Table of Contents

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General

In terms of sections 10(2)(c) and 32(2) of the 2012 Act, where the validity of a registrable deed to which an application relates might be affected by an entry in the Register of Inhibitions (ROI), the Keeper must enter a reference to the entry in the ROI in the relevant title sheet. However, the statutory duty is to disclose an entry in the ROI on a title sheet in the Land Register only when the inhibited person has granted a deed which appears to be in breach of an entry in the ROI.

The note containing the particulars of the ROI entry is made in the proprietorship section of the title sheet. No separate limitation or exclusion of the Keeper's warranty is required.

What is the Register of inhibitions?

The Register of Inhibitions and Adjudications is defined in the Conveyancing (Scotland) Act 1924 as being for the registration of 'inhibitions, interdictions, adjudications, reductions and notices of litigiosity'. These are notifications that the owner of the property or holder of the right cannot competently grant future voluntary deeds alienating or encumbering that property or right. It is commonly known as the ‘personal register’ and legal professionals often refer to instructing a ‘personal search’ of the ROI.

The existence of an entry in the ROI affecting the granter or consenter to a deed does not necessarily prevent a transaction proceeding; rather the deed being registered is at risk of being reduced by court action raised at the instance of the inhibiting party. For example a disposition granted by an inhibited person is liable to being reduced at the instance of an inhibiting creditor. The deed is not ineffective at the time of registration, rather a decree of reduction renders it ineffective at the date of the decree.

An entry in the ROI affects future voluntary transactions by the inhibited party over all properties owned by them so, for example, an entry would not affect a notice of payment of grant as this is not a voluntary deed. An inhibition or other entry in the ROI can affect many types of registrable deed. Typically, these will be registrable deeds which either alienate or encumber the inhibited debtor's property although transactions by the holder of a subordinate right to vary or discharge that right, such as a discharge of a standard security by an inhibited heritable creditor, may also be liable to reduction.

There are two ways in which an officer may become aware of a potential adverse entry in the ROI:

Disclosure by the applicant on the application form

The application form contains questions designed to elicit information from the applicant as to whether they have obtained searches of the ROI and the outcome of such searches.

Through the ROI search carried out for the application (if appropriate).

The registration officer is required to consider whether to search the ROI and thereafter further investigate any apparently adverse entries. The Keeper will not duplicate a search reported by the applicant's agent on the application form. The registration officer will only require to carry out a search for the 'gap' period subsequent to the date to which that search was certified as specified on the application form. If no search has been carried out, unless the deed is of a type where no search is required, a five year search will be carried out by the registration officer. If the granter/proprietor does not voluntarily alienate or grant a right in or over that property, then no ROI search is necessary as the validity of the registrable deed under consideration cannot be adversely affected by an entry in the ROI.

When to search and who to search against

In general terms, a registration officer will carry out an ROI search against the granter of, and any consenter to, a registrable deed which is a voluntary act alienating or encumbering the granter's property. If the registrable deed is not a voluntary alienation (such as a transfer of title, grant of lease or assignation of lease) or a voluntary creation of an encumbrance (such as a standard security, servitude or burden) or a voluntary discharge of such a right, no ROI search is necessary against the proprietor (or any other party to the deed). This is because the transaction is not one which can breach an inhibition and so no search of the ROI is necessary. However, when undertaking a search in relation to a disposition being granted in exercise of power of sale, both the creditor exercising their right and the debtor should be searched (subject to guidance below on well known financial institutions).

Who is searched against?

The following parties must be searched against:

Granter(s) of a deed of the type mentioned below unless the granter is of a type not searched against for risk reasons; and
Consenters (except for Matrimonial Homes or Civil Partnership purposes - because a consenter for these purposes is not conveying a relevant property right);

Grantees do not require to be searched. For example, where only an application for registration of a disposition is presented and the grantee in a disposition is not themselves granting a standard security, then only the granter of the disposition requires to be searched, unless the registration officer is also examining a separate application for registration of a standard security or other deed granted by the grantee in the disposition.

Which granters are not searched against?

It is considered a ‘justifiable insurance risk’ (i.e. no real threat to the Keeper’s warranty) not to search against large, well-established public bodies and financial institutions. These include:

Local Authorities;
Government Departments/Ministers of State or Scottish Ministers;
National Undertakings (such as Scottish Power, British Gas etc.);
Well know financial institutions (such as Bank of Scotland, RBS, Nationwide, Santander etc.);
Accountant in Bankruptcy.

Applications where search usually carried out against granter/consenter

Unless the granter is major lender, local authority, government department, agency, Minister etc then the registration officer should search the granters when examining an application pertaining to one of the following registrable deeds:

Most common registrable deeds	Less common registrable deeds
Disposition	Agreement (Nature Conservancy)
Standard security	Assignation (or partial assignation) of lease/Assignation and variation of lease
Discharge of standard security	Assignation of Bond
Assignation of standard security	Conveyance in liferent
Deed of variation of standard security	Countryside Management Agreement
Deed of restriction of standard security	Deed of conditions/Deed of real burdens- separate benefited property or properties nominated at registration
Ranking Agreement	Deed of servitude
Assignation of lease	Deed of variation of servitude
Contract of Excambion	Deed of servitude, discharge
Grant of lease/ sub-lease	Deed of application/disapplication of development management scheme
	Deed of variation of burdens
	Discharge of bond/ex facie absolute disposition
	Discharge of real burdens/servitude
	Forestry dedication agreement
	Good neighbour agreements
	Minute of extension of lease
	Renunciation of lease
	Section 32 Agreement (Enterprise and New Towns (Scotland) Act 1990)
	Section 75 planning agreements
	Undertaking not to exercise pre-emption
	Unilateral obligations (Section 75(1)(b) Town and Country Planning (Scotland) Act 1997
	Variation of development management scheme

Applications where no ROI search carried out irrespective of granter

Do not search any person when examining applications for registration of any of the following registrable deed types. In most cases, this is because either (1) the registrable deeds are not voluntary acts of the proprietor of the subjects but are transactions undertaken by third parties or court orders, (2) a policy decision has been made not to search against the granter of the deed or (3) there is no recipient of a right which would be at risk of reduction.

Ancient monuments	Lands Tribunal Order
Certificate granted by private rented Housing Committee	Nature Conservation Order
Certificate of consignation	Notice of decision to vary or revoke a repairing standard enforcement order
Certificate of exclusion of monuments	Notice of cessor of improvement grant/repairs grant
Charging order- all types	Notice of revocation of maintenance plan
CPO	Notice of payment of grant/loan
Decree of adjudication in execution (for debt)	Notice of termination
Decree of adjudication in implement	Notice of title
Decree of foreclosure	Notice of potential liability for costs
Decree of irritancy	Notice of decision to vary/revoke RSEO
Decree of reduction of voidable deed	Notice of revocation of maintenance plan
Decree of rectification of defectively expressed deed	Receipt under Industrial and Provident Societies Act
Deed of Conditions/Deed of Real Burdens- no separate benefited property/ies at registration	Schedule conveyance/statutory conveyance or conveyance under s106 Title Conditions Act
Determinations under Town and Country Planning (Scotland) Act 1997	Stopping up order
Discharge of repayment order	Tree Preservation Order
Discharge of charging order	Maintenance order
Extract decree of foreclosure	Maintenance plan
Extract Decree of irritancy of lease	Management Agreement (National Parks)
GVD	Voluntary registration application
Guardianship order or Intervention order under Adults with Incapacity (Scotland) Act 2000

Examples of when and who to search

Application to register a disposition only

Search the granter of the Disposition, as an inhibition affecting the granter/seller might result in the Disposition being declared void.

Do not search against the grantee — any inhibition against them will not affect the validity of the Disposition.

Application to register a disposition and a standard security

Search (1) the granter of the Disposition and (2) the granter of the Standard Security (invariably the grantee in the Disposition).

In other words, search the ROI against both seller and purchaser. The search against the granter of the standard security is necessary because if he/she is inhibited then the standard security is voidable by the inhibiting creditor.

Application to register a standard security only

Search the granter of the Standard Security

Do not search the creditor in the standard security. An inhibition against the creditor does not affect the validity of a heritable Security (or other deed) being granted in their favour.

Application to register a discharge of a standard security

Do not search the proprietor of the subjects (usually this is the grantee in the discharge).

Do not search against the granter of a discharge who is a major lender or well-known public body etc.

However, if the creditor is neither a major lender nor a public body, then they must be searched against.

Notice of payment of grant or notice of potential liability for costs

No search is required. Do not search either the registered proprietor in the title sheet or the applicant in the application.

If the Granter/proprietor does not voluntarily alienate, no ROI search is necessary against the proprietor (or any other party to the deed) because the transaction is not one which is in breach of the inhibition.

Searching procedures - how to search correctly

This section concerns the best practice in searching the ROI using the LRS. In particular it considers how to search non-natural persons, such as companies but also types of individuals such as members of the nobility or foreign forms of personal name.

When an ROI search is run from the LRS, the search results are accessed via a link that can be found on the Intranet under "Quick Links" called "LRS ROI Search/Disclosure Results" . The results of your search can be found either by doing a "Title Number Search" which will display your results or you can select the relevant County and then click on the Submit button to display a list of results in title number order. Scroll down the list to find your title number and click on it to display the results "print" on your screen. Alternatively, if there are a large number of results you can use the "Edit" "Find on this page" functionality in your browser (Ctrl-F) and type in your title number to find your results in the list.

The system which searches the ROI via the LRS employs a searching strategy using names as ‘keys’. Names are not required to be formatted or normalised and usually it will only be necessary to import them as they appear on the screen. The system is designed to catch not only precise name matches but also common variations. All of the individual components of a name are searched e.g. Muhammed McKay is searched giving equal value to both ‘Muhammed’ and ‘McKay’. While, as a general principle, the ROI searching system has been set up to reveal common variations of names, the basic searching rules should be borne in mind when considering whether a name requires to be entered in more than one format to complete an exhaustive search.

Personal names

Personal names are indexed under surname, and are linked to the entry in the register by a unique number. The numbers are allocated to each deed as it is registered and a minute made. An ROI search is likely to reveal entries similar to the following:

Bissett

Alan 99/01234
Allan 99/05678

In the example above, Alan Bissett appeared in deed/minute number 01234 in the year 1999. If an inhibition is registered in the name of Mr and Mrs A Bissett an entry in the Register would be made under ‘Bissett A’ and ‘Bissett’. A search against Alan Bissett should return all entries under ‘Bissett’, together with variations in spelling (Alan/Allan).

In the case of women with two or more surnames, a check should be made to ensure that all the surnames are entered in the surname field: e.g. ‘Young or Sutton or Jones or Walker’ typed as one line.

Punctuation in names

Generally punctuation is ignored in the ROI search, i.e. full stops, commas, hyphens or apostrophes (as in ‘P.L.C.’ etc) should not be included.

An exception to this general rule applies to apostrophes which form an integral part of a name, such as ‘O’Brien’ or ‘M’Wada’, or ‘Jones’s Taxis’, ‘MCG’s’, where the omission of the apostrophe would create a different name.

