Head 7: Warrandice

Question 1

What is warrandice?

Answer 1

Warrandice is a guarantee of a certain state of affairs at the certain point of time.

Question 2

When does warrandice occur in the sale of land?

Answer 2

In the sale of land, there are no fewer than four separate such guarantees:

1. the seller’s warranty in missives[ A contractual warranty]
2. the seller’s warranty in the disposition[ Also a contractual warranty but within the conveyance.]
3. the Keeper’s warranty[ Only applies if the buyer gets onto the Land Register.] as at the time of registration
4. warranties previously given to the seller or the seller’s predecessors.

Question 3

What provisions work to eliminate potential defects of title?

Answer 3

LRA 2012 ss 86 and 91 have the effect of eliminating many potential defects of title. But the conditions for their application are not always met, and in any event s 86 does not cover eg first registrations or errors in the current transaction (‘transactional error’).

Question 4

Why is the seller’s warranty in missives important? What is the time limit for this warranty?

Answer 4

In practice, this first warranty is important mainly for defects in the seller’s title uncovered during the course of the transaction and before settlement.

Like the rest of missives, the warranty is subject to a two-year supersession clause, and once the two years are up, the buyer must rely on the other warranties. 


Question 5

What warranties are implied in the missives?

Answer 5

Two warranties are implied:
. (1) that an absolutely valid title will be given to the buyer; and
. (2) that the title will be free from encumbrances (ie subordinate real rights and title conditions) except those which are either (a) immaterial or (b) known to the buyer as at the date of conclusion of missives.
(a) Materiality

Question 6

What happened in the case of Welsh v Russell?

Answer 6

Example of materiality of servitudes: Suggests that most servitudes will be regarded as material but compare with Lothian.

B bought a property which was subject to a servitude of access which he was unaware about. B sued the seller (A) on the warranty since the seller had guaranteed there were no servitudes. A argued that although this was true, the servitude was trivial. Court held that even though it was a fairly minor servitude, it was not so trivial as not to give rise to a claim in warrandice.

Question 7

What happened in the case of Lothian & Border Farmers LTD v McCutcheon 1952

Answer 7

[Many people think this case is wrong but it has never been overturned so it is the law.]

B bought property and discovered it was subject to a lease. Sued A under the warranty. Court held that this wasn’t material because although it was true that the buyer wouldn’t get the use of the property because of the tenant, they would get the rent. Therefore having a lease is not a ‘material’ encumbrance and therefore does not give rise to a claim under the seller’s warranty.

Question 8

What part does “knowledge” play in the seller’s warranty in the missives?

Answer 8

⁃ If the purchaser knew about an encumbrance prior to the conclusion of the missives then they have ‘knowledge’ and thus cannot claim under the seller’s warranty.
⁃ Accordingly, it is standard practice for the seller’s solicitors to send the title deeds to the purchaser’s solicitors before the contract is concluded - so that they at least have the opportunity to discover any encumbrances.
⁃ The law also counts constructive knowledge as counting as knowledge - this covers things you ought to reasonably have known.

Question 9

How can you distinguish actual knowledge from constructive knowledge?

Answer 9

If constructive knowledge were not taken into account -
‘It would generally be impossible to make an effective sale of a house in town without a very minute and ponderous written contract specifying all restrictions and conditions, however usual, that applied to it.If a man simply buys a house he must be taken to buy it as the seller has it, on a good title, of course, but subject to such restrictions as may exist if of an ordinary character, and such as the buyer may reasonably be supposed to have contemplated as at least not improbable.’ (Whyte v Lee (1879) 6 R 699 at 701 per Lord Young)

Question 10

What are the remedies for breach of the seller’s warranty in the missives?

Answer 10

1. rescission (+ damages)


2. damages alone (actio quanti minoris): Contract (Scotland) Act 1997 s 3

Question 11

Why is the seller’s warranty in the disposition less important?

Answer 11

This is less important than the missives warranty because: -

(i) most defects are uncovered at the missives stage and
(ii) where they are not, the disgruntled acquirer is more likely to claim from the Keeper (as to which see below) than from the seller (although in that case the Keeper is subrogated to the acquirer’s claim and can, in theory at least, sue on warrandice herself: see LRA 2012 s 77(5)).

Question 12

What are the two types of warrandice?

Answer 12

This warranty is not time warranted (however it will prescribe like other legal obligations).
This is known as warrandice. It is implied but law (but again, solicitors will include it expressly).

There are two types of warrandice:
⁃ Absolute warrandice - No title
⁃ Lesser warrandice - Encumbered Title

Question 13

When is absolute warrandice implied?

Answer 13

Absolute warrandice is implied in dispositions granted on sale (in all cases where consideration is given of rate transfer). In practice it is usually also expressed, in statutory form (‘and I grant warrandice’). See Titles to Land (Consolidation) (Scotland) Act 1868 s 8.

Question 14

What does absolute warrandice comprise?

Answer 14

Absolute warrandice comprises the same two guarantees as for missives. The title is warranted as at the date when it becomes operational (only), ie the date of which the disposition is delivered, except in relation to (future) acts by the seller.

Question 15

For warranty type (1) (no title) what is required?

Answer 15

Eviction is required before a claim arises.

If you discover that there is a defect in your title to property after 3 years, the missives warranty has expired (>2 years) and the disposition warrandice cannot be used simply because there is a defect - it can only be used if you’ve also been ‘evicted’.

This means that until you have been ‘evicted’ you cannot claim under the absolute warrandice in the disposition.

