Flashcards in Head 6: Transfer of Land - Some Problems Deck (30):
What is the nemo plus rule? Where in the LRA 2012 is this repeated?
Derivative acquisition requires consent of the owner. So the transferor must either be owner or a person whom the owner has authorised to make the transfer. I cannot give you someone else's property. This is the nemo plus rule, a common law rule which is also sometimes repeated in statute: see, for registered land, LRA 2012 ss 49(4) and 50(2).
When is the law willing to protect a good faith acquirer?
Whether it does so depends on the type of property.
There is no protection for acquirers of incorporeal property and virtually none for acquirers of corporeal moveables. But for acquirers of registered land (only), there is virtually full protection, under LRA 2012 s 86.
This depends on whether the title is void or voidable.
If Alan has a voidable title then as a rule of common law that if Betty is in good faith then Betty gets an absolutely good title - not just a voidable title. (Since this is a common law rule it apples in relation to property of all kinds).
If Alan's title is void then whether Betty acquires title as a bona fide purchaser depends on s 86 of the LRA. This only apples to land.
And even where the protection does not apply, the acquirer (if in good faith) is likely to be eligible for compensation from the Keeper under the Keeper's warranty. As it is sometimes put, an acquirer in good faith will receive either the 'mud' (ie the property) or the 'money'.
What does section 86 state?
S 86(1) states that it applies where a person 'A' who is not the proprietor of a registered plot of land but is entered in the proprietorship section of the title sheet as proprietor and is in possession of the land. 'B' acquires ownership of the land provided that the conditions in subsection (3)[ There are 6 in total, i've listed the most important.] are met:
⁃ (i) that the transferor (or transferor and transferee taken together) were in possession for a year (s 86(3)(a)) and
⁃ (ii) that the transferee is in good faith (s 86(3)(a))
[Possession includes civil possession (s 133(1)). So a transferee can rely on the Land Register, provided that the transferor is in possession: what you see is what you get. Importantly, this means that there is no need to go behind the Register to examine prior deeds (as would be necessary with the Register of Sasines).
The requirement for possession is an attempt to strike a balance between the original owner and the good faith acquirer: as long as the original owner keeps possession, he keeps his property.]
Note that s 86 is confined to the transfer of ownership and does not extend to the grant of subordinate real rights such as standard securities. But there is separate protection in s 90 for the granting of servitudes.
What is the effect where s86 applies?
Where s 86 applies, the effect is to prefer the good faith acquirer over the original owner – and to expropriate the property of the latter. So the original owner must be compensated. This is provided for by ss 94 and 95.
If however it turns out that the good faith acquirer doesn't acquire good title despite being entered on the title sheet as owner (perhaps because the possession requirement is not satisfied) then they may or may not be compensated under the Keeper's Warranty.
If Alan is the registered owner on the title sheet but Tom is actually the owner, what must tom do?
Tom must challenge Alan's title before Alan sells it.
⁃ So if Tom, (the true owner in the case of a void title of Alan, or with a right to reduce in the case of a voidable title of Alan) will have to move fast in order to avoid losing his rightful title.
⁃ Once Tom raises a court action (which would be necessary in the case of a voidable title since Alan's voidable title must be 'reduced') it is possible for Tom to apply for a caveat (meaning let him/her be warned).
What does a caveat do?
This places a warning on the Land Register that there is litigation taking place in relation to the property. The Keeper will then enter this into the Land Register. This will then disapply section 86. This will put any potential purchasers off buying until the litigation has been resolved. If the real owner succeeds then the real owners gets the property back and section 86 has failed.
What was the effect of registration under the 1979 Act?
Under that Act the effect of registration is to confer an immediate real right, even if the deed in question is invalid. This is because title flows from the Register and not from the deed, and the Keeper is said, colloquially, to have the 'Midas touch (s 3(1)(a)). So not only does Betty become owner but so does Alan; and Tom is therefore expropriated much earlier. The Keeper’s Touch turns everything to valid**.
⁃ But because the owner 'should' be Tom and not Alan or, later, Betty, the Register is regarded as (bijurally) inaccurate and Tom can apply for rectification (s 12(1)). Usually, however, he will not succeed because rectification is not available to the prejudice of a 'proprietor in possession' except in limited circumstances, of which the most important is that the inaccuracy was caused by the proprietor's fraud or carelessness (s 12(3)(a)).
⁃ Thus so long as Alan (or Betty or all future owners)
⁃ (i) takes up possession and
⁃ (ii) was not fraudulent or careless, then
⁃ (iii) he gets to keep the property[ So it is much easier to lose ownership under the 1979 Act as opposed to the 2012 Act.].