Words such as ‘Mr’, ‘junior’, ‘of’, ‘as’ ‘The’ etc. are ignored.

Diminutives of names

Diminutives of names can cause problems when searching.

A person may be referred to in a deed as Liz or Bill but it may be that when the entry was made in the ROI the name was given in its full form of Elizabeth or William.

If a deed narrates a diminutive form of the party who is to be searched against, both forms of the name should be entered. However, if the deed gives the full name there is no need to search against possible diminutives. The current searching system should pick up common variations of names, but care should be exercised in such cases.

Names of foreign origin

The surname plus the prefixes are entered in the surname field

Surname	Forename
De La Rue	Frances
Le Mesurier	Charles
De Mello	Frank Antony
van den Bergh	Hendrick

Executors and trustees - search in their capacity as such

Where the granter of a deed is an executor or trustee, they are not searched as individuals. They must be searched in their capacity as executor or trustee.

‘Executors of’ (‘Trustees of’, or ‘Mar Con Trustees of’) will be entered in the prefix field.

Nobility - search under both ordinary name and title used in registrable deed

Titles are entered in the forename field. Nobility should be under all their names/titles. ‘Edward Bruce Logan, Earl of Leith, Viscount Portobello, Baron of Seafield’ will be searched under all three names/titles, viz:

Surname: Logan
Forename: Edward Bruce

and

Surname: Leith
Forename: Earl of

and

Surname: Portobello
Forename: Viscount

and

Surname: Seafield

Forename: Baron of

"Trading as" and firm names

If the party to be searched against is narrated in the deed as ‘Muhammed McKay, trading as Muhammed McKay, Replacement Windows, at 5 Hill Street, Colinsburgh, Fife’, only Muhammed McKay as an individual is searched against i.e.

Surname: McKay
Forename: Muhammed

The additional information is merely a designation. However, if he is referred to in the deed as Muhammed McKay, partner of ‘Muhammed McKay’s Windows’ then the individual (as above) and the firm are both searched against i.e.

Surname: McKay's Windows (firm)
Forename: Muhammed
Prefix: partner of

The ‘Firm of Redwood’ is searched as Redwood, with ‘Firm of’ being entered in the prefix field. Firms which also include an individual’s name e.g. Firm of Margaret Smith are searched as ‘Smith (Firm)’ in the surname field. One-line entry firm names follow the deed and are entered in full in the surname field e.g.

Miss Tidy
Mister Clean

Firms which include individual names or initials often have more than one possibility for indexing and in these instances all possibilities should be searched, e.g. ‘Firm of T C Herriot and E F Jenkins’ should be searched as:

Surname: Herriot and E F Jenkins (Firm)
Forename: T C

and

Surname: Herriot and E F Jenkins
Forename: T C
Prefix: Firm of

Company names

Companies are searched as they appear unless the first word of the name could be the forename of a person.

Meadowbank Homes Limited would be searched as a straight line entry under ‘Meadowbank Homes Limited’.

However, George Brown and Smith Limited would require to be searched under:

Surname: George Brown and Smith Limited

and

Surname: Brown and Smith Limited
Forename: George

Review your results, following the guidance below at Which ROI disclosures can be ruled out and which should be considered for disclosure. If required, you can print out any relevant pages using the normal print functionality in your browser. If there are no matching entries, the disclosure result will simply state ‘No deed’.

If you are unable to eliminate all the name matches from the results, you need to enter the minute numbers in question in your ROI search in the LRS in order to disclose these outstanding entries. The disclosure print obtained from this will provide a full print of the ROI minute for each minute number entered. Following the guidance below you must then decide whether these minutes could constitute an adverse entry and so may require entry in the title sheet under section 32 of the 2012 Act.

Period of search

The application form contains questions pertaining to entries in the ROI. The period that the registration officer must search will depend upon the answers given to the relevant questions in the application form. If the applicant has certified the date to which a search of the ROI has been carried out, (whether in part (i) or (ii) of the question on the application form), the registration officer will use that date in fixing the period during which the ROI is searched.

When to search the 'gap' period

Where for example the date of the application for registration is 23 January 2015, and the date to which the applicant has certified that a search has been carried out in the ROI is 6 January 2015, the period of search will be 6 January to 23 January 2015. Should the applicant disclose any adverse entries in the application form, the period of search will be five years back from 23 January 2015. Where there are attached applications, the registration officer must take account of all the dates to which an ROI search has been certified as having been carried out. Where the granters of each deed are different and in addition, the dates to which a search is certified are also different, the start date for the search should be the earliest date certified. However, if the respective granters of the deeds who require to be searched are one and the same (e.g. the same person grants two Standard Securities) the start date for the search will be the latest date certified.

Disposition and standard security

The disposition is by A to B and the standard security is granted by B.

A search will be carried out against both A and B.

If the dates to which an ROI is certified to have been carried out in the separate application forms are different, you should search back against both A and B to the earliest date certified.

First and subsequent standard security being registered

The standard securities will be granted by the same person and only the granter will be searched against.

If each application form certifies that an ROI has been carried out to a different date, it is acceptable for the start date of the search to be the most recent of these dates.

When to do a five year search

The registration officer should search for five years back from the date of application where there are:

Incomplete or negative answers to the ROI questions on application form

Where the applicant-

indicates that the deed to which the application relates is not capable of being affected by an entry in the ROI but the registrable deed is of a type against which the Keeper would normally carry out a search; or
certifies that no search has been carried out; or
does not certify a date to which the search has been carried out,

then the registration officer must carry out a full five year search back from the date of application.

Adverse entries noted on application form

The application contains a deed which requires an ROI search to be carried out. The applicant has advised on the application form that the ROI search obtained by them or exhibited to them during the transaction has disclosed an adverse entry or entries.

A full five year search should be carried out to confirm whether the entries are adverse. This may also necessitate raising a requisition of the applicant's agent for further information as per the guidance at Which ROI disclosures can be ruled out and which should be considered for disclosure below.

Any discrepancy between the search printout and the information provided by the agent should be referred to the Team Leader or senior caseworker as appropriate.

Which ROI disclosures can be ruled out and which should be considered for disclosure

Whether an inhibition in execution which is disclosed in the ROI search will strike at a particular transaction is governed by the rules determining the effective date of that transaction. An inhibition may only be eliminated prior to raising a requisition if it is clear that it cannot strike at the transaction in question, or if an advance notice protects the registrable deed in the circumstances.

The registration officer may ignore the following:

(1) Inexact matches e.g.

exact name, different address at a distance from any address provided for the granter(s)
exact name (common), present whereabouts unknown
similar name, different address.

(2) Discharge or recall registered in ROI for the inhibition or other ROI entry identified.

(3) Inhibition over 5 years old which has not been discharged.

(4) Notice which was not followed by Schedule within 21 days (unless registrable deed is being registered within the 21 day period) or subsequent entry in ROI was after date of application for registrable deed.

(5) Inhibition against seller recorded after missives signed: Seller no longer has power of disposal, so Inhibition does not affect.

(6) Inhibition against purchaser recorded before date of delivery: Purchaser does not have power of disposal, so Inhibition does not affect. .

What entries should be considered for a disclosure

Exact name and address
Exact name and nearby address
Exact name if uncommon, present whereabouts unknown
Similar name, exact address

Disclose the hits by entering the relevant minutes in the ROI screen in the LRS and then viewing them in the LRS ROI search/disclosure results tab in Quick Links on the intranet homepage.

What should be referred by SO1

Outstanding letters of inhibition/summons of inhibition.
Any entry appearing less than 35 days prior to the application date whether or not there is an advance notice for the registrable deed, to obtain authorisation for entry of details of ROI entry in title sheet.
Any other entries e.g. certified notice of determination/mem of renewal/notice of abandonment.

For any registrable deed where the ROI entry is less than 35 days prior to the date of application in the Land Register, check for an advance notice.

Check for advance notice

If the registration officer identifies ROI entries which may require an entry in the title sheet, before raising a requisition of the applicant for them to provide confirmation of whether the entry affects, the registration officer must firstly consider:

(1) whether the inhibition or other ROI entry identified was registered within the 35 day period prior to the date of application for the deed under consideration and, if so;

(2) whether there is an advance notice either in the application record, in the archive record or recorded in the Sasine register protecting the deed under examination, that was recorded/noted before the date of the ROI entry.

(3) whether, if there is an advance notice, the registrable deed was also submitted for registration in its protected period.

If it was, the ROI entry can be ruled out and does not require to be disclosed.

Archiving

If an adverse entry in the ROI is disclosed in the title sheet, you should add a copy of the disclosure print showing the relevant minute(s) to the archive. Where the ROI is clear, there is no requirement to add a copy of the printout to the archive. Instead, ‘ROI clear’ should be added to the application notes.

Personal Insolvency

Inhibition

The following paragraphs set out the procedure and effect of inhibitions executed on or after 22 April 2009. Registration officers should note that this section only relates to inhibitions in execution. Different rules may apply to other ROI entries which have inhibitory effect, e.g. a notice of determination of sequestration, as set out in the respective sections below.

Effective date of an inhibition

In terms of section 149 of the 2007 Act, an inhibition has effect from the beginning of the day on which it is registered.

However, when all of the following requirements are met:

a separate Notice of Inhibition is registered in the ROI (in the form prescribed);
the Schedule of Inhibition is served on the debtor after that notice is registered; and
the Schedule of Inhibition and Certificate of Execution are registered before 21 days have expired from the date of registration of the Notice,

the inhibition takes effect from the date of service of the Schedule on the debtor, which date will be entered on the Certificate of Execution and in the ROI entry.

This may lead to complications. For example, there may be two debtors cited and the Schedule of Inhibition might be served on party A on the Monday and party B on the Tuesday. In consequence the effective date of the inhibition may not be the same for both parties. Such instances should be referred to a senior officer.

Effect of breach of an inhibition

A deed delivered in breach of an inhibition may be reduced (made ineffective) by a court order obtained at the instance of the inhibiting creditor. The creditor’s right to reduce the deed remains in existence for 20 years from the date that the inhibition is breached.

Whilst section 32 requires that an entry in the ROI be disclosed in a title sheet where the validity of a deed accepted for registration might be affected by an entry in the Register of Inhibitions, such an entry in a title sheet does not require to be accompanied by an exclusion or limitation of the Keeper's warranty to the applicant for registration. This is because the warranty is limited to the time of registration. For example, following registration of a disposition, under section 73(1)(a) the Keeper warrants to the applicant for registration (i.e the new registered proprietor) that the title sheet is accurate in so far as it shows an acquisition of the property in favour of the applicant. The benefits of warranty also extend to owners where the deed being registered triggers automatic plot registration and benefited proprietors where the deed relates to a title condition. As a deed in breach of an inhibition is not void (i.e. it is not wholly ineffective and invalid from the outset), no limitation of the Keeper's warranty is required. However, a title sheet would be inaccurate if a statement under section 32 was omitted in circumstances where the validity of the registrable deed might be affected by an entry in the Register of Inhibitions.

Frequently asked questions:

When can a person can be inhibited?

