9.1.1 Charge Certificates

Section 5(3) of the 1979 Act requires the Keeper, on completion of the registration of a heritable security, to issue a Charge Certificate to the applicant (the creditor). A Charge Certificate shall, however, only be issued in respect of a heritable security as defined in Section 28(1) of the 1979 Act, which adopts the definition in Section 9(8)(a) of the Conveyancing and Feudal Reform (Scotland) Act 1970, namely ‘any security capable of being constituted over any interest in land by disposition or assignation of the interest in security of any debt’. The standard security is the most common example.

No charge certificate will be issued in respect of an application for registration of the effect of a deed which charges the interest with a ‘debt’ as defined in Section 9(8)(c) of the 1970 Act but does not contain a disposition or assignation of the interest in security. This includes Notices of Grant, Absolute Orders and other statutory charges.

9.1.2 Deeds registered or given effect to in the charges section

Rule 6 of the 2006 Rules provides for the matters that shall be entered in the charges section. Deeds that fall to be registered or given effect to in the charges section can usually be categorised as either heritable securities, statutory charges or notices of grant although other types of deeds may be shown.

9.1.3 Contents of the charges section

An entry in the charges section will normally contain the following particulars:

9.2.1 Omissions in pro forma Standard Securities

Major lending institutions such as Banks and Building Societies commonly use pro forma Standard Securities which contain a number of pre-printed clauses and a series of boxes for insertion of the details of the debtors, amount of loan, property description etc.

Registration Officers should ensure that such deeds are properly completed, particularly where the operative clause contains terms which are defined only by means of what has been inserted in the boxes. If any of the ‘boxes’ in such a Standard Security have not been completed correctly, the Registration Officer should contact the agent to point out the defect. If the omission results in the deed not complying with the statutory requirements noted above, the application for registration of the security must be rejected unless the agent agrees to correct the omission. However, if the omission relates to a matter which does not affect the intrinsic validity of the deed and the agent does not wish to amend the deed, it should be pointed out that it cannot be subsequently amended. Should the agent wish to amend it a later date, the only method of achieving that would be by discharging the security and registering a new one. In particular, the agent should be informed that unauthorised changes to a Charge Certificate are not permitted, and that therefore the amendment cannot simply be added into the bound Charge Certificate. If the agent does not wish to amend the error, the registration officer should note this on the title workdesk. See also Chapter 2 Documents and Evidence at Discharges engrossed on Debound Charge Certificates.

9.2.2 Property description in standard securities - background

Note 1 of schedule 2 to the 1970 Act made provision regarding the description of the subjects of the security. It provided that:

The security subjects shall be described by means of a particular description or by reference to a description thereof as in Schedule D to the Conveyancing (Scotland) Act 1924 or as in Schedule G to the Titles to Land Consolidation (Scotland) Act 1868

The courts gave consideration to that note in the cases of Bennett v Beneficial Bank 1995 SCLR 284 and Beneficial Bank v McConnachie 1996 SLT 413. The courts ruled that although a general property description was valid for conveyances and other deeds, standard securities had higher requirements because of Note 1 to Schedule 2. This caused a great deal of confusion for a few years until the matter was put beyond doubt by a section added to the Abolition of Feudal Tenure (Scotland) Act 2000 which amended the note in the 1970 Act retrospectively.

9.2.3 Property description in standard securities- Current position

Section 77(3) of the Abolition of Feudal Tenure etc (Scotland) Act 2000 amended the wording of note 1 to schedule 2 of the 1970 Act. This came into effect on 9 June 2000 and note 1 now reads:

The security subjects shall be described sufficiently to identify them; but this note is without prejudice to any additional requirement imposed as respects any register.

The 2000 Act brings the standard of description into line with the standard of description required in other deeds, such as a disposition. A standard security will no longer be deemed void because of the absence of a particular description or a description by reference to an earlier deed that contained a particular description. This is a considerable relaxation of the pre-abolition Act position. While it is not possible to offer hard and fast rules for what will and will not be acceptable to the Keeper, the following offers a general guide to acceptable methods of description:

9.2.4 Postal addresses

It is emphasised that whilst the Keeper will now accept security deeds which contain solely a general description (i.e. a postal address), there may be occasions when such a description will not be sufficient. The postal address given must always be adequate to identify the property being secured and this will be dependent on the particular circumstances of the deed.

An example of where a postal address would not be adequate is where the subjects are described as, for instance, ‘a flat at 53 Marchmont Road …’. Clearly this is not sufficient to identify the particular flat in question.

If, on the other hand, the subjects were described as ‘the northmost flat on the first floor above the ground floor entering by the common passage at 53 Marchmont Road…’ this would be acceptable.

