an issue that was debated at great length during stage 2.

Rhoda Grant’s amendment 1 is similar to amendments that she lodged at stage 2, which the committee rejected. I understand the sentiments behind amendment 1, but it is as unworkable and undesirable as I suggested that her stage 2 amendments were. I will say why that is the case.

The land register is, of course, open and transparent and shows who owns land in Scotland, as does the register of sasines, albeit not in the same modernised, map-based form. The land register is for registering titles. It allows for the creation of real rights in land and publicises key information that allows the conveyancing process to operate. I reminded myself this morning that a body no less august than the United Nations commended the importance of countries having a land register for economic development purposes. Such a register is important so that trade can be conducted and securities over land can be created. I am sure that members will recall that that is stated in the bill’s policy memorandum. The purpose of the land register is not to allow every piece of information relating to an area of land or its owner to be public knowledge. Its primary purpose is to allow trade to be conducted, property rights to be acquired and economic development to be pursued.

I think that amendment 1 is intended to allow certain as yet unspecified extra information to be entered on a title sheet at the request of a third party with no interest at all in the land, but it does not specify in any way whatsoever what that information would be. As Rob Gibson correctly pointed out, section 111(1)(e) already provides for the keeper to require information to be provided on the title sheet.

The result of the amendment would be a disincentive to people buying and selling land in Scotland, and it could add quite considerable costs for people who use the land register. In other words, it would put up the costs of buying or selling property in Scotland. I respectfully submit that that is the very last thing that we would wish to do at a time when it is very difficult for first-time buyers to get into the property market.

During the previous stages of the bill, we debated the importance of the completion of the land register. In a later speech, I will outline the significant progress that we will make towards that end as a result of the bill. I mention that because, if the keeper were required to do all the extra work of an unspecified nature to enter on the title sheet details of the shareholdings of every property owned in Scotland and to keep track of that—I presume that that would be on a daily basis, as shareholdings are transacted on a daily basis—no matter how that was dealt with, there would be an additional burden. That burden would be imposed on the keeper’s staff at a time when the Parliament will, I hope, support the principle that we want the keeper to extend the land register to cover as many properties in Scotland as possible and to focus the resources of their excellent staff on that task rather than on unspecified tasks that would confer very little, if any, real benefit.

I understand and respect members’ sentiments and confirm that we looked carefully at options that were theoretically available to us. However, for the reasons that I have given, I cannot support amendment 1, and I respectfully ask Rhoda Grant to seek to withdraw it.

Photo of Rhoda Grant Rhoda Grant Labour

I wind up with a degree of concern because my amendment has been misrepresented. The minister said that it would lead to higher costs. It would not, because it is narrowly drawn and it leaves many powers to the minister to use in coming forward with subordinate legislation on the practicalities of how the proposal would work.

Unlike the provision in section 111, which the minister says does the same thing, the amendment is not blanket legislation. It would require certain companies to give information at the request of certain interested parties. Those interested parties could be Her Majesty’s Revenue and Customs, in the case of tax evasion, or they could be tenants, crofters or neighbours. The provision could be so narrowly drawn that there would be perhaps one or two occurrences of its ever being used. It would not create a new bureaucracy or impose additional costs. Indeed, if HMRC made a request, it might save the public purse a huge amount of money.

Another misconception is that there would be a need to list the names and addresses of all shareholders. That would not be the case. When such information was publicly known and available, that type of company could be excluded. The amendment would not lead to huge bureaucracy and it would not be expensive.

Rob Gibson said that amendment 1 was more about heart than head. As I said, if this was about heart I would be taking forward a totally different amendment. This is about head—it is about having a practical solution to a difficult problem that occurs every day. We need to ensure that loopholes are closed and that is what amendment 1 does.

The amendment does not create a bureaucracy, unlike the provision in section 111. The minister argues that that provision does the same thing as amendment 1—I argue that it does not. The amendment says that ministers “must make regulations”; section 111 allows ministers to make regulations at their own behest if they so wish. Section 111 also ensures that every property will be subject to those regulations and that anyone can request the information. The amendment narrows that down to cover only certain types of property ownership and certain types of interested people.

I press amendment 1.

Photo of John Scott John Scott Conservative

The question is, that amendment 1 be agreed to. Are we all agreed?

Members: No.

The Deputy Presiding Officer:

There will be a division. As this is the first division at stage 3, I suspend the meeting for five minutes.

10:07 Meeting suspended.

10:12 On resuming—

We now proceed with the division on amendment 1.

This is a 30-second division, and members should cast their votes now. However, before they do, they should make sure that their cards are fully inserted into their consoles; we have noted that some are not fully pressed in.

Division number 1 Land Registration etc (Scotland) Bill: Stage 3

The Deputy Presiding Officer:

The result of the division is: For 37, No 73, Abstentions 0.

Amendment 1 disagreed to.

Section 119—Commencement

Amendment 2, in the name of the minister, is grouped with amendments 3 to 5.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

These minor and technical amendments are all related to commencement. Amendments 2 and 5 form a pair and seek to split the commencement of section 110’s subsections (1) and (2). Currently, all of section 110 will come into force on the day after royal assent. That is usual practice for definitions of the type that is contained in section 110(1), and amendment 2 seeks to ensure that that subsection can be commenced on that day.

However, as section 110(2) is not merely a definition, but a gloss for construing references to “registering” elsewhere on the statute book, it might have an effect if commenced on the day after royal assent. Accordingly, amendment 5 seeks to ensures that section 110(2) comes into force on the designated day along with the bill’s other main provisions, in particular sections 30 and 31 on registration.

Amendments 3 and 4 seek to ensure that certain delegated powers in the bill can be commenced by order so as to be exercised before the bill’s main provisions come into force on the designated day. It is important that ministers have that ability to ensure that the necessary implementation work can be undertaken ahead of the main parts of the bill coming into force.