A person can be inhibited:

a) where their creditor has obtained a court decree in a Scottish court, either for payment of a debt or for specific implement of an obligation;

(b) where a document for debt in which they are the debtor has been registered for execution in the Books of Council & Session (i.e. without any court action);

(d) where they have been interdicted from dealing with property by a restraint order in terms of section 32 of the Proceeds of Crime (Scotland) Act 1995 or section 123 of the Proceeds of Crime Act 2002, the Courts may grant warrant for inhibition against any person interdicted by the order.

Can an inhibition be against a specific property only?

In general terms, an inhibition may affect any heritable property of the debtor. However, an exception is provided by section 153 of the 2007 Act which states that where an inhibition is executed to enforce a decree for specific implement of an obligation to (i) convey heritable property to a creditor or (ii) grant a real right in security to the creditor, the inhibition will then be limited to that property. In such circumstances the property will be specified in the Schedule of Inhibition. If the title is in the Land Register, the description will be by reference to the title number and if in the Register of Sasines by a description conforming to Schedule D or J to the Conveyancing (Scotland) Act 1924.

Can a creditor convert an inhibition affecting specific property to a general inhibition?

This can occur where a creditor has obtained a decree for payment of all or part of a principal sum in an action in which the creditor had executed inhibition on the dependence. An extract of the decree or a certified copy of the interlocutor can then be registered in the ROI along with a Notice of Decree immediately after the decree/interlocutor is issued. The change in status takes effect on the beginning of the date of registration of the Notice of Decree. The ROI entry will be:

[Notice of Decree [dated] following limited inhibition on the dependence under section 15J(b) of the Debtors (Scotland) Act 1987 by [inhibitor] against [inhibitee, designed] in relation to [property description] on [date] with relative [extract][interlocutor] thereon ]

If there is any doubt as to whether such an inhibition affects the subjects of a particular application in the Land Register, it must be referred to a senior officer.

Example ROI entries

Schedule of inhibition

Section 148(1) of the Bankruptcy and Diligence etc. (Scotland) Act 2007 (‘the 2007 Act’) provides for (a) a Schedule of Inhibition and (b) a Certificate of Execution of Inhibition (in forms prescribed by the Diligence (Scotland) Regulations 2009) to be registered together in the ROI. Registration results in a single entry in the ROI Minute Book, in the following style:

Schedule of Inhibition [inhibitor] against [inhibited, designed] served [date] per XY, Agent etc.

Notice of inhibition

A notice of inhibition, as prescribed by section 155(4) of the Titles to Land Consolidation (Scotland) Act 1868 (added by section 149 of the 2007 Act) is entered on the ROI as follows:

Notice of Inhibition by [inhibitor, designed] against [inhibited, designed]. Dated

Schedule of Inhibition affecting specific property

Schedule of Inhibition [inhibitor] against [inhibited, designed] in relation to [description of property being inhibited], per xxxx

Is a registrable deed in breach of, or subject to, an inhibition?

Specific guidance on the methods by which an inhibition is rendered extinct or terminated is set out below. In addition however, there are also several rules of law relevant to whether a particular registrable deed is rendered voidable by a breach of an inhibition.

Only a future act of the debtor can be affected

The inhibition can only affect acts which occur after the inhibition comes into effect.

Only a voluntary act of the debtor can be affected

Where an individual is under a legally enforceable obligation to act at the time of the inhibition, carrying out that act will not breach the inhibition as it was not voluntary. A requisition would require the applicant to confirm that the registrable deed granted by the inhibited debtor was not a voluntary act.

An inhibition cannot affect property acquired after inhibition took effect

An inhibition can affect only property already held by the debtor. Where an inhibition is registered in the ROI before the disposition in favour of the (now) registered proprietor/ inhibited debtor is registered in the Land Register, the inhibition does not affect the property. However, the law is complex as regards whether a debtor might acquire property, for the purposes of the effectiveness of an inhibition against them, on conclusion of a contract for acquisition of the property, or delivery of the title deed. A requisition would require to be raised to seek the applicant's confirmation whether the inhibition affected or did not affect.

Advance notice exists for registrable deed

Section 61(1) and (2) provide a "deed to which an advance notice relates, if registered on a date which falls within the protected period, is not subject to:

(1) an inhibition ... taking effect before that date but during that period; or

(2) anything registered or recorded in that register and taking effect, before that date but during that period, and having the effect of an inhibition registered against the granter."

See Check for advance notice above.

Section 159 of the Bankruptcy and Diligence etc. (Scotland) Act 2007 ("the 2007 Act") - property acquired by third party in good faith

Section 159 of the 2007 Act provides that an inhibition ceases to affect a property of the debtor if the conveyance/granting of the right is for value and the person acquiring the property or right acts in good faith. A person is assumed to act in good faith if they have no knowledge of the inhibition and have taken all reasonable steps to find out whether or not such an inhibition exists. The purchaser will be considered to have acquired the property or a right in it on the date of delivery of the conveyancing deed.

Section 160 of 2007 Act

This provides that an inhibited debtor breaches an inhibition when they deliver a deed to a third party transferring/granting a right in any property which is affected by the inhibition. Section 160 may interact with the common law rule that only a voluntary act of the debtor can be affected, and comes into effect where a concluded contract exists at the time of the effective date of the inhibition against the seller.

Examples of applications

Application for registration of disposition or grant of lease or assignation of lease

Where A concludes a contract (typically missives) to sell subjects or to grant or assign a lease to B and A is thereafter inhibited by C.

If missives have been concluded prior to the effective date of the inhibition, previous court cases have established that the inhibition does not bite at the disposition, grant or assignation of lease between A and B. A is generally considered to be under an obligation to sell or lease the property and the disposition, grant or assignation of lease to B is therefore not a voluntary act and not a breach of the inhibition.

However, given the terms of section 160 of the 2007 Act, it is for the applicant and their agent to reach a view on whether a particular inhibition affects the registrable deed in the circumstances.

Application for registration of disposition and standard security - granter of security is inhibited

There are two critical dates if the inhibition against the purchaser (granter of the security) is after the date of delivery (often the date of entry specified in the disposition but not necessarily).

the date of delivery of the disposition; and
the date of settlement of the loan transaction underlying the standard security

The purchaser’s right under missives is the right to a conveyance delivered in exchange for the price. Until delivery the purchaser has no title. An inhibition does not affect property acquired after the date of registration of the inhibition, or any future dealings with such property acquired after the date of registration of the inhibition, for example the grant of a standard security.

If an inhibition is registered against a purchaser on the same date as that on which his or her purchase is completed (date of settlement), the inhibition would strike at the validity of the standard security.

The facts of each application are not known to the registration officer and again, it is for the applicant to confirm whether a particular inhibition is adverse to the registrable deed.

Application for registration of standard security

The inhibition cannot affect a standard security if the date of settlement of the loan transaction pre-dates the inhibition. However, section 160 of the 2007 Act may affect whether a particular grant of standard security is potentially affected by an inhibition, and it is for the applicant to confirm whether a particular inhibition is adverse to the registrable deed.

Extinction and termination of inhibitions

Part 5 of the 2007 Act sets out a number of ways in which an inhibition may be wholly extinguished.

Expiry of 5 year period

An inhibition ceases to have effect after five years have expired from the date on which it became effective, unless it has been breached. If the inhibition has been breached, the right to reduce any deed which breached the inhibition remains for up to 20 years from the date that the inhibition is breached.

Repayment of debt

In terms of section 157 of the 2007 Act, where an inhibition is executed to enforce payment of a debt and a sum is paid in respect of that debt plus interest, the inhibition expenses and the expenses of discharging the inhibition, the inhibition will cease to have effect. In these circumstances, the Keeper will not disclose the inhibition in a title sheet, provided that a discharge of the inhibition has been registered in the ROI.

If an application contains written confirmation that the provisions of section 157 apply to an apparently outstanding inhibition, but no discharge has been registered, the application should be referred to a senior caseworker.

Recall

Where the debt and other relevant sums have been repaid, the debtor is entitled to a discharge from the inhibitor. If the inhibitor fails to grant a discharge, the debtor may petition the court for recall of the inhibition. A court order recalling an inhibition may be registered in the ROI, and will be reflected in the ROI Minute Book by entry in the following style:

Certified Copy Interlocutor [dated] recalling Inhibition [registration date] in causa [inhibitor] - against [inhibited, designed] per XY, Agent

Discharge

Once the Inhibition is extinguished the creditor may grant a discharge of inhibition in order to clear the record. This will be registered in the ROI using the following style of minute:

Discharge by [creditor] of inhibition [registration date] against [inhibited, designed] per XY, Agent

Performance ad factum praestandum

Section 158 of the 2007 Act confirms that where a decree for the performance of a particular act (a decree ad factum praestandum) is complied with, any inhibition executed to enforce that decree ceases to have effect.xx

Termination by death of the debtor

In general terms, an inhibition will fall on the death of the debtor, i.e. it will not strike at transactions with the debtor’s property which are entered into by their executor. However, if the deceased had already entered into a transaction which breached the inhibition, then the inhibitor has the right to reduce that transaction for up to 20 years after the transaction took place. In practical terms, when deciding whether or not to disclose an inhibition in the title sheet in such circumstances, the Keeper will proceed based on the information provided by the applicant.

If an application by an executor contains written confirmation that an apparently outstanding inhibition is extinguished due to the death of the debtor, the Keeper will rely on the agent's certification in this regard. The registration officer can proceed to complete registration without making reference to the ROI entry in the title sheet as required under section 32 of the 2012 Act. However, if the position is unclear a referral should be made to a senior caseworker in the first instance.

In addition, an inhibition may also cease to be effective against a particular property of a debtor upon purchase by a third party acting in good faith in terms of section 159 of the 2007 Act.

For information about other rules that affect whether a particular inhibition can affect the transaction for example, where a registrable deed must be a voluntary act of the debtor occurring after the date of the inhibition or the inhibition can only affect property held by the debtor at the effective date, see above at Frequently asked questions and Is a registrable deed in breach of, or subject to, an inhibition?

Registration practice where registrable deed not protected by advance notice

Having checked whether the registrable deed was protected by an advance notice, the registration officer should refer the application to a senior caseworker. They will confirm that an entry would be required on the title sheet under section 32 if additional evidence confirming that the registrable deed is not affected by the inhibition is not obtained from the applicant's agent. Thereafter, the registration officer will raise a requisition on an LR21 and place the application in standover for 42 days (see Substitution or Amendment - Requisition Policy and Procedures for further information on standover arrangements).

If no response is received within the 42 day period, an entry under section 32 will be made in the proprietorship section of the title sheet similar to the style provided below.

If clear written assurance is received within the 42 day period then no entry will be made under section 32. See section below for details of registration policy and guidance on the role of the registration officer.

Style of adverse entry note

Note: Schedule of Inhibition, Bank of Alba PLC – against said Christina Mitchell [or against Christina Mitchell (desig)], per James Iain Smith, Registers of Scotland, recorded Register of Inhibitions and Adjudications 19 August 2013 [Notice whereof was recorded 7 August 2013].