In cases of doubt, guidance on whether the description of the security subjects is adequate should be sought from a senior caseworker, who will if necessary consult Legal Services.

9.2.5 Implications for the Land Register

For Dealings with Whole, the title number of the subjects, with or without further verbal description, is an adequate description of the subjects in terms of section 15(1) of the Land Registration (Scotland) Act 1979.

For First Registrations, Transfers of Part and Dealings with Part (e.g. a standard security over part of registered subjects), the registration officer should ensure that the description of the security subjects conforms with one or more of the methods of description outlined in Current position above.

9.2.6 Retrospective effect of alteration to Note 1

Section 77(3) of the Feudal Abolition Act provides that the revised Note 1 to Schedule 2 to the 1970 Act has retrospective effect. In other words, Note 1 is to be deemed as having always been in such terms. The consequence of this is that descriptions in standard securities recorded or registered prior to the passing of the Feudal Abolition Act and which fell foul of the rules which emerged from the Beneficial Bank cases will be deemed to be valid so long as the description of the security subjects meets the new criterion (i.e. ‘described sufficiently to identify them’). This would, of course, include standard securities executed prior to 9 June 2000 but not presented for recording or registration until after that date. They will similarly be acceptable for recording or registration, provided the description of the subjects meets the new criterion.

9.2.7 Previous exclusions of indemnity

Standard securities registered prior to the change to Note 1 may have been registered with an exclusion of indemnity, in respect of the description having not met the standard required following the Beneficial Bank cases. These may now have the exclusion removed provided the description meets the new standard.

Points to note:

In cases of doubt, the matter should be referred to a senior caseworker.

9.3.1 Creation of burdens

The Title Conditions (Scotland) Act 2003 does not prescribe a style or type of constitutive deed.  Accordingly it is theoretically possible to create real burdens that affect the land owned by the granter in a standard security; however the format would have to comply fully with the requirements of the 2003 Act as regards the characteristics and creation of the real burden. Accordingly any such deed should be referred to a senior caseworker.

9.3.2 Creation of servitudes

When the secured subjects are only part of a larger area owned by the debtor, a creditor will frequently attempt to incorporate servitudes into the security deed in an attempt to protect their interest in the event of selling the secured subjects under power of sale procedures.  The rights are frequently appended to the description of the subjects in the same form as in a conveyance (i.e. together with a servitude right of access…).

The form of a standard security is prescribed in the 1970 Act and incorporates the words "grant a standard security in favour of the creditor over (subjects)"; the Keeper is doubtful that these words are capable of creating a stand-alone servitude.  Further the right will normally be granted in favour of the creditor, but not in their capacity as proprietor of the benefited land. 

Any attempt to create a servitude in a standard security should be referred to a senior caseworker in the first instance.  It will generally be necessary to contact the agent to highlight the Keeper's concerns as regards the servitude.  Alternative solutions would be:

9.5.1 Procedure for outstanding standard securities or charges

If there is an outstanding security, but no discharge is listed on the inventory, then the registration officer should proceed with registration showing the outstanding security in the charges section and (where appropriate) in a schedule of prior ranking charges; even if the inventory (Form 4) shows the discharge is ‘to follow’ the current application should not be delayed. The Keeper's policy changed for applications from 1 September 2010.  If an application to register a discharge is submitted before the earlier application for registration is completed then the registration officer should process the cases together.

In the case of a First Registration, the creditor’s interest in the outstanding standard security will not be covered by the Keeper’s indemnity, even though it's recording it disclosed in the charges section and no charge certificate requires to be issued.

9.5.2.1 Entry for outstanding heritable security - First Registration

Where there exists an outstanding security at the time of first registration, it must be entered in the charges section before any charges that are being registered, to preserve the right of the creditors and show the current position of the title.

Example of style of entry:

Bond for £5000 and Disposition in Security by said AB [or by AB (desig)] to CD (desig), recorded GRS (Renfrew) 29 Jul 1968

Note: The current creditor in the above Bond is EF (desig) conform to Assignation recorded GRS (Renfrew) 4 Sep 1974

While the outstanding security is entered in the charges section, it is not actually registered and the creditor does not obtain the benefits of registration (e.g. indemnity). Should the agent wish the security to be registered, an application with accompanying Forms 2 and 4 and relevant fee should be submitted. The date of registration will then be entered and a charge certificate issued, but the original date of recording must still be narrated, as it remains the date of the creation of the creditor’s real right.

9.5.2.2 Entry for outstanding heritable security - Transfer of Part

Where there exists an outstanding security at the time of the transfer of part, it must be entered in the charges section before any charges that are being registered against the new title, to preserve the right of the creditors and show the current position of the title.

