Updating Landlord's (Ownership) Title Sheet after the Conversion to Ownership of the Tenant's Interest in a Registered Lease
When processing an application affecting a tenant's interest in a registered lease where the Keeper has been informed that the lease is a qualifying long lease as set out in the Long Leases (Scotland) Act 2012 and conversion has taken place, the former landlord's ownership title must be checked to ascertain whether it is registered.
Where the landlord's title is also registered, the following steps should be taken in order to update the landlord's title to show the conversion to ownership of the tenant's interest - these instructions are only for use where there is no other live application against the landlord's title. Where there is an existing live application against the landlord's title, the applications should be referred to a senior officer as careful consideration should be given to how the live application against the landlord's title is processed.
If there is a Notice or Agreement under the Long Leases (Scotland) Act 2012 shown in the title sheet, the application should be referred to a senior caseworker.
Minerals
The position relating to any residual ownership right to minerals contained in a registered former landlord's title must be considered when dealing with an application affecting a converted lease title.
Unless specifically provided for, a lease of land does not include those minerals beneath it - the lack of an express inclusion of minerals therefore has the effect of separating entitlement to the surface of the land from entitlement to the minerals beneath it. In practice, rather than an express inclusion, an express reservation of minerals is almost always contained in ultra-long leases of land.
This has an important impact on the conversion process as conversion cannot bestow on the former tenant a greater interest than that which was contained in the lease itself. Accordingly, where minerals were excluded from a lease, then they are also excluded from the property acquired by the former tenant on conversion.
Where conversion of a lease takes place and the minerals beneath the subjects of the lease have not already been created as a separate tenement (either by being expressly reserved by a previous proprietor or by being expressly conveyed to a third party in an earlier deed), such minerals became a separate tenement.
An express reservation of minerals in a lease is not, however, a firm indicator that minerals were ever included in a former landlord's title itself. Sometimes the minerals will, in fact, already be a separate tenement, in which case the purpose of the minerals reservation itself is to make it clear that the minerals do not pass to the tenant - rather than operating as a statement that the former landlord has expressly retained the minerals.
Further complicating the situation is that such minerals reservation clauses usually contain conditions relating to rights to work and payment of compensation. Where minerals are already separated, such conditions merely serve to repeat the terms of the earlier separation. Where the minerals remain in the ownership of the former landlord, however, such conditions serve to regulate the landlord/tenant relationship for the purposes of the lease and continue to do so after conversion of the lease into ownership when the minerals became a separate tenement.
The potential for a former landlord to retain a residual ownership right to minerals therefore requires to be carefully considered when updating a former landlord's title following the conversion of a long lease title.
Before closing or updating an existing ownership title sheet the settler should give careful consideration as to whether the lease includes an express inclusion of minerals, or whether the interest in the minerals was reserved to or retained by the former landlord or his predecessors, or conveyed to a third party. All instances where a ultra-long lease contains an express inclusion of minerals and purports to qualify for conversion should be referred to a senior caseworker.
Subordinate real rights affecting the former landlord's interest
Under section 6(4) of the Long Leases (Scotland) Act 2012, any heritable security or proper liferent that burdened the former landlord's interest immediately before the appointed day was extinguished on the appointed day, to the extent of the converted lease subjects.
The guidance below relates to the situation where the immediate landlord's interest in the subjects of lease is ownership. In the situation where the qualifying lease is a sub-lease and both the immediate landlord's and the ownership interests are registered consideration will need to be given to updating both titles. In some circumstances the immediate landlord's title could be closed and the subjects of lease removed from the ownership title (or vice versa), in other circumstances both titles could be closed or the subjects of lease removed from each title. In other situations, either only the immediate landlord's interest (head lease) or only the head landlord's interest (ownership) may be registered.
Former landlord's title sheet
The qualifying lease contains no express inclusion of minerals
In this case, the minerals beneath the subjects of lease are excluded from the property acquired by the former tenant on conversion. Where the minerals have not already been created as a separate tenement (either by being expressly reserved by a previous proprietor or by being expressly conveyed to a third party in an earlier deed), such minerals become a separate tenement.
The former landlord's title should be examined to establish whether that title contains a minerals reservation in a burdens section deed that relates to the subjects of lease or an indication that the minerals below the lease subjects have been expressly conveyed to a third party.
The qualifying lease contains express inclusion of minerals
In this case, the minerals beneath the subjects of lease are included in the property acquired by the former tenant if the lease converts. Whether conversion can operate will depend on whether the lease includes details of a royalty or payment of rent determined by reference to the exploitation of those minerals being payable or not.
All instances where an ultra-long lease contains an express inclusion of minerals and purports to qualify for conversion should be referred to a senior caseworker.
Subsequent application to register former landlord’s title
The central function of the Long Leases (Scotland) Act 2012 was the automatic conversion of qualifying long leases into outright ownership on the appointed day, 28 November 2015. At that date, ownership of the land transferred to the tenant.
The guidance, above, considers the actions to be taken to update a landlord’s registered title when an application to register a converted long lease is received by the Keeper. There will also be instances where the landlord’s title remains in the sasine register when a converted long lease is registered by the Keeper. In such instances, when the landlord’s title is later submitted for registration, the ownership of the converted lease subjects no longer form part of the landlord’s title and should therefore not be included in the cadastral unit. If the landlord is seeking to register a larger plot of land than the converted lease subjects, the issued title will be to the lesser extent. If, however, nothing remains after the omission of the converted lease subjects, the landlord’s application should be considered for rejection.
This applies when the original landlord is still a party to the application or when the landlord’s former ownership interest in the area has been disponed or transferred to a third party.
The position regarding minerals described at length, above, must still be considered. Before completing or rejecting an application to register the former landlord’s title, the settler should give careful consideration as to whether the converted lease includes an express inclusion of minerals, or whether the interest in the minerals was reserved to or retained by the former landlord or his predecessors or conveyed to a third party. All instances where an ultra-long lease contains an express inclusion of minerals and purports to qualify for conversion should be referred to a senior caseworker.