21.3 Right of a lessee under a long lease

The right of a lessee under a long lease, who has acquired a real right by possession prior to the commencement of registration of title in the area in which the leasehold property is situated, is an overriding interest insofar as the landlord’s title is concerned. It is subject to the noting provisions in section 6(4) of the 1979 Act (see below). Such an interest is also an interest in land and is, now that land registration is in effect across all of Scotland, subject to the provisions for registration following a registrable transaction under section 2(1)(a)(v). In those circumstances, therefore, where the tenant’s interest is assigned, whether or not for value, the assignee will obtain a real right only by registering their interest in the Land Register.

If in an application for first registration of a proprietor's interest an unrecorded lease is disclosed in the warrandice clause, the registration officer should enquire whether it is, in fact, a long lease capable of being noted as an overriding interest and, if so, request the agent provides the appropriate details. If the lease is a long lease that should be noted:

a schedule of leases should be added to the property section of the title; where only part of the subjects in the title is affected by a lease the relevant part should be identified, normally by a reference on the title plan. and

an entry in the following style should be added to the burdens section:

The rights of the tenants under the Leases specified in the Schedule of Leases in the Property Section are burdens on the subjects in this title.

In cases where the lease is being noted on the landlord's title sheet as an overriding interest it may not be possible to obtain a copy of the lease.  In such instances as much information as possible should be included in the schedule, including the date of execution of the deed (on basis there is no registration/recording date). There is however no requirement to exclude indemnity in respect of any missing information, including extent of subjects, as in terms of section 12(3)(h) of the 1979 Act any error or omission in the noting of an overriding interest is excluded from the Keeper's indemnity provisions.

21.4 Tenement property

Rights of common property or common interest in tenement properties stemming from the Tenements (Scotland) Act 2004 are overriding interests. However, the 2004 Act follows the previous common law of the tenement in being default law, meaning that it is subject to the title of the property in question. Where the titles alter the default position in relation to rights of common property and interest, these are not overriding interests.

• Rights and maintenance burdens have not been imposed in any of the respective titles of those individual flats comprising the tenement. In such circumstances the 2004 Act will affect the titles of those flats without the necessity of any reference thereto in the title sheet of each individual flat.

• Rights and maintenance burdens relating to the tenement have been comprehensively imposed in all of the respective titles of those individual flats comprising the tenement. The rights and obligations will be entered into the title sheet upon registration of each flat and will bind the registered proprietor accordingly.

• Rights and maintenance burdens relating to the tenement have been imposed in the titles of some flats but not in all. In reflecting the deeds submitted with the application, some title sheets will contain rights and maintenance burdens affecting the tenement, whereas other title sheets will be silent in this regard. Settlers should reflect the deeds as submitted. Those flats whose title sheet remains silent may seek to rely on the provisions of the 2004 Act; however this is not a matter for the Keeper.  Additionally section 12(3)(h) of the 1979 Act protects the Keeper against any claim for loss arising in respect of any error or omission in the noting of an overriding interest.

21.5 Overriding interest not registrable

Ideally, the Land Register should disclose all rights, burdens and restrictions which run with the lands. However, it was considered that to require registration of all interests which have been included in the definition of overriding interests, in order to make them run with the lands, would be both impractical and seriously disruptive to the introduction of registration of title into any given area. Section 2 of the 1979 Act therefore provides that overriding interests are not registrable. In addition, section 3(2) stipulates that the provisions regarding the creation of real rights by registration, instead of recording, are without prejudice to any other means of creating real rights.

21.6 Distinction between burdened and benefited proprietors

It is possible to record in the Register of Sasines deeds relating to certain of the interests referred to in Definition of overriding interest the most obvious example is that of a deed of servitude. It might be thought that since section 2 forbids the registration of overriding interests it would not be possible to register a deed of servitude. The reason this is not the case stems from the definition of overriding interest in section 28(1). It provides that an ‘overriding interest means….in relation to any interest in land, the right or interest over it of -…’. The various interests which are listed after these words are therefore overriding interests only in relation to the subjects burdened by them, therefore if the burdened subjects are still in the Sasine register then the deed can be recorded there too.