Example of style of entry:

Parent title sheet

Transfer of part title sheet

As the outstanding security has already been registered under the parent title the creditor already has the benefits of registration (e.g. indemnity) and a charge certificate under the parent title number; no new charge certificate should be issued.  The new creditors charge certificate should show the outstanding security in a schedule of prior ranking charges.

9.6.1 Standard security granted by additional parties

A standard security may be granted by the registered proprietor and also (wrongly) by another borrower, who is not the proprietor but is undertaking to repay the loan. Usually this happens because the wording of a pro forma standard security is based on the mistaken assumption that the borrowers and the granters of the security are always the same. Correct practice is for the proprietor(s) alone to grant the security, regardless of whether additional names appear in the security as borrowers. It is also competent for A to borrow and undertake a personal obligation and B, the registered proprietor, to grant the security. What counts is that the registered proprietors (all of them) grant the security. The inclusion of additional parties as granters is incorrect, but will not lead to an exclusion of indemnity. All parties granting the security should be reflected in the charges section.

The Keeper’s former practice in such situations was to exclude indemnity, so if an application is submitted affecting a title sheet bearing an exclusion of indemnity in this respect the exclusion note should be removed.

9.7.1 Standard Security granted by party who is not registered proprietor

Applications for registration of a standard security not granted by the registered proprietor of the property affected (unless there is an application for registration of the title pending or the deed is granted by a proper legal representative of the proprietor such as an attorney or guardian) should be very rare, but if a registration officer does encounter such an application there are some possible explanations; e.g. (1) the granter of the security has recently transferred the property to another party who in the interim has registered their title or (2) an owner  (holding on an unrecorded midcouple) may not have submitted their title for registration. The registration officer should, in any event, enquire of the submitting agent the reason why the granter of the standard security is not the registered proprietor.  

In the first example, the security application cannot proceed unless the granter of the security subsequently re-acquires the property. This applies even if the security deed was executed prior to the property being sold. Such an application should be cancelled.

In the second example, where a granter has not submitted their title for registration (by not only enclosing the midcouples or links in title but also an application on Form 2 for registration of their interest as proprietor), registration officers should note that any right in security obtained by the creditor may be vulnerable to a supervening event that may make it necessary to remove the security from the register by rectification. For example, X has a registered title and has disponed to Y, but Y has not registered the disposition.  Y then grants a standard security to B bank with a deduction of title clause and this is registered under section 12 of the Conveyancing and Feudal Reform (Scotland) Act 1970.  However, suppose that X had also disponed to Z and this disposition was subsequently registered; because Z is not a granter or grantee of the security, nor derives right from either of those parties, and may be entitled to become proprietor unencumbered by the security, he or she could seek to have the register rectified to remove the standard security.  Accordingly, while the Keeper will accept the standard security granted by Y for registration it is only prudent to also exclude indemnity where the granter chooses not to register their title. Even where indemnity is being excluded, registration officers require to examine the midcouple(s) under which the granter of the security holds unregistered title to the subjects.

It is possible to complete registration of standard security without an exclusion of indemnity, provided the granter submits their title for registration with the appropriate application form and fee. The application to register the standard security should be placed in standover until such time as title application is submitted. In terms of section 15(3) of the Land Registration (Scotland) Act 1979, it is not necessary for the unregistered owner to deduce title in the security deed where, for example, they have a right to the property as a beneficiary of the deceased registered proprietor through a midcouple granted by the executor, however they do have to register their interest as proprietor. Because of the vulnerability of the right in security where the granter does not complete their title as explained in the foregoing paragraph, if the granter of the standard security does not make up title indemnity will be excluded in respect of the granting of the standard security.

The exclusion of indemnity should be in the following terms and be shown in both the land and charge certificates:

Note: Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss arising as a result of the granter of the foregoing security not having completed title by registration of their interest in land and that the security therefore has only the limited effects provided for in section 12(2) of the Conveyancing and Feudal Reform (Scotland) Act 1970.

Details of the granter of the standard security should not be added to the proprietorship section of the title sheet, instead a note should be added to both the charges section of the title sheet and also the charge certificate narrating the links in title as produced to the Keeper; e.g.

Note: The entitlement of AB to grant the said standard security is founded on Confirmation of [registered proprietor] with docket endorsed thereon nominating said AB as the party entitled to the subjects in this title.

If the appropriate links/midcouples are not produced then the application cannot proceed, even subject to the foregoing exclusion, and the application will be cancelled.

