What is the Law in your Life?

5 things you need to know about Irritancy in a Lease:

1.   An irritancy or forfeiture clause is a contractual termination clause whereby the lease will come to an end if certain prescribed events occur.

2.   The landlord's ability to terminate a lease is now controlled by statute in the event of non- payment if rent and breach of obligations assumed by the tenant.

3.   Statute the now provides for periods of notice to be served by the landlord under threat of irritancy. Care should be taken with the service of such notices.

4.   If a head lease is irritated, any derivative sub-leases also fall unless protection for sub- tenants has been pre-negotiated.

5.   Secured creditors or insolvency practitioners are not protected unless there is express provision to this effect in the lease.

A Register of Home Reports

The Home Report came about as a result of the findings of the Housing Improvement Task Force which was charged with investigating various matters with a view to seeking to identify ways in which Scotland’s housing stock could be improved. It was formed in 2001 and its report can be found at www.scotland.gov.uk/Resource/Doc/158826/0043128.pdf 

It is fair to say that the Home Report has not been without its critics since being introduced on 1 December 2008 with some criticisms being focused on cost, shelf-life and its alleged negative effect on the house buying/selling process. The timing of the introduction of the Home Report was very unfortunate in terms of coinciding with impact of the economic recession.  This coloured many people’s minds as to the fact that they were not a good idea. The Government has recently undertaken a review of the Home Report with a view to assessing its efficacy. Although the findings of the review are not yet public, it is suggested that it is unlikely that the Home Report will be abolished. Although there have been issues surrounding its effectiveness generally, it has had a positive  effect on the house buying/selling process in that prospective purchasers now have much better information about a property which they are interested in buying. That has to be a good thing. A fact that is often overlooked is that prior to the introduction of the Home Report over 90% of prospective purchasers relied on a Mortgage Valuation – the cheapest of the three survey options available in the market. The Home Report has also had an effect on the fixing of more realistic asking prices given the inclusion of a valuation in the Report. Only after a further review in say 10 years time will it be possible to carry out  a full objective assessment as to whether the Home Report has had a positive effect on improving the quality of Scotland’s housing stock. At present, it is questionable if there has been any material effect and, even if there has been, there is no effective means of measuring that.

One of the reasons for this is that Home Reports are not collated and held anywhere. Unfortunately, the then Government did not make it a requirement that Home Reports be held in a central database or register – unlike the position in England and Wales at the time. Property prices are in the public domain once titles have been registered and there is no reason why the information contained in Home Reports should also not be publicly available.

The Home Report has three constituent parts: the survey; the Property Questionnaire; and the Energy Property Certificate. There is a register of EPCs. This is held by the Energy Savings Trust – https://www.epcregister.com 

Given the absence of a Register of Home Reports, it is unfortunately the case that the system can be abused. A hypothetical example of how this could happen is as follows:

Seller A wishes to sell his flat and a Home Report is instructed. This produced a valuation of £165K but approximately £15K of essential repairs are identified. Seller A pays for the Report and decides to commission a second Report. This Report values the property at £175K with £5K of essential repairs being identified. Still not satisfied, Seller A pays for that Report and instructs a third surveyor. The third surveyor values the flat at £185K with no essential repairs being identified. Seller A pays for the survey and instructs the flat to be marketed at Offers over £180K. As an aside, this potential problem is exaggerated when one bears in mind that the RICS Red Book provides that a difference of up to 10% between surveyors' valuations is acceptable.

Such circumstances may never occur but the fact is that the system can be abused in this way and the loser is the prospective purchaser. In such circumstances, prospective purchasers have no way of knowing about the previous Home Reports and will generally proceed on the basis of Home Report 3 without instructing their own private survey over the property. So, for an outlay of less than £2K, it is possible that Seller A may secure a higher price than might otherwise be the case and the property will not have had essential repairs undertaken to it. That would be the case even if the purchaser’s solicitor followed the growing practice of inserting a clause in the Missives that the seller confirms that they have only instructed one Home Report over the property. This is all well and good, but without a Register of Home Reports how would a purchaser find out the true position without calling round every surveyor in the area? This potentially makes the clause in the missives of little value.  In what way is that fair? What contribution has been made to the goal of improving the quality of Scotland’s housing stock in such circumstances? The system was arguably fairer when lenders retained a proportion of mortgage funds until repairs identified in their mortgage valuation report had been undertaken to the satisfaction of the surveyor who undertook the survey. At least that way, the repair work was done. Such retentions still occur but are not so common as they once were.