How are existing inaccuracies treated when the LRA 2012 comes into force?
existing inaccuracies on the Land Register are treated in one of two ways (LRA 2012 sch 4 paras 17, 22):
• if the Keeper had power to rectify the inaccuracy, the power is deemed to have been exercised to the extent that the person who would have gained rights is deemed to have done so (Tom becomes owner in place of Alan, though Alan remains on the Register at least for the moment);
• if the Keeper had no power to rectify the inaccuracy, the Register ceases to be inaccurate (Alan remains owner and Tom loses any prospect of getting the property back).
What happens when the transferor owns later but not at the time of the registration of the disposition? What is this called?
If the transferor does not own at the time of registration of the disposition but becomes owner later, ownership passes at that moment to the original transferee. So absence of title at the time of the disposition is cured by a subsequent acquisition of title. This is known as accretion.
[ Accretion is a general principle - it applies to all types of property and also not only to ownership - it also applies to subordinate real rights etc.
**Accretion has a habit of appearing HIDDEN in exam questions. DO NOT FORGET!!!***].
How does the doctrine of accretion apply in this scenario: Where Y thinks he is owner (more likely in good faith) and transfers to Z, and later X transfers to Y and Y then becomes owner?
The doctrine of accretion is that Y does not have to transfer again to Z.
What happens if in year 1 Alan dispones land to Betty. B registers in the Land Register. In fact the land belongs to Tom. In year 5 Tom dispones the land to Alan who registers in turn?
Under the doctrine of Accretion BETTY becomes owner - the title passes straight through Alan to Betty.
What is required for accretion to operate?
For accretion to operate the disposition must contain either
⁃ (a) a grant of absolute warrandice or
⁃ (b) a clause conveying granter's whole right, title and interest present and future.
Is accretion retrospective?
Accretion is not retrospective - in the example Tom would remain owner until year 5 rather than
retrospectively losing ownership from the date Alan disposed to Betty.
Where does accretion not operate?
Accretion cannot operate (and is not necessary) where LRA 2012 s 86 applies.
Accretion is prevented by supervening sequestration of granter: Bankruptcy (Scotland) Act 1985 s 31(3).
Accretion cannot take place if, in the time between year 1 and year 5 ( forexample) B has been sequestrated (bankrupt). If this occurs, where A conveys the property to B in year 5, then it goes to B, not C, to pay off A's debts. (Bankruptcy (Scotland) Act 1985 s 31(3)).
What happens when the transferor owns now but not later? For example: The transferor (Alan) might be owner but hold on a title which is voidable (ie subject to challenge).
When is a title voidable?
Only if there was some defect in the method by which he acquired the property in the first place. For example, if Alan previously acquired from Zara, Alan's title may be voidable either because of the misbehaviour of Alan[ In the case of fraud or undue influence.] or because of the misbehaviour of Zara[ Examples (ii) - (vi)] (which affects Alan if Alan was gratuitous or in bad faith.) But not all misbehaviour has this effect.
What are some examples of voidable titles?
Examples of voidable titles include:
. (i) Alan induces the transfer by fraud or undue influence.
. (ii) Zara, aged 16-18, makes a prejudicial transaction: see Age of Legal
Capacity (Scotland) Act 1991 s 3.
. (iii) Zara makes a gift to defeat her creditors: see Bankruptcy (Scotland)
Act 1985 s 34 (gratuitous alienations).
. (iv) Zara makes a gift to defeat her spouse: see Family Law (Scotland) Act
1985 s 18.
. (v) Zara transfers in breach of an obligation not to do so: see the rule
against offside goals: see Head 8 below.
. (vi) Zara’s own title is voidable: see below.
A voidable title is a good title (ie Alan really is owner) unless or until the disposition in his favour is reduced and the decree of reduction is registered in the Land Register or Register of Sasines. See Conveyancing (Scotland) Act 1924 ss 46 and 46A (inserted by LRA 2012 s 54).
By fraud, Alan induces Tom to dispone land to him. Alan registers the disposition in the Land Register. Tom raises an action of reduction of the disposition, obtains decree, and registers the decree in the Land Register.
- What if Alan transfers to Betty before the decree of reduction is obtained (or, if obtained, registered)? What, in other words, is the position where the transferor has a voidable title which has not (yet) been avoided?
1. A decree of reduction MUST be registered before it has effect.
2. If Betty is in good faith and the transaction is a sale (ie Betty gives value), Betty obtains an unchallengeable title. Tom's remedy is to claim damages from Alan.
⁃ Otherwise[Ie if Betty is in bad faith, or if the transaction is not a sale] Tom is able to reduce not only the disposition to Alan but also the later disposition to Betty [So Betty's title will also be voidable.]. So Tom will recover the land. Betty's remedy is to claim damages from Alan (generally for breach of warrandice).