In circumstances where a standard security covers multiple properties and the granter of the deed is not proprietor of one (or more) of the properties the submitting agent should be advised that the standard security will only be registered against the properties that the granter is proprietor of. The foregoing guidance on situations where the granter has a title to a property or properties but has chosen not to register their interest as proprietor should be applied as necessary.

For the avoidance of doubt, the above guidance does not apply in respect of an improvement/repairs grant or notice of grant when it is acceptable that the party in receipt of the grant does not correspond with the registered proprietor.

9.8.1 Standard security over part of registered subjects

The general rule in registration of title is that anything entered or noted in the title sheet affects the whole subjects in the title sheet unless there is an express statement to the contrary. Therefore, if a security is over only part of the subjects, that part will require a separate reference on the title plan to identify it (except where a verbal description is appropriate, for example in a tenement), and the entry in the charges section should identify the part affected, e.g.:

Standard Security [for £ .… ] by AB to CD (desig) over the part tinted pink on the title plan [or over the north house on the top flat …]

Note: The charge certificate cover also requires to be amended to read:

The within-mentioned Charge has been registered against part of the subjects in the above title

9.10.1 Schedule of conditions of loan

Some standard securities are accompanied by a schedule giving conditions of the loan. Such schedules will normally be referred to in the standard security, but may or may not be described as ‘annexed to’ the deed and may or may not be physically attached to the standard security. If the schedule is described as ‘annexed to’ and/or is physically attached to the standard security, it should be included in the charge certificate, but no mention of it need be made in the charges section entry or the certificate page of the charge certificate.

See Examination of Title at Schedules and annexations which explains the circumstances where the schedule requires to be subscribed. Registration officers should particularly ensure that any clause which is required by statute to be included in the standard security (see Standard security above) forms part of the subscribed deed.

9.12.1 Companies registered in Scotland

The various enactments of legislation affecting company charges have provided that any security granted by a company must be registered with the Registrar of Companies within 21 days of the date of creation of the charge.

For charges created from 6 April 2013 the provisions are contained in section 859A of the Companies Act 2006, with the effect of non compliance covered in subsequent sections.

Between 1 October 2009 and 6 April 2013 section 878 of the 2006 Act contained the relevant provisions, while for charges created prior to 1 October 2009, equivalent provisions in section 410 of the Companies Act 1985 apply.  The date of creation of a charge by way of a heritable security over registered property is the date of registration of the security in the Land Register.

Failure to register the charge in the Register of Charges will render the security void against a liquidator, or a future administrator of the company and any creditor of the company. Because of this the Keeper must be assured that a heritable security, or any charge, created by a company has been registered in the Register of Charges within the 21 days. The evidence necessary to prove this is the certificate of registration of charge issued by the Registrar of Companies, or a certified copy thereof, which certifies the date of registration in that register. From 6 April 2013 the certificate will contain the name and number of the company that granted the security and the date the certificate is "given" by Companies House, together with the unique reference code allocated by Companies House to the charge; as this detail is insufficient to satisfy the Keeper that the requirements for registration with Companies House have been complied with further information must be supplied in a supporting letter.

The letter enclosing the Companies House certificate should include the Land Register title number and application number, and an assurance that the certificate relates to the standard security as submitted for registration with the Keeper and the date of registration at Companies House.  If there is more than one security with the application then the letter of assurance should clearly identify which deed the certificate relates to. While the letter may not explicitly state the security that the certificate relates to if it is otherwise clear from the nature of the application (i.e. there is only one standard security affecting the subjects and the letter contains details of the property, title or application number), then it should be accepted that the agent will only be submitting the certificate for that security. Any areas of doubt should be referred to a senior caseworker.

Alternatively it is possible for the agent to obtain a print of charge particulars from Companies House website; this provides full details of the parties, date of creation by registration with the Keeper, date of issue of certificate and brief details of the property.  Submission of this printout removes the requirement for this detail to be included in a covering letter.

If the certificate and letter (or printout of charge particulars) are submitted, and proves that the charge was registered within 21 days of the date of receipt by the Keeper of the application for registration of the standard security, registration may proceed with full indemnity. The letter and certificate must be archived (and also any printout of charge particulars). For applications relating to securities created prior to 6 April 2013 only the certificate will be required as this will include sufficient information to uniquely identify the charge.

As an alternative to receiving a paper copy of the certificate of registration of charge the Keeper may receive and electronic copy; this is because the Registrar of Companies emails an electronic version of the certificate to the submitting agent.  The Keeper will accept the electronic version if the initial email from Companies House is forwarded and the covering email from the agent includes sufficient detail, as outlined above, to satisfy the Keeper as to which security the certificate relates.