The details for the note are obtained from the ROI minute.

Registration policy and practice on apparently adverse entries

Where an inhibition intervenes between the date certified in the application form and the date of application for registration of the registrable deed, the applicant's agent will be contacted and a written assurance sought that the relevant right has not been created, transferred or discharged in breach of the inhibition. If the applicant's agent gives such assurance reliance will be placed upon this assurance and an entry under section 32 will not be included in the title sheet. Where the applicant's agent is unable to give such assurance, an entry will be made for the details of the inhibition or other ROI entry on the title sheet in the style provided above.

The written assurance should either:

(1) clearly indicate that the ROI entry does not relate to the granter of the registrable deed; or

(2) clearly state that the registrable deed is not in breach of the inhibition whether further reason for this view is given or not.

The registration officer does not require to consider whether any reason provided in the written confirmation is apparently appropriate or any separate evidence submitted to assess the position.

Reinhibition

Although an inhibition lasts for only 5 years from the date it comes into force, the creditor can re-inhibit at the end of that period and on subsequent occasions for a further five year period. The inhibitor may wish to re-inhibit, either because the inhibition has prescribed or is about to prescribe, or so as to inhibit property acquired by the debtor after the date of the original inhibition.

To all intents and purposes, re-inhibition constitutes an inhibition of new and the rules outlined in paragraph Effective date of an inhibition above will apply (i.e. the effective date of the inhibition will be either the beginning of the date of registration or the date of service of the Schedule on the debtor). Furthermore, the inhibition will strike only at property over which the debtor has a power of disposal at the time the new inhibition becomes effective, which may be different from property struck at by the original inhibition.

In practical terms, re-inhibition may be comparatively rare as section 165 of the 2007 Act provides that the expenses of only one further inhibition after the original inhibition will be recoverable from the debtor.

ROI Entries relating to Proceeds of Crime legislation

An inhibition under the Proceeds of Crime legislation has the same effect as any other inhibition: it affects all heritable property of the inhibited person, unless the inhibition itself limits its effect to particular property.

In terms of the Proceeds of Crime Act 2002, there are a number of recourses available to enable the recovery of property, the purchase of which was funded by the proceeds of crime. One is, having obtained a restraint order, to apply to the court for a warrant for inhibition against someone specified in such an order; the CCI containing the warrant is then registered in the ROI. Another option is to obtain a civil recovery order, and register this in the ROI.

Both have inhibitory effect against an individual's property; the warrant for inhibition resulting from a restraint order has inhibitory effect from the date of registration in the ROI, whereas the civil recovery order has an inhibitory effect from the date it is made. If either entry is encountered in a search of the ROI, it should be dealt with by registration officers in the same way as any other inhibition, taking account of the foregoing comment on the effective date. However the recovery order will also vest property in the trustee who will act in the civil recovery of the assets. It is therefore open to the trustee for civil recovery to complete title to any heritage, by way of a notice of title and using the recovery order as a link in title.

The inhibitory effect of the order and its registration in the ROI provides a safeguard against transactions by the individual in question prior to the trustee completing title.

When the trustee completes title the proprietorship section of the title sheet should be updated to remove the existing proprietor and register the trustee as the new proprietor.

Example proprietorship section entries

Existing title:

Entry No.	Proprietor	Date of Registration	Consideration
1	B (designation)	12 Dec. 2010	£1,200,000 Date of Entry 2 Nov. 2010

Updated title:

Entry No.	Proprietor	Date of Registration	Consideration
1	Guy Good (designation) as Trustee for civil recovery	12 Oct. 2014	Judicial Transfer Date of Entry [date of order]

If the individual in question was a co-proprietor then the entry should be in the following style:

Existing title:

Entry No.	Proprietor	Date of Registration	Consideration
1	Katherine Anderson and James William Anderson (designation), equally between them	12 Dec. 2010	£1,200,000 Date of Entry 2 Nov. 2010

Updated title:

Entry No.	Proprietor	Date of Registration	Consideration
1	James William Anderson (designation) to extent of a 1/2 pro indiviso share	12 Dec. 2010	£1,200,000 in respect of the whole subjects in this Title Date of Entry 2 Nov. 2010
2	Guy Good (designation) as Trustee for civil recovery to extent of a further 1/2 pro indiviso share	Date of Registration 12 Oct. 2014	Consideration Judicial Transfer Date of Entry [date of order]

Sequestration

What is sequestration?

Sequestration is a process that is invoked either by the debtor or one of his creditors. The estate of the debtor is taken over and subsequently distributed among the creditors according to their various entitlements. For sequestration to be awarded, the debtor must meet the test set out in the legislation for apparent insolvency. Apparent insolvency is the terminology that replaced the more familiar term "bankrupt".

Sequestration is governed by the Bankruptcy (Scotland) Act 2016 ("the 2016 Act"), which consolidated the Bankruptcy (Scotland) Act 1985, the Bankruptcy (Scotland) Act 1993, elements of the Bankruptcy and Diligence etc. (Scotland) Act 2007, the Home Owner and Debtor Protection (Scotland) Act 2010, the Bankruptcy and Debt Advice (Scotland) Act 2014 and the Protected Trust Deeds (Scotland) Regulations 2013, and related pieces of statute. Its terms apply to petitions and debtor applications lodged on or after 30 November 2016.

Who may be sequestrated?

Section 1 of the 2016 Act provides that "the estate of a debtor may be sequestrated in accordance with the provisions of this Act". In addition, other provisions in Part 1 of the 2016 Act set out that this includes living debtors, the executors of deceased debtors, trusts, partnerships, limited partnerships, bodies corporate and unincorporated bodies. Companies registered under the Companies Acts, LLPs, or an entity in respect of which an enactment provides that sequestration is incompetent are excluded.

All references to the Bankruptcy Act in the manual refer to the Bankruptcy (Scotland) Act 2016 ("the 2016 Act"). This Act did not change sequestration law in Scotland: rather, as a consolidating act, it amalgamated the terms of the various acts referred to above into a single item of legislation. In turn this means that the policies and practices set out in this manual will apply to all sequestrations and applications for registration affected by them, regardless of whether the sequestration is governed by the 2016 Act or the previous statute.

Inhibitory effect of ROI entry

The recording of the relevant order, i.e. the certified copy interlocutor granting warrant to cite or the determination awarding sequestration (as the case may be), has the effect of an inhibition for a period of 3 years dating from the date of sequestration (the date of the award/order rather than the recording date). This means that the property becomes litigious and the Trustee can seek reduction of any deed granted by the bankrupt if he attempts to transact with the property during that time. Since the date of sequestration is the date of the order/award and not the date of recording in the ROI, litigiosity is retrospective, albeit usually only to the extent of 2 or 3 days.

There are two routes to sequestration. Either the creditor can initiate proceedings through the courts or the debtor himself can choose to do so by application to the Accountant in Bankruptcy (AiB).

Debtor application

A debtor may apply to the AiB for his or her own sequestration. The AiB can award sequestration forthwith if the relevant criteria are met. If the AiB awards sequestration, they will appoint a trustee or act themselves as trustee if no-one else is appointed. If the AiB refuses to award sequestration, the debtor can appeal to the sheriff court. If successfully appealed, the trustee is appointed on the award of sequestration by that court. If the criteria are met, a determination awarding sequestration will be granted and the AiB must send a certified copy of the determination for recording in the ROI.

The effective date for the sequestration is the date on which the AiB issues the determination awarding sequestration (17 April 2015 in the example below), not the date on which the determination is recorded (again using the example below, 20 April).

Example ROI entry for determination awarding sequestration

The entry in the ROI will be in the following (or similar) terms:

012345 20 April 2015

Certified Copy Determination awarding sequestration of estate of Charles Le Mesurier, Flat 1/2, 68 Queen Street, Edinburgh. Date of Award 17 Apr 2015. Per James Iain Smith, Registers of Scotland.

Petition by creditor or trustee under trust deed

The procedure is the same for a creditor or a trustee under a trust deed. On receipt of a petition that conforms to the statutory requirements, the court will grant an interlocutor (an order of the court) instructing the debtor to appear before the court on a specified date between 6 and 14 days later. The hearing affords the debtor the opportunity to persuade the Sheriff that sequestration should not be awarded.

In terms of section 26(1) of the 2016 Act, after the sheriff grants warrant to cite the debtor, the sheriff clerk is required to send a certified copy of the court order granting warrant to cite the debtor to the Keeper for recording in the Register of Inhibitions. The date of the warrant to cite the debtor is taken to be the date of sequestration.

The effective date for the sequestration is the date on which the court issued the interlocutor (in the example below 5 January), not the date on which the certified copy of the interlocutor is recorded in the ROI (in the example below 9 January). The date of recording in the ROI will generally be some 2 to 3 days after the date of sequestration, although longer delays can occur.

Example ROI entry for Certified Copy Interlocutor granting warrant to cite debtor

The entry in the ROI will be in the following (or similar) terms:

012345 9 January 2015

Certified Copy Interlocutor (Sequestration), granting warrant to cite Wacława Nowakowska, 12 Bank Street, Montrose. Date of warrant 5 Jan. 2015. Per James Iain Smith, Registers of Scotland.

Multiple warrants to cite

Occasionally the court grants more than one warrant to cite the same debtor. This often arises where the original interlocutor contains some informality such as an erroneous designation. The date of sequestration runs from the date of the first warrant to cite.

The AiB also has authority to correct clerical or incidental errors in any documents required by the legislation. In the event that the correction affects a matter in the Register of Inhibitions then a certified copy of the order must be sent to the Keeper without delay.

This situation should not be confused with the position where a debtor is once again sequestrated after being discharged, which might occur whilst the 3 year inhibitory period of the previous sequestration is still running.

The following ROI entries must also be considered:

Refusal of award of sequestration

Sequestration can be refused when the petition calls before the sheriff in consequence of the warrant to cite having been served on the debtor. In the event that a warrant to cite is registered in the ROI and there is no subsequent deed counteracting this, the presumption is that sequestration has been awarded. If the sheriff refuses to award sequestration, a certified copy of this order will be recorded in the ROI.

Recall of award of sequestration

After an award of sequestration has been made, it can be recalled by means of a petition to the sheriff. Recall of sequestration is distinct from refusal and results from the raising of a separate legal action in respect of an existing sequestration. A certified copy of the order recalling the sequestration must be sent to the Keeper. The sheriff deals only with a limited number of requests to recall sequestrations and the majority of such applications will go to the AiB. In those cases, where a recall is granted, the AiB will send a certified copy of the decision to the Keeper.

Discharge/Deferral of discharge of debtor

For petitions lodged or applications made after 1 April 2015, a debtor is no longer automatically discharged; similarly, there is no provision for discharge on composition. There are different discharge procedures to be followed depending upon whether the AiB is trustee or not but, in both cases, the AiB determines whether or not to discharge the debtor. There is no provision for the AiB to send a certified copy of the decision to discharge or not to the Keeper.

