Lenders and Intermediaries brace themselves for Scottish remortgage reverse.
An unintended consequence of the major changes to the Scottish registration system in December 2014 are changes that are already making some remortgage transactions more expensive and lengthier with deeper repercussions following in the next few months. This is important news for lenders, intermediaries and consumers.
Properties in Scotland currently sit within one of three registration types. These are named Sasines, 1979 and 2012. What registration type a particular property belongs to depends upon where in Scotland that property is situated and the last time the property was sold for value. Since the advent of the Land Registration Et cetera (Scotland) Act 2012 on 8 December 2014 various transactions involving Sasines registration properties which are commonplace in remortgage triggered a more extensive legal process. Those transactions were where a property that still remained in the oldest form of registration was transferred even if no payment is being made.. It is fairly often the case in remortgages that properties require to be transferred at the same time as the remortgage. Why is this? In today's more atomised society where there is a greater fluidity of relationships and family units it may be that a property sits in the name of one person within a couple. On approaching a lender for a remortgage, both salaries may require to be taken into account in which case the lender will demand that both names are on the title as well as the mortgage.
This is known as a "transfer of equity" and until last December such transfers of Sasines registered properties did not generally invoke what is known as the "first registration process". This process is the transfer of a property from the old style "bundle of deeds" Sasines registration system to the map based Land Register. Now, when such a transfer of equity is required for a property which remains within the Sasines register most of the extensive techniques required when the property is bought are required at the remortgage stage. This can often include detailed comparison of the boundaries of the property which can be time-consuming and expensive.
While transfers of Equity are fairly common, they probably only impact upon 10% of remortgage transactions. A bigger problem will be faced in the next few months when the Sasines register is closed by the Land Register of Scotland (the Scottish body responsible for dealing with the public registration deeds). This will mean that all remortgages where the property is still registered within the Sasines register will require the same work on registration as if the property was being bought.
Roughly 8% of Scottish properties remain within the Sasines register. These are more weighted away from the West of Scotland simply because when land registration was initiated in Scotland in 1981 the first parts of the country to which it was applied were in the west central belt. You can find out the dates which are applicable to which parts of Scotland by looking at this page of the Land Register website.
The cost penalty for these types of remortgage is likely to be around £200 and it is unclear at this point how those schemes promoted by lenders where fees are paid by the lender will deal with these additional costs. It may well be that some cost reverts back to the person taking the remortgage even if the fees are mostly being paid by the lender.
In addition, speedy remortgage times may well be meaningfully delayed if the property falls within those properties to which the new arrangements will require to be implemented.