The Registrar of Companies counts the first day following registration of the deed with the Keeper as the start of the 21 days (e.g. standard security registered with Keeper on 30 May and registered with the Registrar of Companies on 20 June is acceptable). If presented outwith 21 days the Registrar of Companies will return the copy of the deed, without issuing a certificate, and advising that a court order would be required instructing the Registrar of Companies to accept a late registration. In these circumstances the Keeper would require the certificate of registration, covering letter and a certified copy of the court order.

If this certificate and supporting letter/charge printout are not produced, the Keeper cannot register the security with full indemnity. If the company went into liquidation the creditor under the security might not be able to enforce it and on failing to do so would have a claim against the Keeper unless indemnity had been excluded (for exclusion note see Exclusion of indemnity below).

9.12.2 Execution of the Certificate of Registration of Charge

The Registrar of Companies issues a certificate of registration of charge to the agent which in turn is forwarded to the Keeper to demonstrate that the charge has not been rendered void.  The legislation provides that the certificate of registration of charge 'shall be signed by the registrar or authenticated by the registrar's official seal'.  The current practice is simply to seal the certificate. No signature accompanies the seal.

The current provisions are contained in section 859I(5) of the Companies Act 2006; between 1 Oct. 2009 and 6 April 2013 the relevant section of the 2006 Act was 885(5) (repealed) and the Companies Act 1985 included similar provisions in section 418(2) (also repealed).  Previously the practice as regards authentication for all such certificates was to be signed on behalf of the Registrar of Companies.

9.12.3 Requisitioning the Certificate of Registration of Charge

When a form L19 is issued by a confirmation officer to the agent under paragraph 9.11.1 above, to confirm the date of registration of the standard security, the agent is also requested to exhibit the certificate of registration of charge and supporting letter to the Keeper. If no response whatsoever has been received by the Keeper within 60 days of the date of the L19 letter, or only one of either the certificate or letter have been produced, the legal registration officer should proceed to complete registration of the standard security with an exclusion of indemnity (see Exclusion of indemnity below). No additional requisition is required. The case may require to be placed in standover for the full period to pass if no other requisitions are required.

If it is not apparent from the casebag that an L19 was issued, and it is clear from the application that registration of the charge at Companies Register was required, either in terms of Companies registered in Scotland above or Companies registered outwith Scotland below, a requisition should be raised in the normal manner.

9.12.4 Error in security deed

On the registration of a charge in the Companies Register a copy of the security creating that charge is lodged with that Register.

Problems have arisen when it has been discovered subsequent to the lodging of the copy security deed in the Companies Register that the security deed requires to be amended. It is not an option for the security deed to be significantly amended and the original date of registration in the Land Register to be retained as the deed would be at variance with what has been presented to the Companies Register.  If an agent requests the return of a deed for amendment after it has been registered with Companies House they should be advised that the application for registration in both registers may have to be cancelled and the process re-started.

This requires some clarification of what is a significant change.  The Keeper's view is that as a testing clause is not a statutory requirement but rather speaks to the ex facie validity of a deed then any amendment to the testing clause is not a significant change, even if it is to add designations of parties executing the deed (e.g. director, secretary or address of witness).  Conversely any alteration to the actual execution, including adding the signature of a witness, or to the text of the body of the deed prior to the testing clause will be considered as a significant change.  If at the time of confirming the registration date of a company security it is identified that such an amendment is required then it should be highlighted to the agent that if application for registration at Companies House has already been made then this may have to be cancelled and re-presented.  It should be noted however that the Keeper is entitled to rely on the submission of the certificate of registration of the charge as evidence that the statutory requirements have been complied with.

Note that this is similar to the situation for applications that had been created prior to 6 April 2013 where Companies House had advised that as long as the fundamental details of the charge (company name, creditor, amount secured, property secured) do not change, and the security retains its original registration date in the land register, then it would not have to be re-presented to Companies House. 

If there is a significant amendment required to the security deed after the deed has already been submitted to Companies House then the application to register that deed must be cancelled, the registration date is lost, and the amended security deed will have to be re-submitted for registration and re-presented to Companies House.

9.12.5 Companies registered outwith Scotland 

9.12.5.1 Position for charges created prior to 1 October 2009

'Overseas Company' with place of business in Scotland

An 'overseas company' in this context means a company registered outwith Great Britain. For the avoidance of doubt, this would mean that companies incorporated in the Isle of Man, the Channel Isles, Northern Ireland or the Republic of Ireland are overseas companies.

