Insolvency - Personal and Corporate

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. 

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. 

The following parties must be searched against:

1. Granter(s) of a deed of the type mentioned below unless the granter is of a type not searched against for risk reasons; and
2. 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. 

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:

1. Local Authorities;

2. Government Departments/Ministers of State or Scottish Ministers;

3. National Undertakings (such as Scottish Power, British Gas etc.);

4. Well know financial institutions (such as Bank of Scotland, RBS, Nationwide, Santander etc.);

5. Accountant in Bankruptcy.  

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:

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.

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.

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 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. 

The surname plus the prefixes are entered in the surname field

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. 

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

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 

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 

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.

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.

Where the applicant-

1. 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
2. certifies that no search has been carried out; or 
3. 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.

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.

(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. .

• 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.

• 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.

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);

(c) where a liability order is made against them in terms of section 38 of the Child Support Act 1991;

(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.

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.

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.

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

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 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.

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 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.

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.

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.   

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.

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

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

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

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.

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.

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.

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.

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.

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. 

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. 

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. 

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.

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.

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).

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.

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. 

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.

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.

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. 

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).

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.

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. 

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.

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. 

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.

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.

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.

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. 

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).

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.

Example proprietorship section 

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

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.

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.

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.

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

1. reduction relating to deeds which are voidable because they were granted in breach of an inhibition;
2. 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.

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 ... 

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.

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.   

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).

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.   

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. 

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).   

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).  

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. 

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.

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

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.

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. 

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.

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.