For petitions lodged or applications made between 1 April 2008 and 1 April 2015, the debtor is discharged one year after the date of sequestration. Discharge is automatic unless the trustee or the AiB proceed with a petition to the Sheriff for deferral of discharge. Where deferral is granted, the sheriff clerk will send a certified copy of the order to the Keeper for recording in the ROI.

The effect of a debtor's discharge remains the same regardless of whether the petition was lodged or application made before, on or after 1 April 2015: the debtor is discharged of all debts and obligations owed by him (under certain exceptions), but discharge (or lack thereof) does not alter or bring to an end the inhibitory effect of the recording of the CCI granting warrant to cite or the award of sequestration in the ROI.

Memorandum of renewal of sequestration

By section 26(6), the trustee in sequestration may, if he has not been discharged before the end of the 3 year inhibitory period, send a memorandum for renewal to the Keeper for recording in the ROI. Such recording renews the inhibitory effect for a further 3 years. It is possible for the trustee to continue to renew the sequestration at, or before, the expiry of each subsequent 3 year period. Although infrequent, it is therefore possible that a sequestration which commenced initially in, for example, 2005 to be still ongoing as a result of memoranda of renewals being recorded in 2008, 2011 and then 2014. This provision applies no matter what date the sequestration commenced.

Renewal continues the effect of the sequestration as an inhibition and citation in an adjudication in terms of section 26(3) of the 2016 Act regarding property which has already vested in the trustee and prevents a family home from re-vesting in the debtor in terms of section 112. The 2016 Act also clarifies that the inhibitory effect of the recording of renewal begins with either (i) the date of expiry of the inhibitory period triggered by the recording of the certified copy interlocutor granting warrant to cite, or (ii) the expiry of an additional three year inhibitory period that resulted from the recording of a previous memorandum of renewal.

It is important to realise that recording a memorandum of renewal does not prevent the debtor's automatic discharge where this is possible for pre-1 April 2015 sequestrations. The existence of a certificate of discharge of the debtor in terms of said section does not mean that a memorandum can be ignored. However, the memorandum does not prevent the debtor from acquiring new property which will (i) be free of the inhibitory effect of the original sequestration, and (ii) not vest in the trustee since by virtue of sections 86(5) and 79(5)of the 2016Act it is only property acquired after the date of sequestration and before the debtor's discharge becomes effective which vests in the trustee.

Section 152 of the 2016 Act provides for a trustee to be appointed or reappointed if certain assets of a debtor are discovered after the trustee's discharge, but before the expiry of a five year period beginning with the date of sequestration. Such trustees may send a memorandum for recording in the ROI before their appointment expires and this has the same inhibitory effect as the memorandum of renewal described above, although the date that this inhibitory period begins is the date of notification in terms of section 153(1).

Any application involving a memorandum of renewal or a memorandum under section 152 must be referred to a senior caseworker.

If sequestration is granted by the sheriff court, the trustee is appointed and vested in the debtor's estate on the award of sequestration. In practical terms the ROI is cleared at the conclusion of the 3 year inhibitory period unless a memorandum of renewal, recall, or refusal to award sequestration is subsequently recorded in the register.

Powers of Trustee in relation to heritable property

Once appointed, the trustee can either register their title to the debtor's property, dispone the property or ultimately reconvey it to the debtor. The terms of the Land Registration etc (Scotland) Act 2012 mean that the Keeper will no longer expect a deed of appointment to be submitted as part of an application for registration of a disposition by a trustee. Instead the applicant will be expected to certify on the application form that the appropriate links are in place.

Registration of trustee's title

The trustee is appointed and vested in the debtor's estate on the award of sequestration. This enables the trustee to complete title to the heritage in his own name (in the capacity of trustee in sequestration) using a notice of title. In line with usual practice, the application to register a notice of title does not need to be accompanied by the relevant link. A notice of title in the appropriate statutory style effectively certifies that the midcouples exist and provided that the applicant does not indicate a concern with the validity of the title in the application, registration can proceed provided that the notice is otherwise ex facie valid, is executed correctly and narrates the appropriate title number.

However, the registration officer should ensure that the debtor is the current owner (or co-owner) of the subjects.

Example title sheet entry

The original entry(ies) in the proprietorship section should be amended to remove reference to the debtor.

If the debtor is the sole proprietor, the trustee in sequestration will replace him in the Proprietorship Section. The consideration should be stated as "Not applicable". If a date of entry is given in the deed and/or the application form, the process outlined in Entry Date and Property Details can be followed. If no date is provided (standard for notices of title) no date should be entered but an explanatory note added to the entry as follows:

Entry No.	Proprietor	Date of Registration	Consideration
1.	A, [designation] as trustee on the sequestrated estate of B. Note. "The date of entry field is intentionally blank."	10 Apr. 2015	Not applicable Date of entry

Entry No.

Proprietor

Date of Registration

Consideration

A, [designation] as trustee on the sequestrated estate of B.

Note. "The date of entry field is intentionally blank."

10 Apr. 2015

Not applicable

Date of entry

If the debtor owns the property with another party or parties, reference to the debtor should be removed. An additional entry for the trustee should be created, as below.

If the interest is subject to a special destination, notes should be added to the entry for the subsisting proprietor and the trustee, also as below. Even if a trustee completes title to a half-share in a property, a special destination will continue to subsist and should be disclosed.

Entry No.	Proprietor	Date of Registration	Consideration
1.	A, [designation] to the extent of a 1/2 [pro indiviso] share Note: the said A holds a 1/2 [pro indiviso] share of the interest subject to the destination in the disposition to A and B [designation], [terms of special destination] of the whole subjects in this title, registered 11 Nov. 2011	11 Nov. 2011	£100,000 in respect of the whole subjects in this Title Date of entry 11 Nov. 2011

2.	C, [designation] as trustee on the sequestrated estate of B, to the extent of a further 1/2 [pro indiviso] share. Note: the title of said C is held subject to the destination described in the note to entry 1. Note. "The date of entry field [in entry xx] is intentionally blank."	10 Apr. 2015	Consideration Not applicable Date of entry

Entry No.

Proprietor

Date of Registration

Consideration

A, [designation] to the extent of a 1/2 [pro indiviso] share

Note: the said A holds a 1/2 [pro indiviso] share of the interest subject to the destination in the disposition to A and B [designation], [terms of special destination] of the whole subjects in this title, registered 11 Nov. 2011

11 Nov. 2011

£100,000 in respect of the whole subjects in this Title

Date of entry

11 Nov. 2011

C, [designation] as trustee on the sequestrated estate of B, to the extent of a further 1/2 [pro indiviso] share.

Note: the title of said C is held subject to the destination described in the note to entry 1.

Note. "The date of entry field [in entry xx] is intentionally blank."

10 Apr. 2015

Consideration

Not applicable

Date of entry

Sale by trustee/Disposal of bankrupt's Family Home

After the award of sequestration the trustee has the power to sell the debtor's property, either after having completed title to the property or by disposition. The applicant will confirm that the relevant links are in place. If this is not the case the application should be referred to a senior caseworker.

The registration officer must ensure that the debtor is the current owner of the property.

If the debtor is a co-proprietor then the trustee only has title to transact with the debtor's share. Any statutory restrictions on the sale of property by the trustee will have been investigated and resolved by the agent prior to submitting the application. If there is any indication that this is not the case, the application should be referred to a senior caseworker to consider cancellation.

Reconveyance by trustee to debtor

If the trustee has completed title to heritage but not transferred title to a third party - which could include another pro indiviso proprietor - before the sequestration comes to an end (by the trustee and the debtor both being discharged) it will be necessary for the trustee to convey the subjects back to the debtor. Discharges of the trustee and debtor are not registrable deeds: a formal transfer by the trustee is required.

Where there is no other pro indiviso proprietor, and the whole property is being transferred to the debtor, the existing entry in the Proprietorship Section for the trustee should be deleted, and a new entry added for the transfer from the trustee to the former debtor.

Where title is registered in the name of the trustee in sequestration and another party (or parties) in accordance with the guidance provided in the above section relating to the registration of trustee's title, then the entry relating to the trustee can be removed. A new entry can then be added for the transfer from the trustee to the former debtor. The following reflects how such a transaction would be given effect to in the example title sheet shown above.

If the original disposition in favour of the debtor and another party or parties was subject to a special destination, notes disclosing this should be added to the entries, As the title of the trustee can be no better than that of the debtor, consequently the subsequent re-vesting of the property in the debtor is not capable of differing from the original title. In other words, the destination remains relevant.

Example title sheet entry

Entry No.	Proprietor	Date of Registration	Consideration
1.	A, (designation), to extent of a 1/2 pro indiviso share	19 Sep. 2010	£100,000 in respect of the whole subjects in this Title
			Entry
	Note: The said A holds a 1/2 pro indiviso share of the subjects subject to the destination in the disposition to said A and B [designation] [terms of destination] of the of the whole subjects in this Title, registered 19 Sep. 2010.		30 Aug 2010

		Date of Registration	Consideration
2.	B (designation) to extent of a further 1/2 pro indiviso share	15 Jul. 2016	No Consideration
			Entry
	Note: The title of the said B is held subject to the destination described in the note to entry 1.		10 Jul. 2016

There is a prohibition on a trustee in sequestration completing title within the 28 day period beginning with the date that the CCI granting warrant to cite or certified copy notice of determination was recorded in the ROI. However, this is a statutory requirement that the submitting agent and applicant should be aware of, and have complied with, prior to submitting a notice of title for registration on behalf of the trustee.

Effect of sequestration on inhibitions and prior registered securities

An inhibition against a debtor registered prior to the date of his sequestration ceases to be effective as an inhibition upon that date and should not be disclosed on the title sheet.

There are two reasons why the trustee's title is not affected by prior inhibitions against the debtor. In the first place, acts by the trustee are not voluntary acts by the debtor. In the second place, section 78(5) of the Bankruptcy (Scotland) Act 2016 provides that the exercise by the permanent trustee of any power conferred on him by that Act in respect of any heritable estate vested in him shall not be challengeable on the ground of any prior inhibition. (Inhibiting creditors whose inhibitions have been registered more than 60 days before sequestration are compensated by having a preferential ranking on the debtor’s estate).

However if the debtor has taken a title which is subject to an inhibition against a previous proprietor, that inhibition will remain effective on the principle that the trustee in sequestration can acquire no better title than the debtor has.

All outstanding standard securities should continue to be disclosed on the title sheet, unless formally discharged.

Guidance on procedures to be followed if a deed is received that has been granted in breach of the inhibitory effect of an ROI entry can be found below at Transaction by debtor.

Acquirenda

Acquirenda operates differently depending on the date that the application to the AiB or petition to the court was made:

For applications and petitions made prior to 1 April 2015, property acquired by the debtor from the date of sequestration up to his automatic discharge a year later vests in the trustee. If a debtor's discharge was deferred by the court then acquirenda could continue to operate throughout the deferred period.
For applications and petitions made on or after 1 April 2015, property acquired by the debtor from the date of sequestration until four years after this date will vest in the trustee. Discharge of the debtor is no longer automatic after this date, nor is discharge linked to the operation of acquirenda.

