How lenders’ remortgage small print and “fees free” offers may have a problem….
A major milestone in the Scottish land reform process is fast approaching. And it is one that is going to cause headaches for lenders. We reported on this some months ago.
The 400 years old Sasine Register closes its doors for the few remaining documents that can be registered within that register 35 years after the introduction after the Land Register.
Most pertinent for lenders are new standard securities for properties that remain within the Sasine Register and broadly speaking this means remortgages on such properties. Here are the headlines:
- The transactions to which this relates are those cases where the title of a prospective remortgage customer is registered in the Sasines register. That is generally expressed at around 8-9% of current applications.
- Where an application for first registration is required under these circumstances the Land Register will not charge an additional registration fee above the normal Standard Security registration. Whilst that is good news, the bad news is that all the other requirements of 2012 first registration do apply.
- There is a considerable cost implication arising from the first registration requirements.
- Disbursements: A plans report is required to ensure that the property meets the mapping requirements of the 2012 Land Register. Currently the cost is around £70 inclusive of VAT. In addition there are common circumstances where copy deeds have to be obtained to meet the obligations relating to applications and this may be roughly estimated at an average cost per case of say £15 inclusive of VAT. However, in many cases the cost is zero but in other cases the cost might be £100
- Legal time: other than create a document transferring the property everything needs to be done that would require to be carried out on a first registration conveyancing. Because of the vicissitudes of the 2012 Land Register these proved to be very variable. Let’s not bore you with the frustration of Scottish conveyancing (and there are plenty) but a rapid remortgage will potentially be anything but rapid. Broadly speaking averaging out the tremendous differences would generally produce a fee of something like £295 plus VAT.
- A particular issue of concern for lenders is the required transparency for customers. Up until now any additional conveyancing in Scotland has always been because of a matter personal to the borrower. Now, that the requirement for voluntary first registration is an imposition of the registration system it is to some extent potluck whether the customers title is still within the Sasines register. Why is this? Land registration was introduced into Scotland at a glacial pace between 1981 and 2003. If a customer were in the part of the country where it was introduced in 1981 then the chances of a title remaining within the Sasines register are fairly remote. However, if a customer is within that part of the country where Land Registration was last introduced then they could have owned the property for around 12 years only. This creates many problems on sales, with intermediaries and most of all customers.
- The Lender has to decide whether it will treat the automatic voluntary Land Registration in the circumstances as a customer added cost or whether the Lender will bear the cost.
- Whatever the decision by the Lender there are other implications. It is easy to group solicitors with farmers and taxi drivers in that all of them complain vociferously about their working environment. But in this case the introduction of the 2012 Act has been truly nightmarish on first registration cases and the fact that the Land Register have turned 180° on several different areas is testament to that fact. Realistically timescales will go out of the window on these cases. That is because of the complications, the need for further reports, specialist time and the requirement to report to the client on any issues which may affect their title on an ongoing basis. Given the incredulity of clients when one tries to explain that a change in the law means that their existing title is problematic (and that no one is to blame), their response within a remortgage scenario (however accommodating, careful and supportive one is) is likely to produce complaints, cancelled cases and intermediaries demanding to know why this is a problem.
- Although the Sasines register closes on 1 April 2016, because it is the date of application that is relevant solicitors will effectively be applying a cut-off date on transactions completing on or about 18 March 2016 to allow plenty of time for the Sasines application to safely reach the register.
- That means in respect of any transaction completing after that time it will on the basis that voluntary first registration will be necessary.
There is no way to really ascertain whether a remortgage case will be subject to these problems without obtaining a search in the first place. Even where someone has bought their property after 2003, there are circumstances where they acquired their property, say following a split with their spouse, where the property would not have found its way to the Land Register.
McVey and Murricane have developed solutions for lenders to assist with this thorny problem. Even if a lender has an existing fees free remortgage scheme it makes sense to deal with these separately. McVey and Murricane have more experience of the new 2012 Land Registration than any other single location in Scotland.
Lenders can find out more by contacting