Registers of Scotland & Coronavirus (Scotland) Bill - taking forward commercial property transactions

Closure of Registers of Scotland

Background

In response to this unprecedented situation, Registers of Scotland (ROS) closed the Application Record on 24 March 2020, and therefore is not accepting any applications for registration, thus meaning that no transactions which require the registration of any deeds by ROS may complete.

Owing to the great difficulties the closure of the Application Record will and has caused, ROS has put in place interim measures to help a limited number of transactions complete, providing a strict set of criteria can be met.

Advance Notices

The provision for the limited opening of the Application Record, and therefore, the limited ability to complete transactions hinges on the registration of an Advance Notice. We appreciate that many of our clients may not be aware of Advance Notices, as they generally are considered a “legal” matter which we deal with in the background.

Solicitors apply for registration of an Advance Notice prior to completion of a transaction. Solicitors then apply to register deeds with ROS after completion. An Advance Notice protects the gap between completion and registration of deeds, by protecting those named in the Advance Notice so that any deeds submitted for registration in their favour will be prioritised over any other deeds submitted for registration and also protects against the insolvency of the granter of the deed, and that deed is protected for a period of 35 days. Advance Notices are generally registered in the week before completion, when the completion date is known, or is likely to be imminent. At the moment, the Application Record is open for all Advance Notice applications.

Can my transaction complete?

There is scope for some urgent transactions to complete but for the majority we will need to see the Coronavirus (Scotland) Bill (the Bill) coming into force before completion can proceed. The interim measures will apply to a limited number of transactions which do not conflict in any way with the Government restrictions and the Law Society of Scotland has recommended that parties to transactions should attempt to reschedule settlements rather than completing during the closure of the Application Record.

ROS, the Law Society of Scotland and financial institutions have agreed interim measures to complete transactions scheduled for imminent completion if the following essential criteria can all be met:

1. An Advance Notice has already been registered, and

2. There must be delivery of signed deeds to the relevant solicitor.

This could however be constructive delivery by email agreement between solicitors so that the solicitor holding a deed can demonstrate or confirm that it has been validly executed and is being treated as delivered on the basis it will be physically delivered to the solicitor on the other side immediately after the Applications Record re-opens.

It would appear that the main rationale behind this limited completion ability is to ensure there are not families “on the doorstep” of new/old homes, rather than to enable the completion of commercial transactions.

Coronavirus (Scotland) Bill

Background

The Bill passed on 1 April 2020 and is suspected to come into force when it receives Royal Assent hopefully within the next week. The Bill provides some good news and deals with a number of points which will inform how interested parties will take forward commercial property transactions.

The Bill has been drafted with the intention that it will expire on 30 September 2020 (although some provisions have other timelines). There is an ability for the Scottish Government to terminate the provisions early or extend them to 31 March 2021 and, after 30 September 2020 to 31 March 2021.

Advance Notices

For the duration of the effect of the Bill, any Advance Notice which was already on the Application Record as at 24 March 2020 is to be treated as extended until 10 days after the Application Record reopens, meaning that priority will be given to the party named in the Advance Notice over other applications for registration for an extended period. Provision has also been made that any Advance Notices which are added while the Application Record is fully or partially closed will last until 10 days after that full re-opening date.

If for any reason the application record is closed for Advance Notice applications and you do not have an Advance Notice on the register, then you will have no protection. As such, our advice is that Advance Notices are submitted as soon as the required details are obtained to enable such Advance Notice to be registered so that your deed has a protection until 10 days after the Application Record is fully reopened.

Electronic registration

The Bill allows for registration on the basis of a copy of a traditional document submitted for registration through electronic means and there is reference in the Bill to submission of the copy by a means (and in a form) which is specified on the ROS website as being acceptable. We understand that ROS staff are working to put the necessary practical arrangements in place to do so but this could take between 3 and 4 weeks to get the processes set up.

Future completions

Both the extension to the period of Advance Notices and a full mechanism for electronic registration should allow commercial transactions to move to completion after the Bill comes into force as the parties would have the protection of the extended period of an Advance Notice to register all deeds after the application record is fully reopened. That being said, there are very obvious practical difficulties in getting deeds signed and sent to the required recipient, though CMS are well placed to aid our clients in this regard.

Planning

Under the terms of the Bill, any planning permission due to expire during the period of 6 months beginning with the date on which the provisions come into force (the “emergency period”) will have its lifetime extended. The permission will instead expire 12 months after the provisions come into force unless the authorised development has commenced before then. Where the deadline for submission of any matters specified in conditions (‘reserved matters’) application falls within the emergency period, the deadline for submission of those applications will be 12 months after the provisions come into force.

The Scottish Ministers will have powers to amend these time periods under Regulations.

Planning and similar legislation often includes requirements to publish/publicise a document, give notice of documents being available for inspection or make documents available for public inspection. It is proposed that public authorities can decide not to comply with such a duty where they consider doing so:

(i) may give rise to a significant risk of coronavirus transmission; or

(ii) is likely to be ineffective or inappropriate due to restrictions in place to control the incidence or transmission of coronavirus (e.g. public deposit locations being closed).

Where they choose not to comply with the duty, they will be required, if possible, to use an electronic alternative to complying with the duty, such as publicising or making the document available for inspection on their website.

Irritancy

In Scotland the landlord’s right to terminate a lease because of tenant breach is known as irritancy. The Bill includes some extra protection for commercial tenants who may fail to pay rent during the pandemic. The existing legislative provisions on irritancy have been amended to extend the notice period for non-payment of rent or other monetary sums from 14 days to 14 weeks. This means that if the tenant is able to clear its arrears during a 14 week period from the serving of a formal notice of breach from the landlord, the landlord will not be entitled to terminate the lease. The Bill also acts retrospectively so that where a notice has already been served when it comes into force, and the 14 day notice period under current legislation has not elapsed, that notice will be void and a further notice will have to be served by the landlord with the 14 week notice period before the landlord will be entitled to terminate for non-payment. Depending on the length of the pandemic these periods of notice may be further amended and the Bill provides for the Scottish Minister to further extend them.