How much law, anyway?
1 August 04
A paper from an Update seminar, on where the balance lies between law and practice in the modern conveyancing transaction, and some difficult situations to which the current law can give rise
In my highly colourful article for the Journal, November 2003 (“Death of the Conveyancer”) I sought to point up the way in which the law relating to conveyancing was moving. According to Professor Halliday conveyancing was the law which related to deeds and, as we know, deeds at the moment are physical things which we can touch.
In early conveyancing law of course there was a progress of deeds. One simply did not obtain ownership by way of a recorded or registered conveyance. There would have been a conveyance, an instrument of sasine and some sort of charter of confirmation from the superior. When I became a law apprentice in 1967 a conveyancing transaction consisted in the main of detailed noting of the title – description, burdens, discharged security writs and miscellaneous matters. At the end of the notes there was a long list of observations. A disposition was drafted, clean drafted, clean drafted again and then sent out. It was not unusual for there to be a full written report on title to the client before the date of entry at the same time as one collected the deposit and fees and outlays. The missives part of the transaction usually lasted 24 to 48 hours and the offer might have run to seven or eight clauses, a straight acceptance being the norm.
So far as the security transaction was concerned, in those days security would have been taken by ex facie absolute disposition qualified by a back letter. Ground burdens were also important. Accordingly the average conveyancer in the late 60s and early 70s would have had to have a fairly good grasp of conveyancing law (and I use that word appropriately). He or she would have had to know how to interpret a sasine description; to know the law relating to feuduties and in particular the allocation of the same; and to know the law relating to real burdens including, dare I say it, ius quaesitum tertio or third party rights. I suspect that in those days there were lawyers who actually attempted to understand that tortuous body of law. If a death was involved, knowledge of the law of succession would have been required. If a bankruptcy or insolvency was involved then a knowledge of the law of insolvency would have been required. Certainly he or she would have had to know about the law of execution of deeds. The deeds would have had to be signed on each page and witnessed. Moreover the law relating to deletions and erasures was extremely important. Things have changed and are changing faster than many of us would really like. The purpose of this lecture is to examine what law is now to be found in a conveyancing transaction.
Contract – the pivotal stage
Quite apart from the legislative changes which face us all on 28 November this year, the balance of a conveyancing transaction has swung away from the title phase of the transaction to the contractual phase. Many solicitors find that the bulk of their time can be taken up in attempting to conclude missives on mutually agreeable terms. The search is to find consensus. Very often the title examination phase of the transaction is crammed into the missives or contractual phase. There are two reasons for this:
(1) Many sellers and their solicitors want the purchaser to commit to the title as it stands before missives are concluded, and
(2) Many titles are registered with indemnity in any event and, so the theory goes at any rate, once a title is registered with indemnity the question of validity need not be examined. Property law, if you like, is replaced by land registration law and a state guarantee.
So far as the missives phase is concerned, conveyancers should always bear in mind that the missives are a contract and accordingly that the law that relates to missives is not conveyancing law or conveyancing practice but the law of contract. The law of contract is far from simple, especially when one comes to look at the area of breach of contract and the remedies which flow from a breach. Let us take a few examples.
For a contract such as missives to be binding on both parties there must be offer and acceptance, and consensus must be achieved. It used to be a feature of the Scottish system that consensus was achieved fairly quickly. That is no longer the case. As a matter of law clients ought to be made aware that there is no legally binding contract until all the qualifications have been accepted. In my experience of negligence claims this is something that sometimes is not put across. It is not uncommon for the missives to be concluded the day before settlement in circumstances where the removal has already been booked and nobody has any backup plans to cover the situation where the missives are not in fact concluded because consensus is not reached. It should be borne in mind that the law relating to missives at the moment is that they require to be in writing, but only subscribed writing (Requirements of Writing (Scotland) 1995, section 1). There is no requirement for missives to be probative. It should also be borne in mind therefore that so called “informal” correspondence may be just as legally binding as formal correspondence. However one can withdraw from missives before they are concluded by any means, including oral communication at a meeting or during a telephone conversation. Oddly enough the same formality requiring subscribed writing for consensus or conclusion does not apply to withdrawal (McMillan v Caldwell 1990 SC 389).