Transaction by debtor

Transactions prior to end of 3 year inhibitory period

Prima facie, any dealing by a sequestrated party who is still subject to the inhibitory effect of an entry in the ROI, whether in respect of property that vested in the trustee at the date of sequestration, or property that has vested in the trustee by virtue of acquirenda, is irregular without the participation or consent of the trustee in sequestration.

The Keeper will not limit warranty if a debtor transacts with property after the expiry of the three-year inhibitory period even though the trustee remains vest in the property because there is no breach of the inhibitory effect. Accordingly, even if the debtor is transacting with property that has vested in the trustee by virtue of acquirenda, the main point for consideration by registration staff is whether the transaction breaches the inhibitory effect of an entry in the ROI, whether a Certified Copy Interlocutor (CCI) granting warrant to cite, a Certified Notice of Determination (CND), or another type of document.

If it is apparent that a transaction is struck at by the inhibitory effect of an entry in the ROI, either from information contained in the application, a search undertaken by the registration officer as part of the application, or because the matter is already disclosed on the title sheet, and the trustee in sequestration has neither granted nor consented in gremio, details of the sequestration should be entered on the title sheet, in terms of section 32(2) of the 2012 Act, as detailed below.

Style of entry in proprietorship section - disposition granted in breach of the inhibitory effect of an ROI entry

In this case, details of the sequestration should be entered in the proprietorship section. This should be in similar terms to the following, with the details of the CCI being taken from the ROI search:

Note: The title of the proprietor of the plot of land in this title follows upon a disposition by X {design} (insert name of grantor/debtor) to Y (purchaser from debtor) registered (insert details of registration). The estate of the said X has vested in the trustee in sequestration on the estate of the said X. The title of the said X was subject to the following entry in the Register of Inhibitions: (details of CCI or determination).

Where the new proprietor has granted a standard security, no further note is required in the securities section, since the title sheet as a whole is clear that the title of the registered proprietor is subject to possible reduction by the trustee in sequestration.

Style of adverse entry note - standard security granted in breach of the inhibitory effect of an ROI entry

Details of the sequestration should be entered in the proprietorship section in the following way. It remains open for the trustee in sequestration to make up title to the subjects.

Note: The estate of the said X has vested in the trustee in sequestration of the said X. The title of the said X is subject to the following entry in the Register of Inhibitions: (details of CCI or determination).

Acceptable transactions by debtor

There are two situations (specific to sequestrations awarded on or after 1 April 2008) where the debtor can transact with property within the 3 year inhibitory period. These are set out below.

Transactions within 7 days of the date of sequestration

Section 87(10) of the 2016 Act provides that where a person deals with a debtor after the date of sequestration, the dealing is not void if it relates to incorporeal or heritable property, was done in good faith for an adequate value and was done during the period of 7 days after the sequestration is awarded. This takes into account the period when a sequestration has been granted but does not appear in any register, a time when the grantee could not reasonably know of the sequestration. The statute sets out that the dealing can constitute ‘the creation, transfer, variation or extinguishing of a real right in heritable property’.

If a registration officer encounters this situation as a result of a ROI search disclosing the existence of the sequestration, evidence should be sought from the submitting agent that the provisions of section 87(10) have been met. If no evidence is forthcoming, details of the sequestration should be entered on the title sheet as above.

Abandonment of the property by the trustee

Where the trustee has abandoned to the debtor any heritable property, section 87(9) of the 2016 Act provides that the trustee is to record a notice in the prescribed form in the ROI (but please note that it is not possible for a trustee in a sequestration that pre-dates 1 April 2008 to abandon property). This ensures that anyone dealing with the debtor can see from a search of that register that the debtor is the owner. A search would reveal the existence of the sequestration: without the notice of abandonment being recorded it would appear to a searcher that the property was still owned by the trustee for the creditors in the sequestration.

Example Notice of Abandonment

747474 02 Apr 2008

Notice of Abandonment dated 02 Apr 2008, of the sequestrated estate of CHARLES LE MESURIER, Flat 1/2, 68 Queen Street, Edinburgh in relation to Flat 1/2, 68 Queen Street, Edinburgh under Land Register Title No. MID1234. Date of award 01 Apr 2008. Per James Iain Smith, Registers of Scotland

The existence of the notice of abandonment is sufficient evidence to allow the debtor to transact with the property as narrated in the notice. When processing an application for registration where the property has been abandoned by the trustee, the Keeper would expect this fact to be disclosed by the agent as additional information to the application for registration. If the notice of abandonment is identified by the registration officer as part of the search of the ROI, the officer must be satisfied that the notice of abandonment relates to the property the debtor is transacting with. If this is not clear from the ROI minute, confirmation should be sought from the submitting agent. If no evidence is forthcoming, details of the sequestration should be entered on the title sheet as detailed above.

Moratorium on diligence

Sections 195 - 198 of the 2016 Act contain provisions for there to be a moratorium on diligence when a debtor notifies the AiB that he intends to apply for sequestration, for a trust deed to be granted the status of protected trust deed, or to enter a debt payment programme. During the period of moratorium – the length of which varies depending on the circumstances – it is incompetent to commence and execute diligence, or present (or concur in the presentation of) a petition for sequestration founded on debt owed by the person in question. It is therefore possible (if unlikely) for the Keeper to receive an application for registration of a deed that appears to be affected by an adverse entry in the ROI which would usually fall to be disclosed in the title sheet, but which an agent claims to be incompetent due to a moratorium when contacted by a senior caseworker. An application involving such a claim should be referred to the Legal Policy unit for consideration.

Trust deed for creditors

A trust deed for creditors is defined at length in section 228(1) of the 2016 Act. In summary it is a formal, voluntary, arrangement entered into by an individual and his or her creditors. It will provide for the debtor to manage repayment of debts more efficiently via his or her trustee.

A trust deed for creditors is by its nature a voluntary act and can itself be considered to be a fraudulent preference or a gratuitous alienation. The trust deed conveys irrevocably the assets of the granter of the trust, but only assets capable of voluntary transfer may be effectively transferred even if the trust deed purports to have a different effect.

A trust deed may be granted "protected" status. This protected status of the deed means that the creditors are unable to petition for the debtor's sequestration during the period that the trust deed subsists, and repayments have to be pursued via the trust deed arrangements. From a registration perspective, the considerations are generally the same as for a trust deed, provided that an application for registration does not indicate any concern about (a) the trust deed's constitution, or (b) whether the property in question can be validly transacted with by the trustee.

Implications for heritable property

The trustee becomes vest in the debtor's property when the trust deed is delivered, but the trust deed does not transfer the real right to property to the trustee and it is not a registrable deed. However, a trustee can apply to register title in their name using a notice of title. In a transfer to a third party, the trust deed can be used as a link in title.

Notice of title by trustee

Where a trustee under a trust deed wishes to expede and register a notice of title, the guidance in "Who can expede a notice of title?" in Requirements of Registrable Deeds can be followed.

Sale to third party by trustee

Where a trustee under a trust deed is conveying to a third party and is not registered proprietor, the guidance in "Grantor Must Have Title to Grant" in Requirements of Registrable Deeds can be followed.

Trust deeds and the register of inhibitions

A trust deed for creditors must be registered in the Register of Insolvencies, not the ROI. However, schedule 4, para. 3 of the 2016 Act provides that the trustee may record a notice in the ROI. If recorded, this has the effect of a schedule of inhibition.

If a registration officer becomes aware of a recorded notice in the ROI by a trustee under a trust deed, the guidance in above relating to schedules of inhibition can be followed.

It is possible - if unlikely - that the debtor could grant title to a purchaser who had no knowledge of the trust deed. However if the Keeper becomes aware that the debtor has granted a trust deed but the ROI contains no notice, the application should be referred to a senior caseworker.

End of a trust deed

There is no prescribed period for the duration of a trust deed, although there is provision in the 2016 Act for discharge of both the debtor and the trustee. In addition, schedule 4, paragraph 3(3) of the 2016 Act provides for the trustee to record in the ROI a notice recalling the notice by the trustee under the trust deed in the ROI. This will happen after the debtor's estate has been distributed among his or her creditors or if the trust deed has ceased to operate. However it can be unclear at what point a debtor re-acquires assets. Any application where this is an issue should be referred to a senior caseworker.

Registration officers should note that a trustee under a trust deed cannot acquire a higher right than the debtor. For this reason, before granting a trust deed, inhibitions should be discharged. Should an officer encounter a situation where a prior undischarged inhibition is disclosed in an application form or search, the application should be referred to a senior caseworker in the first instance due to the likely complexity of the background.

Adjudication

There are two types of adjudication which a registration officer may encounter, adjudication in execution (otherwise known as adjudication for debt) and adjudication in implement. Adjudication is the next step which can be taken by an inhibiting creditor to obtain a real right in the heritable property of the debtor, though it is possible to adjudge without inhibiting. The effects of adjudication in execution and adjudication in implement are quite different. For guidance on each type of diligence see below.

Adjudication in execution

Adjudication in execution (sometimes also called adjudication for debt) is a form of diligence where a creditor has a decree for payment. When a court action seeking an order for adjudication in execution is commenced, the creditor can choose to register a notice of summons of adjudication. Once a court order in an action for adjudication is pronounced, the decree can be recorded in the Register of Sasines or registered in the Land Register.

Statutory background

A decree of adjudication in execution is a registrable deed by virtue of section 62 of the Titles to Land Consolidation (Scotland) Act 1868, read with section 29(2) of the Land Registration (Scotland) Act 1979. It is relatively uncommon to encounter such an application for registration. The Bankruptcy and Diligence etc. (Scotland) Act 2007 contains provisions intended to end the use of adjudication in execution and replace it with a new diligence known as land attachment. The provisions for land attachment are not yet in force however and decrees of adjudication in execution may still be encountered.

Inhibitory effect of ROI entry - Notice of Summons of Adjudication

As part of the process of obtaining an adjudication in execution, the creditor will usually register a notice of summons of adjudication in the ROI, which has the effect of an inhibition against the debtor in respect of the property identified by the notice, which subjects might be either a plot of land or a lease or, in theory at least, a heritable security. Where such a notice is encountered by a registration officer but the adjudication has not been registered or recorded in the Register of Sasines the registration officer will need to treat the Notice in the same manner as a potentially adverse inhibition if a registrable deed is submitted by the debtor that may be in breach of the notice of summons of adjudication.

The notice would become ineffective however if the action had terminated without the court ordering the adjudication to go ahead.

Example ROI entry for Notice of Summons of Adjudication

Notice of Summons of adjudication, (or of constitution and adjudication), ‑ AB (designation of pursuer) against CD (designation of defender) ‑ relating to (insert description of lands).

Registration of Decree of Adjudication in Execution in land register

On registration of an adjudication in execution in the Land Register, the title of the debtor as absolute owner of a property does not pass to the inhibiting creditor. This is because a decree of adjudication in execution does not by itself give the adjudging creditor an absolute title to the subjects as an owner, as the debtor can still purge the debt at any time during a period of ten years known as ‘the legal’, thereby nullifying the effect of the decree. Rather the creditor is in a similar position to the holder of a heritable security, and will rank with other heritable creditors. In theory, following a decree of adjudication in execution, the owner can be physically removed from the property, which could then be leased by the adjudger at this point, but the creditor cannot sell or transfer the property. This remains the position throughout the period of the legal.

