Conversion of Tenant's Right to Ownership under the Long Leases (Scotland) Act 2012 - DW Settle

General

Instructions for legal settlers for DW applications, registered after 28 November 2015, which affect subjects held under a qualifying long lease (a lease that qualifies for conversion to ownership under the Long Leases (Scotland) Act 2012).

On 28 November 2015 (the "appointed day"), the provisions of the Long Leases (Scotland) Act 2012 ("the Act") converted certain ultra-long leases into ownership. On that day, the landlord's right of ownership of the land over which an ultra-long lease was held was also extinguished where the lease was converted.

How to identify if the application is affected by the Long Leases (Scotland) Act 2012

Check:

if the application form or any correspondence contains a request to convert a tenant's right in a lease to ownership;
if the application contains any terminology that makes reference to the Long Leases (Scotland) Act 2012;
if the application is to register a disposition and the prior title deeds indicate the interest was formerly 'tenant';
if the application is to register a notice or agreement in terms of the Long Leases (Scotland) Act 2012 (or if the deed inducing registration refers to a notice or agreement under the said Act for burdens).

In all cases where the tenant's interest has converted to ownership the landlord's title must be checked to ascertain whether it is registered. In some cases the landlord's title may be registered under more than one title number.

If the former landlord's title is registered it must be updated to reflect the conversion. In order to avoid any competing titles, the application(s) used to update the former landlord's title must be completed on the same day as the DW application. The instructions for updating the landlord's title sheet(s) are set out here: Updating Landlord's Title Sheet after the Conversion to Ownership of the Tenant's Interest in a Registered Lease

If either the application form or supporting information or the current title sheet refers to one of the Notices under Long Leases (Scotland) Act 2012, refer the application to senior caseworker for further instructions.

Only one lease qualifies for conversion to ownership ("a qualifying lease"):

Where subjects are held under 2 or more potential qualifying leases only the lowest level of qualifying lease will convert to ownership. For example, if a tenant under a long lease sub-lets individual parts of the land to 10 sub tenants, under 10 new (sub) long leases, then only the 10 sub tenants interests would convert to ownership (assuming that each of the sub leases are qualifying leases in terms of the Act).

If the sub-lease affects only part of the land originally leased, conversion of the sub-lease would apply to this part and the head lease would be the qualifying lease for the remaining part. For example, if A, the owner of land, leases 10 hectares to B for 999 years and B in turn sub-lets 4 of these hectares to C for 920 years, C is the qualifying tenant in relation to the 4 hectares and B is the qualifying tenant in relation to the remaining 6 hectares.

In the above scenarios, where the sub-tenant's interest converted to ownership, the head tenant's interest in those subjects is extinguished.

This only happens where both leases are qualifying leases - there may be subjects which are held under a long lease where parts have been subsequently sub-let under new leases which are not affected by the Act. In such a scenario where the long lease converts to ownership, the sub-leases will still require to be shown in a schedule of leases on the converted title sheet as the sub-tenants interest subsists.

Discharge/Standard Security (or any other deed which does not effect a title transfer)

Scenario 1: No indication in the application form or supporting information that the tenant's interest has converted to ownership:

Complete the application as per current DW process steps for the appropriate deed. The title sheet will remain as a tenant's interest.

Property section:

Change the interest shown in the "Real Right" field from "Tenant" to "Tenancy"

Scenario 2: The Applicant has informed the Keeper that the tenant's interest has converted to ownership in either the application form or in the supporting information:

Process the DW application as per current DW process steps for the appropriate deed being registered. However, the following additional steps are required as the current title sheet requires the following amendments to note the change to ownership:

Legal Settler:

Property section:

Change the interest shown in the "Real Right" field from "Tenant" to "Ownership"
Remove Schedule for the Short Particulars of the Lease.
Remove any Note that states that the ownership right is registered under another title number.
Remove any Note that states that the extent of the cadastral unit is correct to a specified date.

If there are any sub-leases and/or head/interposed leases disclosed in the title sheet, refer application to senior caseworker for further consideration.

If the applicant has informed the Keeper that the subjects have rights to any servitudes or other rights, or the right to enforce real burdens (or the former landlord's title, where registered, discloses any such rights) that are not already narrated in the property section, refer application to senior caseworker.

If there is no minerals reservation/exception note, or the reservation/exception note affects only part of the subjects, refer application to senior caseworker.

Burdens section:

If editing the current burdens section entry for the leasehold deed(s), the settler will first need to clone the affected deed on the LRS. This new version should contain an LRS Element Note which states "Amended for Conversion under the Long Leases Act". The preamble of the deed may also require editing. For example, the preamble may refer to "Lease referred to in the Property Section"; as the Schedule in the Property Section will have been removed, the words "referred to in the Property Section" should be deleted and the preamble amended as appropriate.

Rent

As the tenant's interest has converted to ownership, the obligation to pay rent should be removed from all burdens section entries (where possible). This includes any cases where deeds such as minutes of agreement or variation have amended the amount of rent payable.