Conversely, in relation to the party who has the benefit of them, they are interests in land which may be registrable. Since, however, with the exception of a long lease which is covered by section 3(3), none of the interests in Definition of overriding interest are interests in respect of which a title sheet may be opened in terms of section 5(1)(a), they may only be registered insofar as they affect a registered interest.

This distinction is clearly demonstrated when one takes the example of a servitude. A servitude is an overriding interest in relation to the burdened property but is a registrable interest in relation to the benefited property. As such it can registered against the benefited property provided the benefited property is itself registered. But if the benefited property is not registered the deed of servitude will not induce first registration in terms of section 2(1)(a) and as such cannot be registered.

Consideration must also be given to the terms of part 7 of the Title Conditions (Scotland) Act 2003 that provides a positive servitude can only be created by dual registration of the deed against both the burdened and benefited properties, except where the servitude is a right to lead a pipe, cable, wire or such other enclosed unit.  In this latter example dual registration is not required however the Keeper would expect an application to register the deed against the burdened property.

Noting overriding interests

21.7 Exceptions

Although not registrable, section 6(4) of the Act provides for noting the existence of overriding interests, subject to two exceptions, on the title sheet. The exceptions are:

• Short term leases. Although leases not within the definition of long leases (see section 28(1) of the 1979 Act) are overriding interests, they are not, in terms of section 6(4), capable of being noted on the title sheet. Short term leases (i.e. those for 20 years or less with no facility for extension) will not appear in the Land Register under any circumstances.

• The interest of a non-entitled spouse under section 6 of the Matrimonial Homes (Family Protection) (Scotland) Act 1981. Although an overriding interest, it is likewise excluded from noting on the title sheet. However, where the property appears likely to fall within the definition of ‘matrimonial home’, the Keeper will endorse the title sheet with a statement on whether or not he is satisfied that the property is not affected by the occupancy right of the spouse of any previous proprietor within the 2 year prescriptive period under the 1981 Act.

21.8 Interests capable of noting, when to note

The remaining overriding interests are capable of being noted on a title sheet. Section 6(4) of the 1979 Act details the circumstances in which an overriding interest can be noted on the register. These are as follows:

1. An overriding interest must be noted if it is disclosed in any document accompanying an application for registration of the interest which it affects (section 6(4)(a)). For example, if on registration of a heritable security by a limited company, the security deed, in addition to creating a fixed security, contains a floating charge, the existence of the floating charge would have to be noted. This would be done in the charges section of the title sheet. It is noted that the Keeper would not have to trace and then note the charge on any other title sheets of that limited company’s properties, but, as an overriding interest, the charge would still affect those other properties.
2. An overriding interest may be noted if application is made to do so (section 6(4)(b)(i)). For example, if a servitude right is granted over a registered interest it is, so far as that interest is concerned, an overriding interest; and either the benefited or burdened proprietor may, by making application on Form 5, request the Keeper to note the servitude on the title sheet of the property burdened by the overriding interest.
3. An overriding interest may be noted if it is disclosed in any application for registration (section 6(4)(b)(ii)). For example, if on the grant of servitude mentioned above, application is made by the proprietor of the dominant tenement, for registration of the servitude as a right benefiting that interest, the Keeper may, on processing that application, note the existence of the servitude right on the title sheet relating to the servient tenement.
4. An overriding interest may be noted if it otherwise comes to the Keeper’s notice. For example, if two adjoining proprietors jointly grant a servitude right in favour of a third, and one of those proprietors applies to have the overriding interest noted on the title sheet of his or her property, under section 6(4)(b)(iii) the Keeper may also note the overriding interest on the title sheet of the co-granter.

Note: The foregoing examples b, c and d relate to servitudes created before 28 November 2004, since that date any servitude (other than servitudes for pipes, cables and wires) created within a deed will require to be registered against both the benefited and burdened properties, see Dual Registration and subsequent section.

