One of the primary innovations created by the 2012 Act was the introduction of Advance Notices. When registered, Advance Notices provide a period of 35 days during which the grantee of an Advance Notice can register their title/lease/security etc. without fear of a third party being able to register a competing title during that period. In fact, a third party could register a competing title in some cases, but the title of the grantee of the Advance Notice would still get priority even if it was registered after the competing title - provided that it was registered within the 35 day protected period.
Advance notices replace letters of obligation
For centuries, the profession relied on solicitors issuing what was called a Letter of Obligation to cover the period between the date to which the searches in the public registers had been obtained and the date of registration of the grantee's deed. The risk of a competing title was (until Advance Notices became available) covered by the legal profession's PI cover - a situation which was increasingly considered by many Scottish solicitors to be unacceptable. It's a risk that we would probably not advise our clients to shoulder, had we been asked for advice on this issue!
One of the main benefits of the introduction of Advance Notices is that the need for Letters of Obligation has largely been removed, although they will still require to be granted in certain situations where application for an Advance Notice is not competent.
Insolvency, auction and re-possession sales
Before the 2012 Act came into force I think that most solicitors anticipated that Advance Notices would also be used in situations where traditionally Letters of Obligation had not been provided by the seller's solicitor. The main situations which gave rise to this were sales by insolvency practitioners (where a seller was in administration or liquidation or had been sequestrated) and auction sales - where seller's solicitors often refused to grant a letter of obligation. Sales by heritable creditors (mortgage holders) were also sometimes in that category. The absence of a letter of obligation left the buyer at risk of a competing title, even if it managed to get its title onto the register on the day of completion of the purchase.
So, it was hoped that Advance Notices would remove the risk for the purchaser in these types of transaction.
Many insolvency practitioners, heritable creditors and auctioneers (or their legal advisers) have been refusing to apply for an Advance Notice. I don't understand the reason for their reluctance.
An Advance Notice can only be applied for by the seller or the seller's Solicitor. A purchaser cannot apply for an Advance Notice for a deed to be granted to the purchaser. There is no warranty or indemnity being provided by a seller in providing an Advance Notice to a purchaser and the expense involved (apart from the small amount of work involved in actually submitting the application to the Registers of Scotland) is only £10. There can therefore logically be no justification for Advance Notices not being freely available and used in all transactions.
Why will some sellers not grant an Advance Notice?
I wonder whether the Advance Notice is simply seen as a replacement for a Letter of Obligation - and that because, in those situations which I have described above, a Letter of Obligation would not normally have been provided no Advance Notices are being provided.
A clue that this might be the case came recently in a transaction I had with a Local Authority who were selling an area of land to one of my clients. It was an ordinary commercial transaction but the offer from the Council specifically stated that no Advance Notice would be provided.
When I challenged the Council's solicitor I was told "regarding the Advance Notices, it is not about the cost. As you know Advance Notices are intended to replace Letters of Obligation. The Council used to grant these but they were granted by the Solicitor on behalf of the Council and were essentially worthless. They only reiterated obligations which were in the missives anyway. Your clients are fully protected in terms of the Missives and an Advance Notice will not offer anything extra".
In that transaction the Council did, eventually, offer to obtain an Advance Notice although they commented that they thought it was a bit pointless and just added to the work and costs!
Advance notices should become the norm in all transactions
As there is no liability on a good faith granter of an Advance Notice, I think that they should be used in every situation where it is competent to obtain one. Indeed, given the high risk that can be present in transactions with insolvency practitioners, heritable creditors and in auction sales, it is even more important that Advance Notices are used in these circumstances. There can be no justification, in my view, for a refusal to supply an Advance Notice in such cases - and certainly not the reason that one is not required because, in the past, a letter of obligation wouldn't have been given.
Hopefully, over time, it will become the norm for Advance Notices to be supplied in these transactions but for the meantime we still have to take great care when dealing with those situations to minimise the risk for our client and obviously for our own indemnity policy.