I move amendment 2.

Amendment 2 agreed to.

Amendments 3 to 5 moved—[Fergus Ewing]—and agreed to.

Schedule 5—Minor and consequential modifications

The Deputy Presiding Officer:

We move to group 4. Amendment 7, in the name of Murdo Fraser, is the only amendment in the group.

Photo of Murdo Fraser Murdo Fraser Conservative

Amendment 7 is another that has originated with the Law Society of Scotland and, like amendment 6, it seeks to clarify the law to deal with a situation in which the keeper’s policy causes purchasers undue problems. It seeks to provide clarification that section 26 of the Conveyancing and Feudal Reform (Scotland) Act 1970 will operate to remove from the title sheet any remaining prior ranking or pari passu securities following a sale of repossession, even if the calling-up procedure did not comply with the interpretation of the statutory requirements in the Supreme Court decision on RBS v Wilson.

In Scots property law, the established position has always been that where a standard security is called up and the property is repossessed, then subsequently sold by the first security holder, subsequent or pari passu securities are treated as having been automatically discharged.

However, the keeper’s current policy when processing applications for registration of a dealing that is affected by the decision in RBS v Wilson is not to remove from the relevant title sheet any additional securities on the property that rank as pari passu with, or postponed to, the security that has been called up, unless they have been formally discharged.

It is also the keeper’s policy to expressly exclude indemnity in respect of loss arising from rectification to delete such securities, or from the subjects being found not have been disburdened of them under section 26 of the 1970 act.

The consequence of that policy is that land and charge certificates that are issued to the purchasers in such circumstances indicate that the title is still subject to pari passu or postponed securities granted by the previous owner, and that such securities rank ahead of any new security that is granted by the purchaser, for example for a mortgage. That situation causes serious difficulty to purchasers, lenders and solicitors.

There is academic opinion that states that the keeper’s policy is incorrect, but if amendment 7 were to be agreed to, it would put the matter beyond doubt and would allow the keeper to change policy to ensure that the purchasers of repossessed properties are not put at a disadvantage.

Amendment 7 has the support not only of the Law Society of Scotland but of the Council of Mortgage Lenders, which is keen that the issue be resolved. I also record that if a property that has been repossessed is sold, any excess sum that is left over once the first security holder has been paid will be accounted for by the second, or subsequent, security holder. As a result of that, no individual or institution would suffer any loss.

Amendment 7 will represent a real benefit to many purchasers who are caught in this unfortunate situation as a result of the RBS v Wilson judgment, which suggests that the keeper’s practice is unfortunately out of step with general understanding of Scotland’s property law.

I have pleasure in moving amendment 7.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I fully understand the difficulty that has arisen for conveyancers, lenders and home owners as a result of the clarification of the procedures in relation to power of sale by the Supreme Court in the case of RBS v Wilson.

However, I cannot see quite how amendment 7 would help to resolve the mischief that is at the root of the issue. Conveyancers and lenders are now fully aware of the decision in RBS v Wilson and have, I understand, amended their procedures accordingly; practitioners are to be praised for their swift action. As a result, amendment 7 is unnecessary because proper procedures are now clear and are being followed.

There remains a possible difficulty for a relatively small number of cases that were completed or were on-going at the time of RBS v Wilson. Technically, the change that amendment 7 proposes may not be a retrospective change to the law, but it is not clear how it would work. Crucially, it could remove the rights of those who might be adversely affected by the subsequent sale to seek redress in line with their rights as declared by the Supreme Court.

If amendment 7 is intended merely to clarify the law, it appears to the Government that it would go much further than is necessary. The difficulty in the existing cases is limited to the failure to issue a calling-up notice. Amendment 7 would operate on any and all failures by the creditor to follow the law on calling-up procedure. That would be a quite extraordinary result, and the potential for unintended consequences is considerable. In the Home Owner and Debtor Protection (Scotland) Act 2010, Parliament passed legislation that is designed to offer protection to home owners, which is absolutely crucial in the current climate. Therefore, I cannot support an amendment that risks cutting across such protection.

Photo of Murdo Fraser Murdo Fraser Conservative

The minister fairly identified that there is a problem that is a result of the keeper’s interpretation of the consequences of the RBS v Wilson case, which I believe affects the purchasers of several hundred properties. Can the minister assure me that he and his officials will work with the Law Society of Scotland and with the keeper’s office to find a resolution to the difficulties that have been presented to that group of individuals?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Yes—I will be pleased to do that. Murdo Fraser has quite properly brought to Parliament a matter of particular significance and importance to a number of people in Scotland who may be affected by the RBS v Wilson case. I do not think that a legislative solution is appropriate, but I will take up Mr Fraser’s suggestion. In discussions with my officials yesterday evening, I was minded to act in such a way. I have instructed my officials to work closely and promptly with the Law Society and others, including the Council of Mortgage of Lenders, to see what assistance, if any, the Scottish Government can provide to progress the relatively small number of cases that are affected. I am happy to provide that assurance to Mr Fraser and Parliament.

I cannot support amendment 7 for the reasons that I have outlined and which I hope Murdo Fraser will accept, so I respectfully ask him to withdraw it.

Photo of Murdo Fraser Murdo Fraser Conservative

I very much welcome the assurance that the minister has given me. The purpose of amendment 7 was to resolve a difficulty that has arisen because of the keeper’s practice. The minister has fairly indicated that he and his officials will work with the keeper and the Law Society to find an alternative way of resolving the difficulty. In view of that, I do not intend to press amendment 7.

Amendment 7, by agreement, withdrawn.

The Deputy Presiding Officer:

That ends consideration of amendments.