In complicated transactions, particularly commercial transactions, qualifications can go backwards and forwards for months. One should always consider whether or not it is appropriate to try and adjust a draft offer which is capable of a straight acceptance. This may not take as long and it may result in a clear set of missives at the end of the day. There are some missives which I have seen where one would be hard pushed to know what was agreed. It should not be overlooked that the law of contract contains a great many principles and presumptions which apply to interpretation. A contract can be void if it is too ambiguous. If it is not as bad as that, various legal presumptions may bring about results which are not looked for by the clients. Finally, in relation to conclusion of missives it should be remembered that the basic rule of contract law is that a qualified acceptance destroys the previous offer, so that what is on the table for acceptance is the offer as qualified by the qualified acceptance. One cannot go back down the chain of missive correspondence and withdraw a letter containing one’s own qualifications with a view to accepting a previous letter from the other side (Wolf & Wolf v Forfar Potato Co 1984 SLT 100; Rutterford Ltd v Allied Breweries Ltd 1990 SLT 249). Only in one case (Findlater v Maan 1990 SC 150) has this been allowed and that was in very special circumstances where one of the letters in the chain had become isolated and possibly had not been received by the time the other letter went out from the other side.
A special area of contract law relates to suspensive conditions. There are two points which I think are worth mentioning here. In the first place, if acting for a purchaser an express right to waive the suspensive condition without the consent of the seller and without purification actually taking place should always be reserved, as it will not now be implied that such a condition was conceived wholly for the purchaser and accordingly is capable of unilateral waiver (Manheath Ltd v H J Banks & Co Ltd 1996 SC 42). The second point is that if time limits are expressed in relation to doing certain things to purify the suspensive condition, these time limits should be stated to be material, as the ultimatum procedure (Rodger (Builders) Ltd v Fawdry 1950 SC 483) does not appear to apply to time limits for the purification of suspensive conditions (T Boland & Co Ltd v Dundas’ Trustees 1975 SLT (Notes) 80).
Materiality of obligation
Missives, even missives in respect of domestic properties, now contain a host of non-title clauses. There may be an obligation to produce an NHBC agreement or a building warrant or a specialist guarantee or a matrimonial consent or affidavit. There will almost certainly be some sort of obligation to produce a local authority or professional planning report and a certificate relative to the roads, footpaths and sewers. What is often not clear however is the legal result which will follow from a breach of one of these conditions. There are two questions from clients which solicitors dread:
(1) We do not want to go ahead with this purchase – can we get out of it?; and
(2) We have heard that the other side want out despite concluded missives – is it all tied up?
Of course the proper answer to both of these questions from a competent solicitor is: “You employ me to conclude a binding contract; of course you/they cannot get out of it.” What often follows from a statement to this effect is a search for some clause in the missives which has been the subject of a technical breach. The party wanting out seizes upon this and seeks to withdraw. However one cannot rescind missives unless the other party is in material breach of contract. A technical minor breach will only give rise to a claim for damages. It is important to realise the difference, especially where clients themselves go through the missives with a fine tooth comb phoning you up every half an hour to tell you that the other party is in breach for some reason such as the fact that the carpet in bedroom 2 is dirty or the kitchen window appears cracked.
It is often difficult in law to work out what is a material obligation and what is not. We know that the reason that there are penalty clauses in qualified acceptances is that payment of the price on the date of entry for some reason is not a material condition (Rodger (Builders) Ltd v Fawdry). However at the other end of the scale it has been decided that failure to produce a completion certificate in respect of an extension is a material breach justifying the purchaser in rescinding. This was decided in a case where a building warrant and planning permission had been granted and the local authority for some technical reason could not give a completion certificate but were perfectly happy to say they were satisfied with the extension and issue a letter of comfort. The court decided that a letter of comfort was not equivalent to a completion certificate. One might have argued here that this was not material breach because there was no practical problem, the local authority having indicated they were happy with the extension after an inspection. Nevertheless the court analysed the nature of the obligation in the overall context of the missives rather than the effect of the breach and allowed the purchaser to rescind. It appears to have been fairly clear that the purchaser wanted out for a completely unrelated and ulterior reason (Hawke v WB Mathers 1995 SCLR 1004).
Title – law and practice
There is still some law relating to title, although the policy and practice of the Keeper may be said to be more important. Here are some examples.
Simple question, tricky situation
Prior to land registration the legal question in relation to title usually was whether or not the seller had produced a valid marketable title. A valid title was one which indicated that a seller owned the land to be sold. A marketable title was one which, in addition to being valid, contained no burdens or reservations which were unduly onerous or burdensome having regard to the type of property. Questions of validity have now largely been superseded by land registration. At least that is how it is at the moment. Anyone who looks at the well thought out discussion paper issued by the Scottish Law Commission on void and voidable titles in land registration matters will see that we probably have at the moment something which could be called a positive land registration system, in the sense that once title is registered one cannot go behind the title sheet and land certificate with a view to unearthing arguments to the effect that the proprietor is not really the owner. This is known as the curtain principle. What it means often is that questions of pure property law which might have arisen in the past in a conveyancing transaction are swept to the side in favour of a very simple question: “Will the Keeper take this without excluding indemnity?”
