Warranty

Introduction

A state guarantee of title exists under the Land Registration etc. (Scotland) Act 2012 (“the Act”).  Upon registering an application the Keeper will warrant to the applicant that the title sheet is accurate.  Warranty is breached if it transpires that the title sheet is inaccurate and the Keeper may be liable to pay compensation to the applicant where the inaccuracy is rectified.  Sections 73 to 79 of the Act contain the warranty provisions.

The Act contains a number of provisions providing compensation for a person who had suffered loss the principal one being warranty in Part 7 of the Act.

See separate guidance for details on other compensation provisions.

Key elements

The default position as set out in section 73(1) is that unless the Keeper decides to limit or exclude warranty, full warranty is given upon acceptance of the application for registration, in other words when registration is complete. This means that where the title sheet is silent as to warranty, full warranty has been given.

Warranty is only given to the applicant or, as the case may be, the owner of the plot of land being registered (see below for warranty under section 74). This means a fresh warranty decision is made upon each application for registration. Warranty does not extend to third parties relying on the register or persons, other than the applicant, who may suffer loss where the title sheet is rectified. However, in terms of section 73(4) where a deed is registered relating to a title condition a person benefiting from the deed would also receive the benefit of warranty.

The Keeper only warrants that the title sheet is accurate at the time the application is registered. The Keeper does not warrant against a title sheet becoming inaccurate as a result of an off-register event that takes place after the date warranty is given. For example, a claim under the Keeper's warranty could not be made where a title sheet becomes inaccurate because a servitude right included in the title sheet has subsequently been extinguished by long negative prescription.

Warranty is breached where it transpires that the title sheet is inaccurate. An inaccuracy is defined in section 65 of the Act and does not include minor typographical errors. The applicant can claim compensation for loss incurred as a result of the breach. However, the Keeper is only liable to pay compensation to the applicant where the inaccuracy is rectified.

Statutory exclusions

Section 73(2) sets out a list of matters that the Keeper's warranty will not ordinarily cover. For example, the Keeper does not warrant that a right to mines and minerals has by registration been acquired by the applicant, nor does the Keeper warrant that alluvion has not had an effect on a boundary. The Keeper will not ordinarily have to consider warranty in respect of those specified matters, and since such exclusions are statutory nothing further will appear on the title sheet.

In addition to the statutory exceptions, as the benefit of warranty extends to persons to whom warrandice is given, should there be an over-registration by the Keeper which results in the title sheet showing a greater extent than the registered deed gave effect to, the Keeper does not warrant that this over-registration is accurate. This means that where the Keeper rectifies the error this does not result in a breach of warranty as no warranty can be given in respect of land outwith the extent described in the deed. Unlike the situation under the 1979 Act, where the Keeper's "Midas Touch" could come into effect, the registered proprietor would not benefit from such an administrative error.

Extension

Whilst the default position is that full warranty is given when the Keeper completes registration, warranty can be extended under section 75(1)(a) where the Keeper is satisfied that it is appropriate to do so. Default warranty under section 73(1) is the highest level available, and an extension of warranty will not exceed this. However, the applicant can ask the Keeper to extend warranty to cover any of the matters ordinarily excluded under section 73(2). Where an extension of warranty is granted the Keeper must, under section 75(3), enter a statement describing this in the title sheet.

The applicant can request an extension of warranty as part of an application for registration, and there is a specific question on the Application for Registration form for this purpose. The applicant must also submit sufficient evidence in support of their request. For example, the applicant may seek to have their warranty extended to cover the right to mines and minerals, in which case they would have to provide the Keeper with sufficient evidence of possession.

The evidence required in respect of a request to extend warranty will vary depending on the nature of the extension sought, and further guidance on this will be issued separately. However, it is important to note that since the application must be acceptable for registration before an extension of warranty can be considered, the Keeper may requisition additional evidence under section 34(1)(b). Also, the nature of the evidence required to extend warranty in any given case will vary depending on the circumstances and may be complex; therefore, a strict application of the one-shot rule is not appropriate.

