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Unravelling Legal Intricacies: Hidden Risks in Property Transactions

Unravelling Legal Intricacies: Hidden Risks in Property Transactions

Image: Laura Lapsley, Senior Underwriter

The recent case of Logan v Irons, which centered on a dispute between neighbouring properties in Dunbog, Fife, underscored the significance of the doctrine of confusion (when dominant and servient properties come into the same ownership).

This case served as an important reminder of how confusion may lead to the extinguishment of a servitude. The complexity arises not only due to this occurring off-register, making it more challenging for a prospective purchaser to detect, but also because no warranty is provided by the Keeper in such instances.

Background

In this particular case, the pursuer, Stuart Logan, was the owner of a property known as the Auld Kirk. He sought a declarator affirming that his property benefitted from specific servitudes over an adjacent property, Beauty’s Land, owned by the defender, Andrew Irons.

A servitude right of access and aqueduct had been granted in favour of the Auld Kirk under Mr Logan’s ownership in 1987 when Beauty’s Land was owned by Legal and General (Pension Management) Assurance Society Limited.

In 1993, the Auld Kirk was disponed to Mr Irons and his wife, and the subsequent year saw them also obtaining ownership of Beauty’s Land. Consequently, the defendant in this case came to possess both the benefitted and burdened properties. This continued until 2007 when both properties were sold to different parties.

In 2017, Mr Logan reacquired the Auld Kirk, and in 2019, Mr Irons repurchased Beauty’s Land, leading to the recent Sheriff Appeal Court case.

The court was tasked with determining whether the servitude right, initially granted on 3 September 1987, was extinguished by confusion when both properties came under joint ownership on 6 May 1994. Alternatively, the court had to consider whether the servitude right was merely suspended and revived upon the separation of the two titles on 16 October 2007.

Ultimately, the court ruled that the original servitude was extinguished by confusion when the two properties were owned by the same individual. However, a new implied servitude of aqueduct was established when the ownership of the two properties separated again in 2007.

The Challenge

This case exemplifies the legal principle of confusion and is worth bearing in mind when acting in the purchase of a property. Despite acting in good faith and conducting thorough due diligence, it remains challenging to identify instances where confusion has led to the extinguishment of a servitude. Such events are not readily discernible from a review of the title sheet alone. In the Logan v Irons case, detection would have required the purchaser of the Auld Kirk to examine not only its title but also that of the neighbouring Beauty’s Land; a practice that typically goes beyond current standard procedures and necessitates a keen understanding of what to look for.

The Solution

A purchaser finding themselves in this situation might wonder whether they can claim compensation from the Keeper of the Register of Scotland (given that they have entered into a purchase of land which on the face of the registered title appears to have the benefit of a servitude). Unfortunately, the Keeper’s warranty does not extend to off-register events such as confusion or negative prescription, explicitly excluded under Section 73(2)(e) of the Land Registration etc. (Scotland) Act 2012.

This is where title indemnity insurance comes into its own. It can be instrumental in addressing uncertainties regarding the validity of a servitude or in situations where no formal servitude exists at all. A title policy not only safeguards the purchaser and lender but also extends to successors in title, offering a means to address gaps in title that fall outside the scope of the Keeper’s warranty.

At Westcor, we understand the importance of keeping up to date with relevant case law in order to recognise the implications for title insurance and the various risks that we insure. We strive to adapt to the changing needs of solicitors, purchasers and lenders and create innovative solutions for our clients.

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