Compensation

This guidance looks at situations in which parties may be entitled to claim compensation.

Inclusion in the land register provides a state-backed guarantee of title. If you suffer loss as a result of certain events, you may be entitled to make a claim for compensation from us.

There are five distinct heads of claim under which you may be able to receive compensation from us:

  • breach of warranty
  • rectification
  • realignment of rights
  • loss suffered under section 106 of the 2012 Act
  • claims as result of inaccuracies in titles registered under the 1979 Act

View our compensation procedures (PDF, 371KB).

Background

The Land Registration etc. (Scotland) Act 2012 (“the Act”) provides for a state guarantee of title. A person who suffers loss as a result of certain events is entitled to make a claim for compensation against the Keeper in respect of that loss.

The Act provides five distinct heads of claim under which a person who has suffered loss can receive compensation from the Keeper:

Breach of warranty

Under the Act, the Keeper has an obligation to pay compensation for a loss incurred as result of a breach of warranty. The liability to pay compensation only arises when an inaccuracy is rectified. A person making claim for compensation as a result of a breach of warranty is not required to exhaust other remedies before making a claim to the Keeper.

View further guidance on warranty.

Warranty is granted to the applicant for registration. However the benefit of warranty can also extend to certain successors of an applicant such as the executor of a registered proprietor.  Therefore a claim under warranty need not only be made by the applicant.

As warranty can be extended, limited or excluded depending on the circumstances of the application for registration, any liability for the payment of compensation will be subject to the level of warranty initially granted. Where warranty has been excluded on the point rectified there will be no compensation payable by the Keeper as result of the rectification. Where compensation is payable, the loss to be compensated will be the value, at the date of rectification, of the right lost.

There are limitations to the Keeper's liability to pay compensation for breach of warranty, for example:

  • If the inaccuracy is consequent upon an error in the cadastral map and that error was made in reasonable reliance on the base map;
  • If the existence of the inaccuracy was, or should have been, known by the applicant or person acting as solicitor for the applicant;
  • If the rectification arose from a breach of the statutory duty of care (section 111) by the applicant or their solicitor.

Rectification

Where the register is rectified the person securing the rectification can receive compensation for certain losses and expenses, such as reasonable extra-judicial legal expenses.

There are limitations to the Keeper's obligation to pay compensation for rectification, including where:

  • the inaccuracy was caused by an off-register event, such as the extinction of a servitude after negative prescription.
  • the inaccuracy was a result of an error in the cadastral map resultant from the Keeper’s reasonable reliance on the base map (being the Ordnance Survey map).
  • the register was rectified to remove a provisional entry for a prescriptive claimant whose title had been successfully challenged.
  • the inaccuracy was caused by an act or omission on the part of the claimant.

View further guidance on inaccuracy and rectification.

Realignment

In situations where realignment of rights has occurred, as provided for in Part 9 of the Act, the Keeper must pay compensation to the party who has been deprived of the right or to the proprietor of a property burdened by a servitude as a consequence of realignment.

Rectification and realignment - further provisions

The compensation payable for losses due to the rectification of the register or the operation of the realignment of rights provisions, includes reimbursement of reasonable legal expenses incurred by a person (other than litigation expenses which would be dealt with by the court) and compensation for other consequential loss. Proof that a claimant has paid for extra-judicial legal expenses and the date of that payment, as well as evidence of the date that any consequential loss was actually sustained will be required in order to calculate any payments.

Payment of compensation by the Keeper under any of the above provisions does not extinguish any rights which the claimant may have against another person in respect of the loss compensated. However, a condition of the payment is that the claimant assigns these rights to the Keeper. The claimant must therefore sign the Keeper's pro forma assignation before receiving a payment of compensation.