Limitation or exclusion

In terms of section 75(1)(b) the Keeper can also give less extensive warranty than that available under section 73(1). Warranty can be limited or it can be excluded entirely where the Keeper is not satisfied as to some aspect of the application. However it is important to note the effect of the one-shot rule in this regard, which is discussed below.

There is no duty on the Keeper to notify the applicant where warranty is being limited or excluded. The only obligation the Keeper is under in this regard is to enter a statement describing the exclusion in the title sheet under section 75(3). However, where warranty has been limited or excluded the Keeper will confirm this in writing when the documentation submitted with the application is returned to the applicant.

The wording of the statements required under section 75(3) will vary depending on the nature of the extension, limitation or exclusion but will generally be in the following terms:

"Warranty is extended in terms of section 75(1)(a) of the Land Registration etc. (Scotland) Act 2012 in relation to XXX or in terms that XXX."

"Warranty is excluded in terms of section 75(1)(b) of the Land Registration etc. (Scotland) Act 2012 in relation to XXX or in terms that XXX."

"Warranty is limited in terms of section 75(1)(b) of the Land Registration etc. (Scotland) Act 2012 in relation to XXX or in terms that XXX."

"As regards XXX on the cadastral map warranty is excluded in terms of section 75(1)(b) of the Land Registration etc. (Scotland) Act 2012 in relation to XXX."

Warranty and the one-shot rule

Under the 1979 Act, where there was an issue with an application for registration, the Keeper could in many cases make a requisition in order to remedy it. For example, if something was omitted from the application, or where the deed to be registered was defective in some way, the Keeper could put the case into standover whilst requesting the omitted item or sending the deed back for amendment. Should the applicant fail to comply with the requisition this could lead to rejection, however the Keeper could often proceed to register the application but with an exclusion from indemnity.

In terms of the 2012 Act this approach is no longer possible. In order for an application for registration to be accepted under the 2012 Act, the general application conditions and the conditions of registration must be met as at the date of application. This means the Keeper can no longer return defective deeds for amendment while the applications are pending registration, and all material information must be included at the point of receipt. In terms of section 21(3) where there is such an omission or defect the Keeper must reject the application, and this is referred to as the "one-shot rule".

View separate guidance on the one-shot rule.

The one-shot rule will mean a marked reduction in instances where a requisition is possible (examples are discussed in separate guidance), however it will also have an effect on warranty. If an application fails to meet the application or registration conditions it must be rejected, therefore the Keeper can only consider limiting or excluding warranty where the application is acceptable for registration purpose but where some element of doubt exists.

The effect of the one-shot rule is that the Keeper's power to exclude or limit warranty cannot be used as a mechanism to enable registration of defective applications, since they must be rejected. In this way warranty and requisitions are connected. It is likely that limitations or exclusions of warranty will occur where the application meets the relevant conditions but where the applicant has failed to comply with a requisition.

Limitation or exclusion examples

The Keeper's warranty decision in any given case will depend on the particular circumstances of that application. However, the Keeper may consider limiting or excluding warranty in particular circumstances, such as those in the following, non-exhaustive, list:

• Where the applicant has failed to comply with a requisition under section 34(1)(b);
• Where there is an existing caveat on the title sheet;
• Where a statement under section 30(5) is added to any name or designation entered in the plot title sheet following an automatic plot registration or a Keeper induced registration. This section can be used where, for instance, the name of the proprietor cannot be determined with any certainty;
• Where the Keeper becomes aware of a competing title in the Register of Sasines whilst completing registration of an unregistered plot;
• Where the applicant has indicated on the application form that their examination of title has been limited or restricted in some way. For instance, where automatic plot registration has taken place but the applicant has been unable to obtain the titles or unrecorded links in relation to the landlord's plot. In such cases warranty may be granted on the lease title sheet but excluded on the plot title sheet;
• Where there is an existing exclusion of indemnity on the title sheet of continuing relevance;
• Where on the basis of additional information provided on the application form it is appropriate to do so.