The considerations in the preceding paragraphs apply to incorporated companies registered in Scotland (section 878 of the Companies Act 2006, or formerly section 410(5) of the Companies Act 1985 applies). Prior to 1 October 2009, these provisions also applied to companies registered outside Great Britain which have a place of business in Scotland (section 424 of the 1985 Act applies). ‘Great Britain’ in this context includes England, Wales and Scotland, but not the Isle of Man, the Channel Isles, Northern Ireland or the Republic of Ireland. In terms of the 1985 Act, a ‘foreign’ or 'overseas' company which has a place of business within Great Britain was required to re-register in either England and Wales or Scotland and was allocated a company number by Companies House. The company then had to comply with the provisions of the 1985 Act and register any charges in the Register of Charges in Scotland or in England and Wales.

Company registered in England and Wales

Where a company is registered in England and Wales but is granting a heritable security over property in Scotland, the security must be registered with the Registrar of Companies in England and Wales within 21 days of the date of creation of the charge. In terms of section 398(4) of the 1985 Act this is the date on which the deed is presented for registration. If the Keeper has confirmed the date of registration of the standard security but the certificate of registration of the charge has not been submitted within 60 days then indemnity should be excluded. For the avoidance of doubt, it is not necessary to register it also with Companies House in Scotland.

'Overseas Company' with no place of business in Scotland

In cases where the company is an overseas company, that is incorporated outside Great Britain and which does not have a place of business in Scotland, a certificate of registration of charge will not be available. Companies registered in the Isle of Man, the Channel Isles, Northern Ireland and the Republic of Ireland are included in the definition of overseas companies.

The legal registration officer should:

A letter from Companies House, or anyone else, advising that a security had been noted in the ‘Slavenburg Register’ does not constitute a Certificate of Registration of Charge, however it is acceptable as evidence that the charge did not require to be registered in the Register of Charges. The ‘Slavenburg Register’ was a non-statutory register kept by Companies House where a note was made of foreign companies who attempt to register charges, but were rejected on the basis that the companies were not registered in Scotland nor had a place of business in Scotland - the Slavenburg Register was closed on 1 October 2009.

If the agent can neither confirm that the company has no place of business in Scotland nor provide a certificate of registration of charge, an exclusion of indemnity should be entered in the charges section and in the charge certificate in respect of the charge. A suggested style is:

Note: Indemnity is excluded in terms of section 12 (2) of the Land Registration (Scotland) Act 1979 in respect that evidence has not been produced to the Keeper that the granter of the above Standard Security has no place of business in Scotland for the purposes of section 424 of the Companies Act 1985 and in respect of any loss which may result from failure to register the said Standard Security in terms of sections 410 and 424 of the said Act.

9.12.5.2 Position for charges created on and after 1 October 2009

9.12.5.2.1 Companies registered in England and Wales or Northern Ireland

The previous Companies Act of 1985 applied to Great Britain, but the Companies Act 2006 applies to the United Kingdom, that is it now extends to include Northern Ireland (but not the Isle of Man, Channel Isles or Republic of Ireland).

Where a company is registered in England and Wales or Northern Ireland but is granting a heritable security over property in Scotland, the security must be registered with the Registrar of Companies in the part of the United Kingdom where the company is registered, within 21 days of the date of creation of the charge. (The date of creation of a charge by way of a heritable security over registered property is the date of registration of the security in the Land Register.)  A certificate of registration of charge should be submitted by the agents.  In the absence of a certificate of registration of the charge, then indemnity should be excluded using the form of exclusion provided below at Exclusion of Indemnity.  For the avoidance of doubt, it is not necessary to register the security with Companies House in Scotland.

If there is an error in the standard security deed, the considerations in previous paragraph on errors applies.

9.12.5.2.2 'Overseas Companies'- applications on and after 1 October 2009 but before 1 October 2011

An 'overseas company' is a company incorporated outside of the United Kingdom. The United Kingdom consists of Scotland, England, Wales and Northern Ireland and thus excludes the Isle of Man, Channel Isles and the Republic of Ireland. If your application is on or after 1 October 2011, see below at 'Overseas Companies'- applications on and after 1 October 2011.

The Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009, which came into force on 1 October 2009, provided that overseas companies which have re-registered in the UK are required to register charges with the Registrar at Companies House.   

In terms of the Overseas Companies Regulations 2009 an overseas company that opens a UK establishment is required to register particulars with the Registrar. The term “UK establishment” means either

Unlike the position for UK companies, which register either in England and Wales or Scotland or Northern Ireland, from 1 October 2009 where an overseas company re-registers in the UK it will be a 'UK registration’, no matter at which office of Companies House they register. The overseas company will be allocated a company number by Companies House. The overseas company then had to register any charges in the Register of Charges complying with the provisions of the 2006 Act for companies.