Such unfortunate outcomes could be avoided if there was a Register of Home Reports. This would require it to be compulsory to register Home Reports at the same time as the Report is made available to the instructing party. It would then be registered and the Register would be open to public scrutiny. That way, prospective purchasers and their advisers could quickly ascertain how many Home Reports of the property there had been and when the most recent one was undertaken. This would, by necessity, lead to greater transparency in the housing market.

It is suggested that the creation of a Register would not be a difficult task. Such a Register could be held by the Energy Savings Trust along with EPCs or, indeed, by RICS or some other body. The Home Reports could be linked to properties via their Unique Property Reference Numbers and ultimately linked into the cadastral map maintained by Registers of Scotland. Such a  Register would then be searchable by way of address; name;  UPRN; Address Database; and/or  Title Number. Ideally, the Register of Home Reports would be map-based.

Now this may all seem far-fetched but is it really?

There is a flaw in the present system which it is in the public interest to rectify. It is possible to go further however. This would involve the Home Report Register being part of a National Land and Property Information Database. Such Land Information systems exist in other jurisdictions eg New Zealand and Norway. In Norway, the national land information company, Ambita AS (www.ambita.no) maintain a national database called Infoland (www.infoland.no). Infoland is a searchable database of all relevant information on land and property and over 80% of Norway’s Municipalities subscribe to it with net profits being returned to the Municipalities for them to spend on further improvements in local service provision. Put simply, it works and it works well.

The introduction of a Register of Home Reports gives us an ideal opportunity to establish a Scottish Land Information Service and create a timetable for full integration of all data on Scotland’s land and property. This will deliver benefits for citizens and for the economy as a whole. It will also provide a searchable database to interrogate in order to ascertain movements in valuation and the history of the state of repair of the fabric of the property. This would also allow an assessment of  whether or not the Home Report has delivered on one of its key objectives – that of improving the quality of Scotland’s housing stock.

(c) Stewart Brymer 2014

The provision of legal services in a digital world

In the last 35 years during which I have practised law, I have seen many changes - mostly for the good it has to be said. There has, quite frankly, been a revolution in the way in which legal and other business services can be provided. 

The world of legal service provision has undergone what can possibly be described as a perfect storm. Unfortunately, some solicitors appear to think that they are immune to the wave after wave of change that has affected all aspects of business and private life. Others, however, have embraced change and have adapted their methods of service provision accordingly. No one is saying that everything that is known must be put to one side and be replaced with something new. Far from it. There is definitely a place for solicitors to continue to be viewed as the trusted adviser in the legal process. Good communication is the key however - as it has always been.

The world of legal services is diverse, ranging as it does from the huge international law firms (who just seem to get bigger and bigger) to small local firms. There is a place for most but, increasingly, those firms who occupy the mid-ground are coming under pressure from all sides. Some of these firms have gone down the route of merger as a means of expanding their businesses. In some cases, these mergers have been the consequence of strategic planning and those firms will hopefully reap the benefits of their new structures as they deliver more specialised legal services to existing and potential new clients. Others have embarked on what can only be described as defensive mergers however and their prospects are not so good. It is not always the case that an amalgamation of more people with the same or similar skills leads to a more efficient and better respected legal firm. In such cases, firms generally accumulate more bricks and mortar and more people but do not necessarily increase their specialisation levels. With all due respect to those who wish to go down this route, why would you want to do that? Unfortunately, the result is often a dilution of the brand. The legal-services buying public are much more astute than was the case even 10 years ago and they do not accept that big is necessarily beautiful. On the contrary, they often view large firms as being more likely to charge higher fees and less likely to provide an individual service.

Clients shop around for legal services these days and think nothing of using one firm for one type of work and others for different disciplines. Increasingly, however, they also gravitate towards individuals rather than the firm. Those who manage and promote legal firms would do well to remember the principle of delectus personae. A good large firm, and there are a number who are very successful, tend to be very well managed by people who understand business and who encourage the principle of the business operating as a “large small firm” with the focus being on the client. This is best achieved by individual solicitors being encouraged to communicate well with clients as individuals rather than viewing them as a source of billable hours. In other words, the individual solicitors are recognised for their legal skills (which should be a given) and are given the freedom to make decisions and, if necessary, spend time which would otherwise be billable on building relationships with clients – both existing and potential. That is what we value when we are a consumer of a particular service. Why should the provision of legal services be any different? 