Section 74

Warranty is also available under section 74(1) for registrations carried out by virtue of sections 25 and 29. Registration under section 25 occurs where an application to register a certain deed, for example a lease, sublease or assignation of unregistered lease, automatically triggers registration of the plot of land to which the deed relates ("automatic plot registration"). Section 29 provides the Keeper with the power to register unregistered plots of land without an application for registration or the consent of the proprietor.

Since there is no applicant in these types of registration, warranty is given to the owner of the plot of land. The warranty given to the owner under section 74(1) is essentially the same as that available to an applicant under section 73(1). In terms of section 74(1) the Keeper warrants that the plot title sheet is accurate in what it shows, and is not inaccurate in omitting any encumbrances.

It is important to note that where there is, for example, an existing heritable security affecting the plot of land the Keeper will bring this forward from the Register of Sasines. However, the heritable creditor will not receive the benefit of the Keeper's warranty since in terms of section 74, warranty is given only to the owner who has had their plot registered. In order to make this clear to anyone viewing the plot title sheet a note will be added which states that registration of the plot was completed under section 25 or 29.

Section 74(1) is subject to the same statutory exclusions as set out in section 73(2). The Keeper can also extend, limit or exclude the warranty available under section 74 as appropriate.

Variation of warranty

The level of warranty originally granted under section 73 or 74 can be varied by the Keeper outwith the context of an application for registration by virtue of section 76(2). In terms of section 76(3) the Keeper may not give a less extensive warranty than that originally given, therefore any variation is essentially an upgrade. It is likely that in most cases a variation will be requested because the Keeper has limited or excluded warranty when registering the original application for registration.

Where, for example, a piece of additional evidence is requisitioned as part of the registration process but is not produced, the Keeper may be able to proceed to register with an exclusion of warranty. In order to upgrade that warranty to full warranty the applicant can request a variation of warranty and provide the Keeper with the necessary evidence.

A specific Application to Vary Warranty Form is prescribed under regulation 16 of the current Land Register Rules, and this application will attract a £80 fee. If the evidence submitted with such an application is not sufficient for the Keeper to vary the warranty originally granted, the Keeper will advise the applicant by letter why the request has been refused. The applicant would then be required to apply again with the appropriate evidence. There will be no standover facility for such applications.

Caveats

In terms of section 75(2) when considering whether or not to extend, limit or exclude warranty the Keeper must have regard to any relevant caveat placed on the title sheet by virtue of section 67. A caveat is placed on the title sheet as a warning to anyone viewing it that a court action has been raised in respect of that registered title.

View further guidance on caveats.

Placing the caveat on the title sheet will not affect the warranty already given, since warranty is tied to an earlier date, i.e. the last date of registration. However, when registering any subsequent application against that title sheet the Keeper must have regard to the caveat when considering the warranty to be given for that application. Whether or not the Keeper excludes or limits warranty will depend on the nature of the caveat.

Prescriptive claimants

In terms of section 73(5) the Keeper does not warrant that the title sheet is accurate where the application for registration is accepted under the prescriptive claimant provisions at sections 43 to 45. These provisions allow the Keeper to treat dispositions a non domino as valid for the purposes of acceptance. When such an application is registered the entry will be marked as provisional until positive prescription has operated to put the title beyond challenge. No warranty is given by the Keeper when the application is registered, however when the relevant entry in the title sheet ceases to be provisional the Keeper may by virtue of section 75(4) give such warranty as she considers appropriate.

View separate guidance on prescriptive claimants.

Transitional arrangements

Warranty is the new guarantee for all registrations after the designated day but indemnity will continue for 1979 Act registrations. Some title sheets will have the benefit of both warranty and indemnity for a time, until there is a transfer of the whole registered plot.

For example, after the designated day an application to register a standard security is accepted over an existing 1979 Act title sheet. The Keeper will give warranty to the heritable creditor as the applicant in terms of section 73(1). The registered proprietor will not receive the benefit of the Keeper's warranty, since they are not the applicant, however they will continue to have the benefit of the Keeper's indemnity as it existed immediately prior to the designated day.

Schedule 4 of the Act contains specific provisions relating to the transition between the 1979 Act and 2012 Act schemes of registration.

View separate guidance on transitional provisions.