At the expiry of the legal, in order to obtain a real right as absolute proprietor, the creditor has to obtain a decree of declarator of expiry of the legal. If they do not obtain such a decree then the debtor could still purge the debt. See Procedure following expiry of the legal below.

Currently, a decree of adjudication in execution does not induce first registration of a plot of land in the Land Register. Such a decree would, however, be registrable in the Land Register where the plot of land is registered. Registration of the decree of adjudication is given effect to in the proprietorship section of a title sheet by retaining the existing entry relating to the registered proprietor (the debtor) as it stands, and making a further entry giving full particulars of the adjudger as a form of limited proprietor (or limited pro indiviso proprietor, if only one of the registered proprietors is the debtor in the decree). However, a note also requires to be entered in the proprietorship section to confirm that the adjudger’s title is a decree of adjudication in execution which remains subject to the legal. An entry is also made in the securities section in respect of the security element of the decree, to establish its ranking in relation to other securities.

Style entries and notes for Decree of Adjudication in Execution

Example proprietorship section

Entry No.

Proprietor

Date of Registration

Consideration

CHRISTINA MITCHELL, 25 Murrayhall View, Cambusnethan

20 JUN 2015

£215,000

Date of Entry

10 Jun 2015

MEADOWBANK HOMES LIMITED, a company incorporated under the Companies Acts (Company Number SC12456) and having its registered office at 4 Carltona Terrace, Edinburgh

Date of registration

30 JUL 2016

Consideration

Not applicable

Date of entry

Not applicable

Note: The right of the said Meadowbank Homes Limited is not that of absolute proprietor; it is founded on a Decree of Adjudication in Execution registered 30 JUL. 2016.

Example securities section entry

		Date of Registration
2	Extract Decree of Declarator and Adjudication in Action at instance of said MEADOWBANK HOMES LIMITED (hereinafter referred to as "the Pursuers") against said CHRISTINA MITCHELL (hereinafter referred to as "the Defender") - Finding and Declaring from the Defender to the Pursuers of the principle sum and interest as thereinmentioned and Adjudging the subjects in this Title to the Pursuer. Dated 29 Nov. 2005 and extracted 12 Dec. 2005.

Procedure following expiry of the Legal

If, on the expiry of the legal, the adjudger obtains a decree of declarator of expiry of the legal, then upon a request for rectification submitting the decree of the expiry of the legal as evidence that the debtor can no longer purge the debt:

the entry relating to the former registered proprietor will be removed from the title sheet;
the note explaining the position of the adjudger as a form of limited proprietor will be removed;
the entry in the securities section for the adjudication will also be removed; prior securities must be retained.

If, however, the adjudger chooses not to obtain such a decree, both entries will remain in the B section untouched along with the entry in the securities section.

If no declarator of expiry of the legal is obtained by the adjudger and the Land Register rectified when the Keeper is made aware of the manifest inaccuracy, it is understood that prescription will operate in favour of the adjudger to make them absolute owner at some future date. There is some doubt as to when the prescriptive period commences and if a request for rectification is received on this basis, a referral to a senior caseworker should be made.

The long negative prescription can operate in favour of the proprietor if the adjudger neither obtains a decree of declarator of expiry of the legal nor completes the adjudger’s right by prescriptive possession. If the debtor or their successor as proprietor requests rectification on this basis then the enquiry should be referred to a senior caseworker.

The general rule is that adjudications rank chronologically like any other securities (the exception to this is provided for in the Diligence Act 1661 as regards the ranking of more than one adjudication, in that all adjudications within a year and a day rank pari passu). The adjudger will, subject to the ranking of other creditors, be paid any surplus if a prior standard security holder sells the property.

Discharge of Decree of Adjudication in Execution

Once the underlying debt has been repaid, the adjudication is effectively discharged. This would create an inaccuracy in the Land Register. A former debtor who seeks to have their title rectified will need to demonstrate that the register is manifestly inaccurate. They could, for example obtain a formal discharge of the adjudication executed by the creditor in the adjudication and submit this with a request for rectification of the Land Register (for example a Notification of Inaccuracy) to remove the second entry in the proprietorship section for the creditor in the title sheet and the entry in the securities section of the title sheet for the effect of the adjudication as a heritable security.

Evidence less than this may suffice to make the inaccuracy in the Land Register manifest; however each request will need to be considered on its merits.

If a notice of summons of the adjudication was registered in the ROI, then the debtor may wish to consider registering a discharge of the adjudication there to clear the record, but this does not require to be done prior to rectification being possible.

Adjudication in implement

In contrast to adjudication in execution, adjudication in implement is not based on the failure to repay a debt. If a seller fails to grant a disposition (or other deed), the purchaser/acquirer can apply to the court to order the seller/granter to sign the deed. If the seller/granter refuses, the court may grant either a warrant to the sheriff clerk to execute the deed instead of the seller/granter, or alternatively it may grant a decree of adjudication in implement. This type of situation might arise, for example, in a divorce case where a spouse or civil partner refuses to sign a disposition of their interest in the property.

The adjudication in implement operates as a conveyance, and the extract decree can be registered in the Land Register where the plot of land is registered.

This type of adjudication is not subject to ‘the legal’ (a period of 10 years). It is also extremely rare and applications for registration should be referred by the registration officer for guidance on proceeding. In particular, if an adjudication in implement is received as the deed inducing first registration of a plot of land, the application should be referred to a senior caseworker. It is understood that adjudication in implement is not a registrable deed inducing first registration, as it does not fall within the definition of a disposition, in terms of section 23 and section 46 for that purpose. The application for registration may require to be rejected as the deed is not a registrable deed in those circumstances.

Notice of litigiosity

Registration officers should note that there are different types of notice which enter the ROI which are often referred to as 'notices of litigiosity'. These types of ROI entry are notifications that a plot of land or right in land is now the subject of court action. They are often called 'notices of litigiosity' for that reason, and operate as an inhibition but only in respect of the property affected, which is why the notice must describe the subjects in question. Subject to specified exceptions set out below, a notice of litigiosity may require to be entered in a title sheet in terms of section 32 of the 2012 Act under the general rules applying to adverse entries in the ROI. Further information on each type of notice is set out below:

Notice of application for rectification of a deed

Under section 8 of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1985, it is possible to seek an order from the Scottish Courts to rectify the terms of a deed if its terms were originally defective.

Once a property is registered in the Land Register, the caveat procedure must be used to render the property litigious.

An entry for such a notice registered in the ROI could be made under section 32 of the 2012 Act at first registration in similar fashion to adverse inhibitions, but if a registration officer encounters a notice in an ROI search, or disclosed as having been registered in ROI in the application form, when processing a deed affecting the whole or part of a registered title, they should refer the application for consideration by a senior caseworker.

Notice of summons of reduction of a deed (including a deed granted in breach of an inhibition)

There are two types of reduction with which such a notice may be concerned:

reduction relating to deeds which are voidable because they were granted in breach of an inhibition;
reduction relating to a deed for another reason, for example that the granter lacked authority.

No entry can ever be made in a title sheet for a notice of litigiosity of the type (1) above in terms of section 32(3)(b). An entry for a notice relating to reduction of a deed for another reason is possible at first registration of the plot of land.

Where land affected by either type of court action (1) or (2) is registered in the Land Register then the caveat procedure should be used rather than registration of the notice of litigiosity in the Land Register.

If either type of such an entry is noted in the ROI at first registration of a plot, a referral should be made to a senior caseworker.

Example ROI entry for notice of litigiosity

Notice of Summons of Reduction: AB (designation of pursuer) against CD (designation of defender), relating to (insert description of lands). Signeted (date of signeting).

Notice of Rectification: A (design) against B (design), relating to ...

Once land is registered in the Land Register, the caveat procedure should be used under the 2012 Act. A notice would not have the effect of an inhibition (see position since 8 December 2014 below).

The position since 8 December 2014

Section 8(7) of the Law Reform (Miscellaneous Provisions)(Scotland) Act 1985 and section 159 of the Titles to Land Consolidation (Scotland) Act 1868, are the enactments that authorise the recording of a notice of litigiosity in the ROI. The 2012 Act inserted section 8(8A) and section 159(2) into the 1985 and 1868 Acts respectively to provide that a notice of litigiosity recorded in the ROI after 8 December 2014 is not effective to render litigious any land registered in the Land Register. The 2012 Act provides that once land is registered in the Land Register, the caveat procedure should be used. Caveats are intended to serve as a warning on the title sheet that certain types of court proceedings are ongoing in relation to that title.

A notice of litigiosity relating to registered subjects, appearing in the ROI after this date, would not have the effect of an inhibition, and should not be entered as such in the title sheet under section 32. However, should such an entry be identified a referral should be made to a senior caseworker in the first instance.

For the avoidance of doubt: (1) a notice of litigiosity can be used where the land to which is relates remains in the Register of Sasines, and (2) an entry may be required in the title sheet under section 32 for a notice of litigiosity relating to a registered title, where the notice was registered in the ROI prior to 8 December 2014.

Existing title sheet entries

A registration officer may encounter an existing entry in a title sheet for a notice of litigiosity in relation to an action to reduce a deed granted in breach of an inhibition. In terms of section 159A of the 1868 Act, such notices should also have been registered in the Land Register, on or after 22 April 2009, where the property affected was registered in the Land Register. If a registration officer does encounter such an entry already in a title sheet, the application should be referred to a senior caseworker for consideration of the appropriate manner of proceeding. It may be appropriate to raise a requisition and/or consider a limitation or exclusion of warranty.

If such an action was raised in relation to a registered title on or after 8 December 2014, the caveat procedure should have been used.

Corporate Insolvency

A company will be insolvent if:

a winding up order has been made or a resolution for voluntary winding-up has been passed (other than member's voluntary winding-up),
a receiver or administrator manager has been appointed, or
possession has been taken by debenture holders or their agents under a floating charge over any property secured by the charge.

How assets are subsequently dealt with depends on whether the company remains a viable concern, or whether its assets are to be realised for the benefit of creditors. In simple terms, the appointment of an administrator will normally be when the intention is to save the company while the appointment of a liquidator is usually when the company is being wound up. Following legislative changes it is only appropriate for the holder of a floating charge executed prior to 15 September 2003 to appoint a receiver. Accordingly, instances of receiving a deed granted by a receiver will be reducing: instead an administrator will be appointed.

Registration practice
It is unlikely (but not unheard of) for an administrator or liquidator of a company to take title to additional property, or to take security as a creditor over property. If such a situation is encountered, the application should be referred to a senior caseworker for further guidance.

The following guidance relates to dispositions granted by the administrator, liquidator or receiver.

Administration

Administration is considered as a tool to rescue an ailing business considered as still being viable. It provides time to restructure the company and protects against actions by secured creditors but can only be used where it is considered possible to achieve one of the following:

rescue the company as a going concern;
achieve a better result for creditors than if the company were wound up;
realise property to make a distribution to a secured or preferential creditor.