(c) Brymer Legal Limited, 2014

What is the Law in your Life?

5 things you need to know about Alienation under a Lease:

1.   This is an assignation of the tenant's interest in a lease or sub-letting of the leased subjects.

2.   Alienation of part only is generally prohibited.

3.   The lease will invariably provide that there is to be no alienation without the prior written consent of the landlord which consent shall not be unreasonably withheld. This introduces an element of subjectivity to the otherwise subjective discretion of the landlord.

4.   There is no implication of reasonableness in Scots law.

5.   An assignation is only completed when a formal intimation of assignation is served on and acknowledged by or on behalf of the landlord.

What is the Law in Your Life?

5 things you need to know about The Intellectual Property Act 2014:

The Intellectual Property Act 2014 came into force on 1 October. The Act includes various changes to UK legislation – mainly in the areas of patents and designs:

1.   A new legal framework for ratification of the Unified Patent Court Agreement in the UK.

2.   Extension of grounds on which the UK IPO can provide an invalidity opinion on a patent.

3.   It is no longer necessary to put a patent number on a product. All that is now required is a link to a webpage listing the patent(s).

4.   There is a new criminal offence for the deliberate copying of a registered design.

5.   When an unregistered design is commissioned, the commissioner will no longer be the owner of the design unless there is a contract to assign in place.

“Registers of Scotland – the Clue is in the Name.”

A brief comment on the Registers of Scotland - 2012 Act Roadshow

On Tuesday 30 September, I attended the first 2012 Act Roadshows which was held at the Carlton Hotel in Edinburgh run by Registers of Scotland (“RoS”). It is worth saying straight away that the venue, content and speakers were all thoroughly engaging and it is evident that everyone at Registers of Scotland is extremely knowledgeable on the Act and its effects. What’s more is they embrace the questions being asked of them and are happy to provide transparent answers.

There were a few hundred of my fellow professionals in the room with me and this certainly wasn't an event which people were attending just to get the CPD hours.  Given the importance of the topic and the changes which will occur in conveyancing in Scotland, neither should it be.

After a short video presentation, showing key world milestones in the years since the 1979 Act, the key message was delivered by Registers and then, in turn, Ross McKay on behalf of the Law Society.  This message is that the 2012 Act is designed to put conveyancers back at the heart of the conveyancing process and to remove the “crutch” that RoS have become to some practitioners over the years.  We are being asked to certify the title and the forms to RoS and, if there is anything wrong with either, the application will be rejected.  I felt that it was important to remember that this key message was the common theme running through the Roadshow and if you go to such a seminar also, bear that in mind while you are listening to the various presentations.

Heads in the Sand

At times I was left wondering if my fellow professionals had switched on to that key message because a number of questions had an unspoken common theme: “What do you mean you won’t be doing that any longer?”, “That will never work”, “How can we be expected to do that?”

This was never more evident than in the breakout session that I attended  on Prescriptive Claimants.  Under the 2012 Act, RoS will require you to have made all relevant enquiries and used all reasonable endeavours to work out who owns a piece of land to which you want to make a prescriptive claim to.  You must also provide sufficient evidence to RoS otherwise they will reject the application.  The person making the claim must also have occupied the piece of land for one year prior to making an application.  Once an application is made, the proprietor will be marked as “Provisional” on the Title Sheet.  What does that mean in practice?  In essence, it gives the true owner of a piece of land (if one exists) an opportunity to come out of the woodwork.  As we were told, that might result in a true conveyance of the land being completed which is better for all concerned.  Clients may not like it but if the land is owned by someone else, is it not fair that a price should be paid?

Taking that back to the key message again, what a number of my professional colleagues seemed to miss was that essentially this is what we should be doing anyway.  