Interest payable on claims

Interest is payable on the compensation due as a result of breach of warranty, rectification or realignment of rights and continues to run until such time as the compensation is paid. The rate of interest is set at 1% above the Bank of England base rate by The Land Register of Scotland (Rate of Interest on Compensation) Regulations 2014. In terms of the date from which the interest starts to accrue, there are three key dates to bear in mind:

  1. Where the sum is for a loss incurred as a result of a breach of the Keeper's warranty or as a result of rectification or realignment, interest runs from the date the inaccuracy giving rise to the claim was rectified or realigned.
  2. Where the sum is a reimbursement of extra-judicial legal expenses, interest runs from the date on which the claimant paid the sum in question (rather than when the sum is billed).
  3. Where the compensation is for a consequential loss, interest runs from the date that loss was sustained.

Compensation in respect of extracts, information and lost documents

The Keeper is obliged to pay compensation for any loss suffered as a result of a document lodged with the Keeper being lost, damaged or destroyed while in the Keeper's care. Compensation is also payable by the Keeper for providing information as to the contents of the register under section 107 that is incorrect and for the issuing of an extract or certified copy of part of a title sheet, cadastral map etc. that is not in fact a true extract or copy.

Unsuccessful claims

There is no equivalent in the Act to section 13(1) of the Land Registration (Scotland) Act 1979 (the '1979 Act') which allowed a person to seek reimbursement from the Keeper of any expenditure reasonably and properly incurred in pursuing a claim whether successful or not. In their report on Land Registration, the Scottish Law Commission was of the opinion that the Keeper should not be liable for the payment of expenses to those who make unsuccessful claims.

Non-patrimonial losses

The Keeper has no liability to pay compensation for non-patrimonial losses, such as emotional suffering. Likewise, no compensation is payable if the claimant's loss could have been avoided by the applicant, owner or claimant taking certain measures it would have been reasonable to have taken or if the connection between the loss and the inaccuracy is too remote.

The effect of caveat

Caveats act as a warning of ongoing litigation on a title but do not prevent parties from transacting with the land that is subject to the litigation. The existence of a caveat on a title sheet may have the effect of reducing the level of compensation payable to a claimant. If an application is received to register a deed that affects a title sheet that is subject to a caveat, this may lead to the warranty that is given to the applicant being limited or excluded. If the register was to be rectified as result of the court action to which the caveat related, the exclusion or limitation of warranty would have an effect on the compensation that would be payable. The caveat appearing on the title sheet will alert third parties to a court action that may have bearing on the accuracy of the register and allow them to consider the consequences that this will have for any deed registered while the caveat is extant.

1979 Act inaccuracies

Claims for compensation as result of an inaccuracy in a title registered under the 1979 Act are provided for in the transitional provisions in schedule 4 of the Act. Under the 1979 Act where the register is inaccurate the register cannot always be rectified, this is particularly true where there is a proprietor in possession. The rules for rectification for a 1979 Act title are contained in section 9 of that Act and these rules will continue to be applied to appropriate titles under the transitional provisions to determine when the register is inaccurate and therefore can be rectified. This will determine to whom compensation may be payable.

If immediately before the designated day there was an inaccuracy which the Keeper had power to rectify, under the rectification provisions of the 1979 Act, this inaccuracy becomes an actual inaccuracy and can still be rectified after commencement of the 2012 Act. Where the register is rectified and a party suffers loss, compensation will be payable as if warranty had been granted to the applicant. Any such compensation is not payable, or is limited, in line with the indemnity provisions of the 1979 Act, for example under the statutory exclusions or where the loss is attributable to carelessness or fraudulent acts by the claimant.

If immediately before the designated day there was an inaccuracy that could not be rectified under the 1979 Act provisions, this ceases to be an inaccuracy on designated day. In this case, if a party has suffered loss attributable to a right lost they can receive compensation. The claim for compensation that is payable where a person has suffered loss will be payable in the same terms as if a right had been lost as result of the realignment of rights provisions in the 2012 Act.

Making a claim

View our compensation procedures.

Claims for compensation should be directed to:

The Indemnity Manager
Legal Services
Floor 6
Meadowbank House
153 London Road
Edinburgh
EH7 8AU

Further contact information can be found on our website.

Footnotes

  1. SSI 2014 No.194.