It is not necessary to obtain the consent of the registered proprietor prior to noting an overriding interest on the title sheet thereof. By virtue of section 9(3)(a)(i) rectification of the register is permitted, without the consent of the proprietor in possession, where the purpose is to note an overriding interest or to correct any information relating to an overriding interest. Where there is an element of discretion as to whether the overriding interest will be noted, the legal registration officer should consider the case on its merits and – if necessary – seek advice from her or his team leader.

21.9 Noting deeds of servitude

Note, this section is not applicable for servitudes created by deed after 28 November 2004, that, with the exception of servitudes relating to pipes, cables and similar, will require to be dual registered against both the benefited and burdened properties to create a real right. For servitudes constituted by prescription the Keeper will not normally enter in the register a servitude right that has allegedly been created by prescriptive possession or implied grant. The reason for this course of action is explained in Servitudes (Chapter 26).

Particular note should be taken of deeds of servitude executed prior to 28 Nov. 2004 submitted to the Land Register for noting on the title sheet pertaining to the burdened property. Where the benefited property is itself registered, application should be made against that title sheet to register the effect of the deed of servitude. Where the benefited property is not registered, the deed of servitude should also be recorded in the Sasine Register for its effect in respect of the benefited subjects. The desirability of such recording should be drawn to the attention of the submitting agent; however, if the submitting agent does not wish to record the deed no further action need be taken.

Where an application is received from the proprietor of the benefited property for registration of a servitude executed prior to 28 Nov. 2004 on the title sheet of that interest the legal registration officer should also, in terms of section 6(4)(b)(ii) of the 1979 Act, note it on the title sheet of the burdened property if that interest is registered. This should be done by making an entry in the burdens section along the following lines:

Details of the servitude should be extracted from the deed and a reference on the title plan should be included where appropriate. (Obviously no fee should be charged for the noting, as this is being done at the Keeper’s instigation rather than in response to an application to note). It is also necessary, when noting a servitude on the title sheet of the burdened property as a result of its being revealed in an application affecting the benefited property, to create a public next application note on the burdened title number. Not only does this act as a warning that the land certificate requires updating but it advises anyone carrying out a search that the title sheet has been updated since issue of the land certificate.

21.10 Styles of noting

Where the overriding interest is contained in a deed that has been recorded or registered, the entry should be in the form outlined in the preceding paragraph. In other words, the normal style for entering a deed in the burdens section of the title sheet should be followed. If the overriding interest has not been created by a recorded/registered deed, an entry appropriate to the particular circumstances of the case should be used. For example:

Any crofting tenancies that are noted as an overriding interest should appear in a schedule of crofts within the burdens section of the title sheet. The actual entry in the schedule will be determined by the information provided by the applicant. Very often no written lease will exist, or where a lease does exist it may be in very rudimentary terms and may not accurately reflect the occupied extent of the croft. Consequently, no attempt should be made to locate or plot tenanted crofts on the landlord’s title plan. The following example is a style of entry and schedule that should be used:

SCHEDULE OF CROFTS

Where an application for registration of an interest in subjects contains among the title deeds an unrecorded or unregistered deed that relates to a servitude right, the servitude may/shall (depending on which of the circumstances in Interests capable of noting: when to note applies) be noted in the burdens section of the title sheet. It is, for example, not uncommon for servitudes granted in favour of former public utilities and the like to be contained in an unrecorded or unregistered deed. In such instances the entry to appear in the burdens section will be as follows:

21.11 Evidence to support noting

An overriding interest must be validly constituted before the interest over which it is created is subject to it. Consequently, an overriding interest should not be noted on the title sheet of the burdened interest unless some evidence of its valid constitution is produced. For example, where the overriding interest is a servitude right, evidence that it has been constituted by one of the methods set out in constitution of a servitude.

21.12 Effect of noting

As explained above, overriding interests require neither the recording of a deed in the Sasine Register nor registration in the Land Register to make them ‘real’ and so run with the land. It follows, therefore, that the sole purpose of noting an overriding interest in the Land Register is publication of an already existing right, thereby ensuring that the Land Register contains as much relevant information as possible.

21.13 Applying for noting

Application for noting may be made by any person whose interest will be served by the noting. As such, the noting of an overriding interest may take place without the consent or even the knowledge of the burdened proprietor.