An overseas company is, in terms Regulations 8 and 9 of the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 only required to register a charge with the Registrar at Companies House if the company is registered in the UK.  If it is clear from the format of the application that the company has re-registered (e.g. the deed or application form quotes a UK company number) then any charge requires to be registered at Companies House and indemnity should be excluded if the certificate of registration of charge is not submitted.

The particulars of an overseas company are not registered 'unless and until they are on the register and accordingly available for public inspection'.

If the company has fulfilled the requirements of Regulation 8 on the day that the charge is created, then the charge must be registered at Companies House within 21 days of its creation and a certificate of registration of the charge should be submitted by the agents.  In the absence of a certificate of registration, indemnity should be excluded.

There are two circumstances when a certificate of registration of charge cannot be produced:

In such instances, the legal registration officer should:

1. Seek written confirmation from the agent either

In the alternative, the agent may be able to submit a written response from the Companies Registrar refusing to register the charge for this reason. This would also be acceptable to the Keeper, providing that it clearly states that the company was not registered in the UK on the date of the application for registration in the Land Register. In either of these cases, the security can be registered without an exclusion of indemnity.

Note that for charges created on or after 1 October 2009 Companies House will no longer accept them to the Slavenburg Register, which is effectively closed.

2. Provide instructions that such letters are archived.

If the agent can neither confirm that the company is not registered in the UK nor provide a certificate of registration of charge, an exclusion of indemnity should be entered in the charges section and in the charge certificate in respect of the charge. A suggested style is:

Note:  Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss which may result from failure to register the above standard security in terms of Regulation 10 of the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009.   

If there is an error in the standard security deed, the considerations in Error in Security Deed above at 9.12.4 apply.

9.12.5.2.3 'Overseas Companies'- applications on and after 1 October 2011

From 1 October 2011, an overseas company with a UK establishment which has registered at Companies House will no longer require to register with the Registrar of Companies charges created by the company over its UK property, as was the position set out in Overseas Companies- applications on and after 1 October 2009 but before 1 October 2011.

Where an overseas company grants a standard security which is presented for registration in the Land Register on or after 1 October 2011, the Keeper will not require to see a certificate of registration of charge issued by the Registrar of Companies. The applicant should not ask the Keeper to confirm the date of registration of such a security. The applicant should also make it clear in the application that the granter of the security is an overseas company.

9.12.6 Limited Company acting as Trustee

In this situation the Keeper does not require to see a certificate of registration of charge on the basis that they are not acting in a capacity of the principal; the Keeper will however confirm the registration date if requested to by the submitting agent.

9.14.1 Companies registered in Scotland

For standard securities registered prior to 1 October 2009:

Note: Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss which may result from failure to register the above Standard Security in accordance with section 410(2) of the Companies Act 1985.

For standard securities registered on or after 1 October 2009

Note: Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss which may result from failure to register the above Standard Security in accordance with sections 878 and 889 of the Companies Act 2006.

9.14.2 Companies registered in England and Wales

For standard securities registered prior to 1 October 2009, the exclusion of indemnity note should be as follows:

Note: Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss which may result from failure to register the above Standard Security in accordance with section 395(1) of the Companies Act 1985.

For standard securities registered on or after 1 October 2009, the exclusion of indemnity note should be as follows:

Note: Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss which may result from failure to register the above Standard Security in accordance with sections 860 and 874(1) of the Companies Act 2006.

(The above style of exclusion of indemnity should also be used where the company is registered in Northern Ireland and the charge is created on or after 1 October 2009)

9.14.3 Overseas companies

For standard securities registered prior to 1 October 2009 (see above at Position for charges created prior to 1 October 2009), where the company had a place of business in Scotland-

Note: Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss which may result from failure to register the above Standard Security in accordance with section 410(2) of the Companies Act 1985

For standard securities registered after 1 October 2009 but before 1 October 2011 (see above at 'Overseas Companies'- applications on and after 1 October 2009 but before 1 October 2011) -

Note: Indemnity is excluded in terms of section 12(2) of the Land Registration (Scotland) Act 1979 in respect of any loss which may result from failure to register the above standard security in terms of Regulation 10 of the Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009.   

9.14.4 Removal of exclusion of indemnity

If, at a later date, the certificate of registration of charge, or evidence that the charge did not require to be registered in the Register of Charges, is submitted to the Keeper, along with a duly completed form 2 and fee, the exclusion of indemnity can be removed from the charges section and the charge certificate.

Standard Security [for £x] by said (creditor in prior standard security) to AB financial institution (designed) over the Standard Security in entry y.

The within mentioned Charge has been registered against the Standard Security by (initial debtor) to (initial creditor) over the subjects in the above Title, registered dd mmm yyyy.