Appointment of Administrator

An administrator is usually appointed by a court order. However, an administrator can be appointed by a floating charge holder, or by the company or directors of the company, in a simplified process which does not involve a court order. The requirement is that the holder must file certain papers with the relevant court (in particular a statutory form of Notice of Appointment and evidence of the consent of the nominated administrator).

Sales by Administrator

The administrator has power to sell or dispose of the property of the company and any disposition should run in the name of the administrator (or the administrator and the company) and should be executed by the administrator. Where more than one administrator is appointed (and the registrable deed may refer to the appointment of joint administrators) a registration officer may encounter a deed executed by only some of them. Provided that the application does not indicate any concern with the validity of the registrable deed in such circumstances, this is acceptable. Their appointment can permit this and assessment of whether it does is not for the registration officer.

The question on the application form as to whether the granter of the deed is the last recorded/registered proprietor should be answered YES; however if the applicant answers NO they are certifying that the appropriate links in title exist, accordingly the application should not be rejected.

Outstanding securities and inhibitions

Heritable securities should be discharged, unless the court has ordered otherwise. Thus, if no discharge is presented with an application, the security should continue to be disclosed unless the court orders under paragraph 71 of Schedule B1 to the Insolvency Act 1986 that the administrator can sell the property free of the heritable security.
Any floating charge granted by the company is not appropriate to be disclosed in the securities section of the title sheet.
It is also the view of the Keeper that an administrator probably cannot sell free of an inhibition affecting the company unless the court authorises this. Such an inhibition will be disclosed as an adverse entry unless the Keeper is advised that it is discharged or the authority of the court has been given to sell free of the inhibition.

Liquidation

Liquidation is the action of winding up the affairs of a company to realise the assets and distribute funds amongst creditors and members. The company does not have to be insolvent to be liquidated, this being a member's voluntary liquidation (MVL) when the company just wishes to cease trading and distribute the assets. When the company is insolvent it will be either a creditor's voluntary liquidation (CVL) or compulsory liquidation by the court.

Appointment of liquidator

Where a company is in voluntary liquidation, the resolution passed to wind up the company and appoint the liquidator will comprise the appropriate link in title. In cases of compulsory winding-up the court order is the link in title. It is possible for a voluntary winding-up to be converted to a winding up by the court upon application by a creditor or contributory (i.e. a person liable to contribute to the assets of a company in the event of its being wound up).

Sales by liquidator

Once a liquidator is appointed the directors are no longer entitled to exercise any of their powers. The assets remain vested in the company but the powers of the directors are taken over by the liquidator. The Insolvency Act 1986 makes provisions regarding the powers of a liquidator.
A deed granted by a company in liquidation runs in the name of the company, but the narrative refers to the fact that the company is in liquidation. The liquidator executes the deed in place of the directors. (Where there is more than one liquidator appointed, both should sign the deed unless the terms of their appointment enable one to act independently of the other. The Keeper will accept the applicant's certification that the deed as presented is appropriately executed).

Outstanding securities and inhibitions

If the liquidator is selling an asset that is encumbered by a standard security there is no requirement to obtain the consent of the creditor to the sale provided there will be enough funds realised to repay the creditor; in such instances the security should be discharged in the normal manner.

A secured creditor can seek to exercise their right under power of sale procedures. If either the liquidator or secured creditor intimates to the other their intention to sell the property this precludes the other from selling. In the event of receiving an application to register a disposition in virtue of power of sale, provided no contrary information accompanies the application, the Keeper will consider that all statutory procedures have been complied with.

If the sale is by the liquidator then the creditor should grant a discharge of their security and any outstanding securities will be disclosed if not discharged. Any floating charge that has been disclosed on the title sheet should be removed.

Failure to register the security at Companies House

A company must register all charges that it creates (including standard securities) at Companies House within 21 days of creating the charge. If the company does not do this, then, by application of section 859H of the Companies Act 2006, the charge is void against an administrator, liquidator, and the (secured) creditors of the company that created the charge. Although the charge is void against a liquidator under section 859H this does not extinguish the debt, instead the holder will be treated as an unsecured creditor by the liquidator. In cases where a company registers a standard security in the Land Register, but does not register it with Companies House within in the 21 day period, and a liquidator is appointed, the only means of removing the security from the register is either by a discharge in the prescribed form, or a declarator from the court where a discharge cannot be obtained for any reason (by the procedure set out in section 18(2) of the Conveyancing and Feudal Reform (Scotland) Act 1970).

Inhibitions executed on or after 22 April 2009

Inhibitions executed on or after 22 April 2009 but prior to the liquidation provide the creditor with no prior ranking and the power of the liquidator to sell any of the company's property shall not be challengeable (Sections 66(1A) and 166(1A) of the Insolvency Act 1986). These provisions apply to liquidations instigated by creditors, a liquidation instigated by the members is only appropriate where there are no debts and accordingly there should be no inhibitions.

Inhibitions prior to 22 April 2009

All inhibitions registered within a 60-day period prior to the date of commencement of the winding up of a company can be disregarded as ineffective. The justification for this approach is to be found in section 185 of the Insolvency Act 1986, which applies to the winding up of companies registered in Scotland, under inter alia section 24(3) of the Bankruptcy (Scotland) Act 2016. This provision sets out that that no inhibition on the estate of the debtor, which takes effect within the period of 60 days before the date of sequestration, shall be effectual to create a preference for the inhibitor.

The situation with inhibitions registered before the 60-day period is less clear (see, for example, Gretton: The Law of Inhibition and adjudication, chapter 11). Some commentators (see for instance, Palmer’s Company Insolvency In Scotland, chapter 4) argue that liquidators can sell free of any prior inhibition against the company, whilst others are less certain. Gretton, for example, discusses the possibility that a distinction can be made between a voluntary and a compulsory winding-up, arguing that the latter cannot be held to be a voluntary act of the company and so prior inhibitions against the company cannot be effective. Since all such views must remain speculative until the matter is clarified by legislation or settled by the courts, the Keeper is obliged to adopt the prudent line that all prior inhibitions registered against a company before the 60-day period are effective, and so require to be disclosed as adverse entries in terms of section 32 of the 2012 Act. This is the case whether the winding-up is compulsory or voluntary.

Receivership

Receivership is the action of enforcement of a floating charge on behalf of the creditor. The receiver's role is to realise assets to repay the floating charge creditor and any prior ranking creditor to the floating charge.

Provisions in section 250 of the Enterprise Act 2002, which came into force on 15 September 2003, amend the Insolvency Act 1986 to the effect that, subject to various exceptions, it is not competent for the holder of a floating charge executed after 15 September 2003 to appoint an administrative receiver. Accordingly the appointment of receivers will be gradually diminishing.

Floating charges executed on or after 15 September 2003

Any disposition by an administrative receiver (even if called by another name) would be void, as he would not have been validly appointed.

An administrative receiver is defined as a receiver appointed under section 51 of the Insolvency Act 1986 where 'the whole (or substantially the whole) of the company's property is attached by the floating charge'. The above provision would not apply if this was not the case, or if any of the complex exceptions narrated in the 2002 Act applied. The more usual practice has been to grant a floating charge over the whole of the company's assets and accordingly the appointment of the receiver will be struck at by the foresaid provisions.

Therefore in the case of any sale by a receiver appointed under a floating charge executed on or after 15 September 2003, registration officers should refer the case to senior caseworker, since where there is a disposition by a purported receiver, whose receivership is struck at by section 72A, the disposition is considered void. The senior caseworker will consider whether the receivership is covered by one of the exceptions in the 2002 Act.

The 2002 Act introduces new provisions whereby the holder of a qualifying floating charge in respect of a company's property may instead appoint an administrator of the company.

Floating charge executed prior to 15 September 2003

Such a floating charge must be validly constituted and sufficient in its terms to charge Scottish heritable property.

Sale by receiver

The disposition runs in the name of the company, but the narrative refers to the fact that the company is in receivership. The receiver executes the deed in place of the directors.

Prior sale of part of subjects
One of the implications of the House of Lords decision in the case of Sharp v Thomson (1997 SCLR 328 and 1997 SLT 636) is that, once a disposition of heritable property by a company has been delivered to a purchaser, a floating charge over the company’s property and undertaking cannot attach to that heritable property. It is possible that if the company delivers a disposition to a purchaser, the purchaser (for whatever reason) will not record or register the deed. Later, after the company’s floating charge crystallises, the receiver may not learn about the earlier disposition and sell the property to someone else. The second purchaser is at risk of having their title defeated by the first purchaser who holds on the delivered but not recorded/registered disposition.
However, the Keeper considers the risk is too remote to justify a blanket limitation of warranty in all sales by receivers; a purchaser acting in good faith will be expected to have made appropriate enquiries of the receiver.

In an application on behalf of a purchaser to register a transfer of title from a receiver, provided there is no other documentation in the application to suggest a prior disposition of the property by the company, the settler may proceed to register the title with no qualification of warranty.

If there are any concerns, the case should be referred to a senior caseworker.

Outstanding securities and inhibitions

In the event of a limited company going into receivership, standard securities do not automatically fly off following a conveyance of the company’s property by the receiver. Standard securities granted by the company must be disclosed in the title sheet pertaining to any purchaser from the receiver, unless one of the following exceptions applies:

A discharge for each outstanding standard security is submitted;
The creditor in the outstanding security consents in the conveyance by the receiver, to the effect of either discharging the security or disburdening the subjects of the security;
The sale is being conducted under section 61(1) of the Insolvency Act 1986.

Section 61(1) of the Insolvency Act 1986 provides that where a receiver sells or disposes of any property or interest in property of the company which is subject to the floating charge by which the receiver was appointed, and either

that property is subject to any security or interest of, or burden or encumbrance in favour of, a creditor, the ranking of which is prior to, pari passu with or postponed to the floating charge or
that property is affected or attached by effectual diligence and the receiver cannot get the consent of the creditor or the person executing the diligence, the receiver can apply to the court for authority to sell free of the security or diligence.

Where a sale is carried out in accordance with the authority of the court, the recording/registration of the conveyance has the effect of:

disencumbering the property of the security and
freeing the property from the diligence.

In sales by receivers falling within the above category, the application should make clear if appropriate court authority exists, in which case any outstanding securities can be omitted. If not referred to then outstanding securities should continue to be shown.

An inhibition preceding the grant of the floating charge giving rise to receivership is capable of striking at the charge. Where there is an inhibition predating the floating charge, the case should be referred to a senior caseworker.

Section 61(1A) of the 1986 Act (inserted by S155 of the 2007 Act) provides that for the purposes of said sub-section 61(1) an inhibition that takes effect after the creation of the floating charge by virtue of which the receiver was appointed is not an effectual diligence. Therefore an inhibition that was laid on or after the date of creation of the floating charge that has not been adjudicated on before the floating charge is crystallised does not strike at the charge and the application can proceed.

Any unusual circumstances should be referred to a senior caseworker.

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