Form 5 is prescribed for use where application is being made for the noting of an overriding interest on the title sheet. In addition, application Forms 1, 2 and 3 make similar provision. If, therefore, the request for noting is made at the same time as an application for registration, either on first registration or of a dealing, a separate Form 5 is not required.

21.14 Distinction between burdens and overriding interests: implications for noting

Rule 7 of the Land Registration (Scotland) Rules 2006, which implements the provisions of section 6 of the 1979 Act, draws an important distinction between burdens and overriding interests. It provides that burdens and conditions are to be ‘entered’ in the burdens section whereas overriding interests are to be ‘noted’. Theoretically, the distinction between ‘entered’ and ‘noted’ is significant because there is a liability for indemnity in respect of matters which are entered but not in respect of matters that are noted. That distinction is, however, of no practical importance in the burdens section for section 12(3)(g) rules out the possibility of indemnity in respect of the loss arising from the inability to enforce a real burden or condition. As such, when editing burden deeds no attempt need be made to distinguish in the burdens section between matters which are ‘entered’ under section 6(1) and those which are ‘noted’ under section 6(4).

To try and make such a distinction would in any event be impractical. Many of the burdens and conditions set out in a normal conveyance can be classed as servitudes and so fall within the definition of overriding interest. However, from 28 November 2004 it is a requirement in the format of deeds that real burdens are particularly identified and accordingly servitudes should not be intermingled with the real burdens. Some restrictions on buildings were classed as a form of servitude (altius non tollendi) and were often inextricably mixed with other burdens and conditions which do not fall within the definition of overriding interest and separation of them for the purpose of indicating that they are ‘noted’ as opposed to ‘entered’ would be virtually impossible.  From 28 November 2004 the creation of such negative servitudes is prohibited and instead they must take the form of real burdens. Any existing negative servitudes are converted to real burdens in terms of section 80 of the Title Conditions (Scotland) Act 2003 but this status may be subject to review from 29 November 2014, at which time further guidance will be issued.

21.15 Discharge of, or freedom from, overriding interests

While section 6(4) only makes provision for noting overriding interests, a discharge of an overriding interest may be noted on the Register in terms of section 6(1)(g). This provides that the Keeper shall enter on a title sheet ‘such other information as the Keeper thinks fit to enter in the Register’. Application for noting the discharge of, or freedom from, an overriding interest should be made on Form 5 and must be accompanied by such documents or other evidence as are necessary to support the application.

21.16 Circumstances in which a discharge of an overriding interest must be noted on the title sheet

Rule 7 of the 2006 Rules provides that, where, an overriding interest is discharged by probative deed, the Keeper must, subject to what is stated in the following two paragraphs, enter particulars of that deed in the burdens section of the title sheet if the following pre-requisites are met:

• The discharge relates to an overriding interest which has either been recorded in the Sasine Register or noted on the title sheet.

• The applicant requests that the particulars of the discharge are so noted.

The aforementioned provisions do not apply where the overriding interest is a floating charge. In this case, the discharge or memorandum of satisfaction will be given effect to by simply removing the original entry.

In the case of a servitude, particulars of a probative discharge will be noted, whether or not the original grant was recorded in the Sasine Register or noted on the title sheet and regardless of whether the applicant requests it. This is to cover the case of a servitude, constituted by prescriptive possession but subsequently discharged by probative writ.

21.17 Style of entry for discharge

The entry of a discharge should be in one of the following styles;

It should be noted that if the discharge disclosed is of a servitude which has not been noted, the location of the servitude will have to be detailed. Where possible the insertion of a plans reference for the purpose of showing such a discharge should be avoided.

21.18 Indemnity provisions

In terms of section 12(3)(h) of the 1979 Act indemnity is not payable for loss arising in respect of any error or omission in noting an overriding interest. This is so even where the Keeper must note an overriding interest in terms of section 6(4)(a). Indemnity may, however, be payable where the Keeper has omitted to note, or has made an error in noting, the discharge or freedom from an overriding interest in terms of Rule 7.

Although no indemnity attaches to the noting of an overriding interest, legal registration officers should not note an overriding interest unless satisfied that it has been validly created.