Why should Tom raise an action for reduction as soon as possible?
As Tom may lose his chance of reduction if Alan sells to Betty, he will be well advised to raise an action as soon as possible. And once he has done so he can protect his position by obtaining and registering a caveat under LRA 2012 s 67.
What is the difference between the reduction of void and voidable titles?
In the first case the protection is statutory (LRA 2012 s 86) and applies only to registered land, in the second it is based on common law and applies to property of all kinds (heritable and moveable, corporeal and incorporeal) and indeed to grants of subordinate real rights.
Do defects in the contract/missives affect the conveyance? Example: Alan dispones land to Betty. Betty registers the disposition in the Land Register. But the
missives of sale are void due to essential error. Who owns the land?
Two possible answers:
. (1) Causal basis of transfer. Justa causa traditionis (just cause of conveyance) required. So Alan is owner.
. (2) Abstract basis of transfer. Conveyance viewed ‘abstractly’ from contract. So Betty is owner.
Which answer applies in Scotland?
Scotland operates on an 'abstract basis of transfer - the conveyance is viewed 'abstractly' from
the contract'. [Compared to a 'causal' basis of transfer - under this form of transfer there must be a valid contract in addition to a valid conveyance.]'
Therefore even if the contract is invalid, the conveyance can still be valid.
What are some common undiscoverable encumbrances?
Not all encumbrances can be registered in the Land Register or Register of Sasines. (In LRA 1979 these were known as ‘overriding interests’.) These include short leases (ie of 20 years or less), many servitudes, and floating charges.
Most encumbrances, however – including long leases, standard securities, liferents, and real burdens – have to be registered in order to be created. They will therefore appear on the Land Register or Register of Sasines, and an acquirer buys with his eyes open. But just occasionally, an encumbrance which ought to be on the Land Register is missed out. This might occur by Keeper error on first registration, or where a discharge of the encumbrance was forged, leading the Keeper to delete it.
How can the existence of floating charges be discovered? How can the others be discovered?
The existence of floating charges can be discovered from the Companies Register.
With the others, a transferee simply has to take the risk, although a lease or in some cases a servitude involves possession and may be obvious from an inspection of the property
What happens if an encumbrance emerges at a later date?
If, later, an unknown encumbrance emerges, the transferee will often have a claim against the transferee under warrandice.
How does the LRA 2012 protect the good faith acquirer?
LRA 2012 s 91 protects the good faith acquirer: on becoming owner by registration in the Land Register, an acquirer takes free of any encumbrances which exist but are not listed on the title sheet. The encumbrance is extinguished, leaving its holder to claim compensation from the Keeper under ss 94 and 95.
What are the exceptions to claiming for Keeper compensation under ss 94 and 95?
Section 91(4) lists some exceptions.
[ Encumbrance does not include:
(a). Public right of way
(d) A lease
Where can most encumbrances be found?
Most encumbrances can be found out in section C (securities) and section D (burdens) of the Title Sheet of the property.
What are the potential problems of identifying encumbrances on a title sheet?
⁃ 1) Not all encumbrances are registered
⁃ Certain types of subordinate real rights are not required to be registered. These include:
⁃ Short leases (20 years or less)
⁃ Many servitudes
⁃ Floating charges (however these can be discovered from the Companies Register)
[In the case of these types of difficulties, nothing can be done about them - it is simply a risk that the buyer has to take when buying property. However, the transferee will often have a claim against the transferee under warrandice]
⁃ 2) Sometimes an encumbrance which ought to be on the register is not registered
occasionally, an encumbrance which ought to be on the Land Register is missed out. This might occur by Keeper error on first registration, or where a discharge of the encumbrance was forged, leading the Keeper to delete it.
⁃ LRA 2012 s 91 [NB that unlike s 86, s 91 CAN apply to first registrations.] protects the good faith acquirer: on becoming owner by registration in the Land Register, an acquirer takes free of any encumbrances which exist but are not listed on the title sheet. S 91 does not apply if there is a caveat on the title sheet (91(2)(b)).
⁃ The encumbrance is extinguished, leaving its holder to claim compensation from the Keeper under ss 94 and 95.
If the property is damaged or destroyed, is the deal off or must Betty go ahead and pay for charred remains?
⁃ If the damage is due to fault then the person whose fault it is has liability under the law of delict.
- If it is nobodies fault [E.g. house blown down by a tornado.] then the answer depends on whether risk (ie the risk of injury to or destruction of the subject of a sale without fault on the part of any responsible person) is with Alan or with Betty.