NB eviction is not ejection. Normally this is judicial eviction[ This means that the person who does own the property (i.e. since there is a title defect this would be Tom, not Betty) takes active steps to assert his title against you. Normally this means that Tom would have to raise a court action against Betty and be successful.

If Tom is successful, then Betty can recover under the disposition warrandice.] (ie by a court) - see Clark v Lindale Homes Ltd 1994.

⁃ More recently the courts have been move flexible about what constitutes ‘eviction’ by holding that you don’t necessarily have to go to the length of litigation if the challenger’s[ The true owner, Tom.] right is unquestionable[ So if it is so obvious that Tom is the owner then he need not go to the length of litigation.].This constitutes ‘extra-judicial’ ‘eviction’.

⁃ One difficulty for extra-judicial eviction is knowing how good Tom’s title has to be for it not to be required to be proved in court - Morris v Rae [2012].

Question 16

Can a warrandice claim be started before eviction?

Answer 16

a) A warrandice claim may be started before eviction completed if (a) the seller denies he is bound by warrandice or (b) the seller is vergens ad inopiam[ ‘Verging on bankrupty’].
b) In addition the requirement for eviction is not needed if the title defect is caused by the seller’s own act.

Question 17

Is eviction required for guarantee type (2) - encumbered title?

Answer 17

No eviction is required for guarantee type (2) (encumbered title). And, exceptionally, no eviction is required for type (1) where defect caused by second inconsistent deed of the transferor.

Question 18

What is the remedy under absolute warrandice?

Answer 18

The remedy under absolute warrandice: damages only. See Welsh v Russell (1894).

Question 19

What is lesser warrandice? What does it limit the warranty to?

Answer 19

Where land is gifted rather than sold, only simple (ie not absolute) warrandice is implied (although absolute warrandice may be granted by an express clause).

Simple warrandice limits the warranty to defects caused by the future voluntary acts of the granter.

Question 20

What is the third type of warrandice?

Answer 20

Fact and deed warrandice is sometimes granted expressly, notably in dispositions by trustees or executors. This is limited to defects caused by acts of the granter, whether past or future

[So it is like simple warrandice but slightly better since it guarantees that the granter has not and will not do anything to affect the titel.].

Question 21

When is the Keeper’s Warranty relied upon?

Answer 21

As an alternative to relying on the seller’s warranty, assuming the property is on the Land Register the Keeper also guarantee’s the title, under the Keeper’s warranty[ This is essentially a state insurance scheme.].
(This is essentially an alternative to the warrandice in the disposition (because if you are using the warranty in the missives, the transaction is probably at an early stage).)

Question 22

What is the difference between the first two warranties and the Keeper’s Warranty?

Answer 22

Whereas the first two warranties relate to the state of the transferor’s title, the Keeper’s warranty goes further and guarantees the transferee’s title. Unlike the other warranties, therefore, it covers the events of the current transaction. (It also applies to all deeds which are registered and not merely to dispositions.)

Question 23

Which provision gives details of the Keeper’s Warranty? What does this provision guarantee?

Answer 23

The details are given in s 73. Essentially, the warranty guarantees that, as at the time of registration, the Register is accurate:

(i) in showing the transferee as owner and
(ii) in not omitting any encumbrances (other than encumbrances which cannot be shown on the Register).

Question 24

When can a claim for Keeper’s Warranty be made?

Answer 24

A claim can be made only if the Register is actually rectified (s 77(2)) – the equivalent of eviction. So if the Register is rectified to remove Betty’s name from the proprietorship section or to add a standard security which had been mistakenly omitted, Betty has a claim for compensation. Section 79 sets out how compensation is quantified.

Question 25

What is excluded from warranty?

Answer 25

There are certain exclusions from the warranty: see ss 73(2) and 78.
• Note in particular that actual or constructive knowledge of the inaccuracy at the time of registration prevents a claim.

Question 26

Can the Keeper vary the warranty?

Answer 26

The Keeper is allowed to vary the warranty, either at the time of registration or (subject to restrictions) later, and may even exclude it altogether

Question 27

What happens if the Keeper pays compensation?

Answer 27

If the Keeper does pay compensation then the Keeper takes over any claims that the person they paid out to would have against anyone else (e.g. the seller) and the Keeper can then pursue them if they are worth pursuing.

Question 28

Can warranties be assigned to the seller or seller’s predecessors?

Answer 28

As personal rights, the various warranties may be assigned, and indeed are assigned by the (implied) assignation of writs clause in dispositions. See LRA 1979 s 16(1), (2).

In the case of warrandice, this is done automatically by a disposition. So every disposition impliedly assigns all previous grants of warrandice over the property. Therefore the purchaser obtains warrandice from all previous owners insofar as they have not been extinguished by preescription.

Question 29

What is the limitation on assigning warranties?

Answer 29

Not all of these older warrandices will be useful because warrandice applies to the state of the title at a particular time (it doesn’t tend to guarantee the future). So the older warrandices will only be useful if the defect existed at the time warrandice was granted.

Question 30

What happens when in year 1 A dispones to B. In year 4 B dispones to C. In year 6 C dispones to D. It is now year 8 and a title defect is discovered. Each disposition contains a grant of absolute warrandice. Against which parties does D have a claim?

Answer 30

D can recover against C, B or A.

This can lead to a chain of claims - D would normally make a claim against C. C is hugely out of pocket so will want to sue B - but the problem is that the right had already been assigned from C to D, so C has no longer got any warrandice. So if C wants to sue B they must get the right re-assigned by D! This situation arose in Cobham v Minter.

⁃ The LRA 2012 extends this principle to the Keeper’s Warranty under s 73(3) (so you will be able to stack up Keeper’s Warranties)