I have seen arguments, for example, to the effect that a servitude has not been properly constituted because it was granted by a local authority in respect of a former council house over an adjoining path in the title of the next door property. The next door property had been sold by the local authority some years previously and they had unfortunately forgotten to reserve this right of access. Accordingly they were in no position to grant the servitude. Nevertheless the Keeper had missed this and put the servitude in the property section. This brings about a tricky question. According to the law of property the servitude is invalid and does not exist; according to the law of registration the Keeper has included this right in the property section and it has been created by the act of registration itself. On that basis a solicitor looking at the land certificate with the servitude would require to do no more. However the other neighbour might attempt to rectify the title. Unfortunately the law of rectification and indemnity under sections 9 and 12 of the 1979 Act is showing signs of strain, especially when rectification is not possible against a proprietor in possession. The Lands Tribunal has also held that one does not possess a servitude. Accordingly if I were to ask what sort of law conveyancers need to know in relation to title matters I would have to say that it is the law of rectification and indemnity which is currently the most important.
Descriptions – masking reality
Theoretically when a title is registered the description should not be much of a problem. The Keeper will register the title without exclusion of indemnity if the sasine title plan matches the Ordnance Survey, and of course the Ordnance Survey ought to be accurate as to the physical position. As a matter of practice, as opposed to law, that does not absolve a solicitor in a conveyancing transaction acting for a purchaser from checking that the title plan in the property section does adequately reflect the physical position. This is not a P16 case. Title is already registered. The client should however be asked in the normal way to confirm that the title plan duly registered does conform to the physical position.
Unfortunately there are a number of cases where land registration brings about unlooked-for results. Recently I was asked for a view in a situation where the boundary between two properties had been adjusted between two previous owners without any alteration being made to the title. The fence had been shifted and proprietor A then built a garage close to the new fence. The corner of the garage of course was in the title of the property belonging to proprietor B. The situation remained as it was for well over 25 years. Proprietor B then sold his property to proprietor C and the Keeper registered a title in accordance with the sasine plan, taking in part of the garage ground possessed by proprietor A. Unfortunately the Ordnance Survey map was not detailed enough to show the garage so the encroachment was not obvious to the Keeper. Proprietor A then applied to build an extension over the garage and proprietor C objected. Proprietor C then researched the title position and demanded that the garage be knocked down because he had an indemnified title to the ground on which the garage or part of it was situated. My view was that proprietor A could do nothing because although he had possessed for 20 years he had possessed with no title. Prescription did not apply and he was not a registered proprietor in possession. He could not therefore demand that the Keeper rectify the title of the adjoining registered property by removing the sliver of ground on which part of the garage rested. There was no defect in that title to be rectified. No solicitor was at fault in any of this. That was my first conclusion but it does throw up an anomaly in the land registration system. After all proprietor C bought from proprietor B with the garage and fence in their physical position. Proprietor C could never have thought that he was buying part of his neighbour’s garage. The law of encroachment relating to heritable property would probably prevent proprietor C succeeding in an action to have the garage knocked down, but the law of registration of title will not remove title from proprietor C and hand it over to proprietor A.
In practice, on practice
I think it was Doctor Johnson who said: “Lawyers know no law, they only know practice.”
I suppose it would be fair to say that many lawyers engaged in conveyancing transactions proceed on the basis of instinct. I would be the first to agree that conveyancing transactions run as much on practice as they do on law. To that extent there might not be much law involved in an ordinary, smooth running, domestic conveyancing transaction. However to my mind it is more accurate to say that the balance of the law has shifted away from pure conveyancing law to contract law on the one hand where it relates to missives, and land registration law on the other hand where it relates to title. In the not too distant future ARTL will be introduced and we will have paperless dispositions. By that time I would expect missives to be capable of being concluded without written documentation as well. Around the same time there will be a wholesale reform of the Land Registration Act 1979. It is not so much that there is no law involving conveyancing transactions; rather it is that different areas of the law will be involved in the future.
Robert Rennie is Professor of Conveyancing in the University of Glasgow and a partner in Harper Macleod, Glasgow