However, there may be instances where the rent is intermingled with other burdens and it would not be practical to remove the reference. In such cases, the rent should be left in the burdens section entry and a note following the style below, amended as appropriate, should be added to the end of that entry:

Note: The rent payable under the above Lease is extinguished by virtue of Section 5(1) of the Long Leases (Scotland) Act 2012 and is shown only insofar as it affects/assists with the interpretation of other real burdens contained in this Title Sheet (in respect of maintenance obligations, liability for common repairs etc).

Leasehold conditions

Unless the applicant has stated in the application that they consider that some of the former leasehold conditions are no longer enforceable, then all of the burdens from the deeds currently shown in the burdens section should be retained in the title sheet.

If the applicant has stated in the application that they consider that some of the former leasehold conditions are no longer enforceable, these conditions should be removed from the burdens section entry.

In applications where there are complex considerations regarding how conditions can be removed, for example commercial property, the application should be referred to a senior caseworker for further advice - this will also include any title sheets where the lease entry has been shown as "copy in certificate"

Where landlord’s interest is registered

Where the subjects registered in the converted lease title sheet are co-extensive with the former landlord’s registered title, the legal settler should ensure that the whole subsisting burdens appearing in the landlord’s title sheet are brought forward to the converted lease title sheet (where they do not already appear), unless the applicant or their agent informs the Keeper that certain burdens do not subsist.

Where the subjects registered in the converted lease title sheet only comprise part of those subjects in the landlord’s registered title, the legal settler should ensure that only those subsisting burdens appearing in the landlord’s title sheet which affect the area of ground subject to the converted lease are brought forward to the converted lease title sheet (where they do not already appear), unless the applicant or their agent informs the Keeper that certain burdens do not subsist.

Note that any heritable security or proper liferent that burdened the former landlord’s interest will be extinguished in respect of the converted lease subjects on the appointed day. Any such security or liferent should not be brought forward to the converted tenant's title sheet.

A burdens section entry that has been brought forward from the landlord's title sheet may require editing for use in the converted lease title sheet. If editing a burdens section entry, the settler will first need to clone the affected deed on the LRS. This new version should contain an LRS Element Note which details the changes made.

Where landlord's interest is in Sasines

The Keeper will expect the applicant or their agent to inform her which of those burdens and servitude rights affecting the unregistered landlord's interest affect the converted lease subjects (if any). Relevant details of those burdens and servitude rights will require to be supplied as part of the application before they can be entered into the converted lease title sheet. Legal settlers should not investigate any burdens or servitude rights beyond those which are narrated in the application.

Burdens Section Footnote Regarding Conversion under the Long Leases Act

A "Long lease conversion note" should be added as the last entry in the burdens section:

The subjects in this title formerly comprised the right of a tenant in a long lease. The right converted into ownership in terms of the Long Leases (Scotland) Act 2012.

This is available on the LRS Deeds Pick-list: Deed Code "424" Type "T".

If the property was previously held on a mixed ownership/leasehold title then the note should be amended accordingly, e.g.:

The subjects in this title formerly partially comprised the right of a tenant in a long lease. That right converted into ownership in terms of the Long Leases (Scotland) Act 2012.

If the landlord's title is registered it must be updated when the tenant's title sheet is updated to reflect the conversion. The instructions for updating the landlord's title are set out here: Updating Landlord's Title Sheet after the Conversion to Ownership of the Tenant's Interest in a Registered Lease.

Assignation

Scenario 1: No indication in the application form or supporting information that the tenant's interest has converted to ownership:

Process the application as per current process steps for Assignation of a tenant's interest in the Registration Manual. The title sheet will remain as a tenant's interest as no conversion to ownership has taken place.

Property section:

Change the interest shown in the "Real Right" field from "Tenant" to "Tenancy"

Scenario 2: The applicant has informed the Keeper that the tenant's interest has converted to ownership in either the application form or in the supporting information:

(a) if the deed was executed after 28th November 2015, refer application to senior caseworker.

In some cases, the application should be rejected - the deed used to transfer the subjects should have been a disposition if the former tenant's right converted to one of ownership on 28 November 2015 - the Keepers advice regarding transfer deeds after conversion is noted on the RoS website.
In other cases, if the lease was exempt from conversion and a notice of recall under the Act has been registered, it may be possible for the application to proceed.

(b) if the deed was executed prior to 28th November 2015 and the deed is presented for registration after that date, the application should be processed as a Disposition and the conversion to ownership processed as per the instructions for Disposition shown below.

If there is any doubt as to how an application for an assignation should be processed in respect of either the execution date or the date of registration, refer the application to senior caseworker for further advice.

Disposition

Where there is an application for registration of a Disposition granted by the tenant in a long lease title sheet, the Keeper will rely on that deed being certified as valid in the application and update the register to disclose that conversion has occurred, unless the content of the lease title sheet contains clear information demonstrating that the lease did not qualify for conversion (for example one of the relevant Notices under Long Leases (Scotland) Act 2012).