Standard Security by (initial debtor) to (initial creditor) over [description of subjects], registered dd mmm yyyy.

9.17.1 Ranking and withdrawal of standard securities

If a standard security that forms part of an application for registration has to be returned to the presenting agent for amendment, when it is returned to the Agency it still is processed as part of its original application notwithstanding that it may now be dated after the date of registration. Because of this, the returning of securities that form part of Land Register applications to agents does not have the same consequences for the ranking of securities as it did in the Sasine Register. If an application containing a security has to be cancelled and there are subsequent pending security applications, the registration officer dealing with the cancellation must inform the presenting agent that there will be a change to the ranking of the securities as a consequence of the cancellation.

9.17.2 Express ranking provisions

In terms of section 7(1) of the 1979 Act, the basic rule of ranking according to dates of recording or registration can be varied by express agreement between the different creditors, by which they agree amongst themselves the priority of their securities. That agreement will be reflected either by a ranking clause in one or more of the relevant standard securities, conform to Note 5 to Schedule 2 of the 1970 Act, or by an express ranking agreement (see 9.17.8 below) which it is appropriate to register. (Registration officers should consider the terms of the information in ‘Subject to’ clauses at section 9.17.11 below when deciding whether a security contains a proper ranking provision or not. A clause stating the security is subject to another does not create any ranking, however many such clauses include both "subject to" and "shall rank …." phrases; as such they may affect the ranking provisions and should be referred in any case of doubt). Thus, irrespective of the dates on which the deeds are registered, the following may be achieved:

9.17.3 Notes to be entered in the charges section

Ranking provisions will be entered in the form of a footnote to the security entry. The procedure and the style of the note will be determined by:

Example 1

Where two (or more) securities are registered simultaneously and the deeds contain straightforward reciprocal ranking provisions the charges section entry will be in the following terms:

Example 2

Where two (or more) securities contain reciprocal ranking provisions as above, but are not registered simultaneously, the entry in respect of the first registered security will remain silent as regards the ranking provisions until the registration of the other security(ies). The footnotes will then be added as above.

Example 3

Where only the first standard security contains a straightforward ranking clause and the second one is silent, the notes will be as follows:

Example 4

Where only the second standard security contains the ranking provisions and the first one is silent, the notes will be reversed:

In examples 3 and 4 above, the notes will only be added on the registration of the second security. All of the above examples presuppose that the provisions of the ranking clause are simple and straightforward. In example 4 the consent of CD would be necessary for the second security to rank prior to the first.

Example 5

It is fairly common for deeds to contain more complex ranking clauses (or ‘dual ranking’), providing that one security should rank prior to another but only to a certain extent, with advances above that amount then ranking pari passu with or postponed to the second security. No attempt shall be made to reflect the exact terms of the ranking in the charges section. Notes in the following general terms will be added.

Where both standard securities contain complicated ranking clauses in reciprocal terms, each will have the following note added after the entry:

Where only one of the securities contains a ranking provision, then the note after that entry will be in the terms above, and the following note will be added after the other entry:

These notes will only be added when the second standard security is registered.

Instructions regarding the notes for the charge certificate and the schedule are set out in Form of a charge certificate. 

9.17.4 Removal of notes regarding ranking

Where a security is discharged and ranking provisions affect it, the note(s) referring to the ranking provisions entered after the other security entry(ies) will need to be deleted or amended.

9.17.5 Schedule of prior and pari passu charges

The term ‘charges’ is used instead of ‘heritable securities’. In terms of Rule 6(1) of the 2006 Rules, this covers all registrable matters that fall to be entered in the charges section.

9.17.6 Effect of ranking clause in one of two or more securities registered on the same day

Where two or more securities are registered on the same day and the intended prior ranking security is for a set amount, has no provision for further advances and the ranking clause in the postponed security makes it clear that it is to rank postponed to the full amount in the first security the entries in the charge certificate will be as follows:

The appropriate ranking notes will be placed after each of the entries in the charges section (see above at Notes to be entered in the charges section).

9.17.7 Dual ranking

When the prior ranking security is for £X and further sums, but the other security recorded on the same day contains a ranking clause postponing it to the amount of £X only, such a ranking clause creates a dual ranking situation. The result is that up to the amount of £X the first security has prior ranking over the second security, but as regards any further advances it does not have prior ranking, because the ranking clause does not cover these further sums. Unless there are express provisions stating otherwise, the two securities will then rank pari passu. In such cases of complex ranking, the situation is reflected by showing the other security in the schedule of prior and pari passu securities annexed to the charge certificate for the first security. Both charge certificates will therefore contain a note indicating the existence of a schedule, unless the charge certificates have previously been issued, in which case they will not be updated.