A few of the key changes

Here are a  few of the key changes that will come into force on the Designated Day on 8th December 2014:

• Register of Sasines – this will be closed to all transfer deeds.
• Rights of Way, Common Areas, Shared Parking spaces etc will all have their own individual cadastral title.  Therefore, if you have a property with a right to a shared parking space, you would have the cadastral title for the sharing property and a cadastral title for the shared property.
• Cadastral Map – “No registration without mapping”.  The Cadastral Map is a representation of the registered geospatial data which cover Scotland. Piece by piece it will be completed as each title is registered.  For the first time, this will also include the seabed up to 12 miles from the coast. There will be no overlapping cadastral units.
• Advance Notices – in place of the Letter of Obligation, the seller (or person who will validly grant a deed) can now lodge an Advance Notice against the property which protects the incoming purchaser.  It lasts for 35 days so the timing of when to lodge an Advance Notice must be given some thought in case settlement moves. http://www.ros.gov.uk/2012act/media/Advance_notice_FAQs.pdf 
• There will only be one Application Form to complete.  This is best done online as it is an automated system with intelligent questions which will adapt to your responses.
• Burdens – if you feel that particular burdens no longer apply, make that clear to RoS on the Application Form and they will not include them.  If you supply any old burden writs, they must have a plan.  If they don’t have one, you must find one.
• You will no longer receive a paper Land Certificate.  Once the Application is complete, you will receive an email with a hyperlink taking you to a downloadable PDF which has the same effect of a Land Certificate. http://www.ros.gov.uk/2012act/media/Notifications_FAQ_sections%20A_and_B.pdf 
• Once a Standard Security is registered at Companies House, there is no longer a requirement to send in the Certificate of Registration of a Charge to RoS.
• Forms 10 and 12 cease to exist and will be replaced by Property Reports.  These will be in place from Monday 27 October so that people are used to the new form.
• There are a new range of fees for the forms and for rejection.  However, the rejection fee will not be charged until February 2015 to allow the profession time to get used to the new system.

Summary – the Clue is in the Name

Turning to the reason behind the title to this blog post - “The Clue is in the Name”.  Put simply, RoS are there to register documents in the Land Register, no more.  We, as conveyancing solicitors are there to do the necessary legal work and conveyancing.  It is essential that this is remembered and that may, by necessity, require more work. The 1979 Act was a poor piece of legislation, relatively speaking, that we have made the best out of over the years.  However, it is not a case of “if it ain’t broke, don’t fix it”.  Here what we have is more a case of “it was never working, so replace it with a new one”.

This is not a case where we as a profession can sit and put our hands on our ears and say “la la la, I’m not listening” and hope the changes won’t happen.  The consultation is done, the time for discussion is over and preparations have to be made because come the Designated Day, everything will change.  Things may indeed be difficult and challenging under the 2012 Act.  Fees might have to increase slightly but a well informed client is a happy client so, if there is any issue about a fee, engage with your client and keep them appraised of fees.  Inaccurate applications being submitted to RoS slow the whole process down and can be seen to give an unfair preference due to retaining the original date of registration.  

Hopefully, the above list of key changes gives you enough of an idea of how much of a shift change the 2012 Act will be and I encourage you to read further on the topic. The slides from the Roadshow will be put online in due course - http://www.ros.gov.uk/2012act/index.html. I would urge anyone who didn’t go, to either read up online or speak to a friend or colleague who did attend. 

Scott Brymer

What is the Law in Your Life?

5 things you need to know about de facto company directors:

You have probably heard the term “de facto director”, but what does that expression mean?

1.   When a person is appointed a company director, their appointment is usually made by the company’s board of directors (or, sometimes, by the shareholders). Notification of the appointment should always be made to Companies House.

2.   However, a person may be deemed a company director without ever having been formally appointed as such or without their position being notified to Companies House. This is because such person has acted as a director, so as to become a director “in fact”- i.e. a de facto director.

3.   This is confirmed by the Companies Act 2006, which provides that the definition of a director includes “any person occupying such a position, by whatever name called”. A person occupying such a position without expressly being named as a director is referred to as a de facto director.

4.   The Court of Appeal in England has confirmed recently that there is no one definitive test for whether someone is a de facto director. In determining the matter, the court will ask whether that person was part of the corporate governance system of the company and whether that person assumed the status and function of a director so as to make himself responsible as if he were a director.

5.   It is important to note that if someone is deemed to be a de facto director, such person will be subject to the same duties and responsibilities (and face the same potential personal liabilities) as if they had been formally appointed a director.