Process the application as per current DW process steps for a disposition. However, the following additional steps are required as the current title sheet requires the following amendments to note the change to ownership:

Legal Settler:

Property section:

Change the interest shown in the "Real Right" field from "Tenant" to "Ownership"
Remove Schedule for the Short Particulars of the Lease
Remove any Note that states that the ownership right is registered under another title number.
Remove any Note that states that the extent of the cadastral unit is correct to a specified date.

If there are any sub-leases and/or head/interposed leases disclosed in the title sheet, refer application to a senior caseworker for further consideration.

If the applicant has informed the Keeper that the subjects have rights to any servitudes or other rights, or the right to enforce real burdens, that are not already narrated in the property section, refer application to senior caseworker.

If there is no minerals reservation/exception note, or the reservation/exception note affects only part of the subjects, refer application to senior caseworker.

Burdens section:

If editing the current burdens section entry for the leasehold deed(s), the settler will first need to clone the affected deed on the LRS. This new version should contain an LRS Element Note which states "Amended for Conversion under the Long Leases Act". The preamble of the deed may also require editing. For example, the preamble may refer to "Lease referred to in the Property Section"; as the Schedule in the Property Section will have been removed, the words "referred to in the Property Section" should be deleted and the preamble amended as appropriate.

Rent

As the tenant's interest has converted to ownership, the obligation to pay rent should be removed from all burdens section entries (where possible). This includes any cases where deeds such as minutes of agreement or variation have amended the amount of rent payable.

However, there may be instances where the rent is intermingled with other burdens and it would not be practical to remove the reference. In such cases, the rent should be left in the burdens section entry and a note following the style below, amended as appropriate, should be added to the end of that entry:

Note: The rent payable under the above Lease is extinguished by virtue of Section 5(1) of the Long Leases (Scotland) Act 2012 and is shown only insofar as it affects/assists with the interpretation of other real burdens contained in this Title Sheet (in respect of maintenance obligations, liability for common repairs etc).

Leasehold conditions

Unless the applicant has stated in the application that they consider that some of the former leasehold conditions are no longer enforceable, then all of the burdens from the deeds currently shown in the burdens section should be retained in the title sheet.

If the applicant has stated in the application that they consider that some of the former leasehold conditions are no longer enforceable, these conditions should be removed from the burdens section entry.

In applications where there are complex considerations regarding how conditions can be removed, for example commercial property, the application should be referred to senior caseworker for further advice - this will also include any title sheets where the lease entry has been shown as "copy in certificate".

Where landlord’s interest is registered

Where the subjects registered in the converted lease title sheet are co-extensive with the former landlord’s registered title, the legal settler should ensure that the whole subsisting burdens appearing in the landlord’s title sheet are brought forward to the converted lease title sheet (where they do so not already appear), unless the applicant or their agent informs the Keeper that certain burdens do not subsist.

Where the subjects registered in the converted lease title sheet only comprise part of those subjects in the landlord’s registered title, the legal settler should ensure that only those subsisting burdens appearing in the landlord’s title sheet which affect the area of ground subject to the converted lease are brought forward to the converted lease title sheet (where they do so not already appear), unless the applicant or their agent informs the Keeper that certain burdens do not subsist.

Note that any heritable security or proper liferent that burdened the former landlord’s interest will be extinguished in respect of the converted lease subjects on the appointed day. Any such security or liferent should not be brought forward to the converted tenant's title sheet.

A burdens section entry that has been brought forward from the landlord's title sheet may require editing for use in the converted lease title sheet. If editing a burdens section entry, the settler will first need to clone the affected deed on the LRS. This new version should contain an LRS Element Note which details the changes made.

Where landlord's interest is in Sasines

The Keeper will expect the applicant or their agent to inform her which of those burdens and servitude rights affecting the unregistered landlord's interest affect the converted lease subjects (if any). Relevant details of those burdens and servitude rights will require to be supplied as part of the application before they can be entered into the converted lease title sheet. Legal settlers should not investigate any burdens or servitude rights beyond those which are narrated in the application.

Burdens Section Entry Regarding Conversion under the Long Leases Act

A "Long lease conversion note" should be added as the last entry in the burdens section:

The subjects in this title formerly comprised the right of a tenant in a long lease. The right converted into ownership in terms of the Long Leases (Scotland) Act 2012.

This is available on the LRS Deeds Pick-list: Deed Code "424" Type "T".

If the property was previously held on a mixed ownership/leasehold title, then the note should be amended accordingly, e.g.:

The subjects in this title formerly partially comprised the right of a tenant in a long lease. That right converted into ownership in terms of the Long Leases (Scotland) Act 2012.

If the landlord's title is registered it must be updated when the tenant's title sheet is updated to reflect the conversion. The instructions for updating the landlord's title are set out here: Updating Landlord's Title Sheet after the Conversion to Ownership of the Tenant's Interest in a Registered Lease.