Bell & Scott's Property Update, August 2009
Welcome to the August 2009 issue of Bell & Scott’s Property Update.
In this month's issue we brief you on a change in the approach of the Keeper of the Registers of Scotland to registering titles to shared amenity or open space areas in developments following a recent Lands Tribunal case.
We also update you on a number of other relevant news items.
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Briefing |
Registration of title to common amenity areas in developments
The Keeper of the Registers of Scotland has issued an Update setting out a change to his registration policy and practice for conveyances of shares in common areas in developments. The policy change affects developments where the common or amenity areas themselves are not clearly identifiable or fixed with reference to a plan but are to be determined at a later point in time such as the completion of the development. The change in policy, for new developments, follows the Lands Tribunal’s decision in the case of PMP Plus Limited – v – The Keeper of the Registers of Scotland. The Keeper’s new policy is effective from 3 August 2009.
Background
The PMP Plus case involved the Festival Park development in Glasgow. The developer’s dispositions of individual units within the development aimed to give each buyer a share in the title to those areas on the development which were not ultimately given over by the developer for houses or flats. For some thirty years since the Land Registration (Scotland) Act 1979 came into force, the accepted way of doing this has been for each disposition which the developer gives to a client purchaser to contain words conveying to it “a pro indiviso share with all the proprietors of all other dwellinghouses erected or to be erected on the Development in those parts of the Development which on completion of the Development shall not have been exclusively transferred to purchasers of dwellinghouses”. However, while the development at Festival Park was ongoing, the developer sold part of the site to PMP Plus who wanted to build a medical centre. The developer gave PMP Plus a disposition of the area but, when PMP presented the document for registration in the Land Register of Scotland, the Keeper decided that he would not issue a Land Certificate backed by his guarantee of title. The Keeper excluded his indemnity for the area of land because he was concerned that the various owners of units on the development, who had already registered their titles, might already have rights in the land acquired by PMP Plus as forming part of the common or amenity areas.
PMP appealed to the Lands Tribunal against the Keeper’s decision to exclude his indemnity. The Lands Tribunal decided that the developer could give PMP a good title to the area of ground on which the medical centre was to be built because the earlier transfers of rights of shared ownership in the common areas given to buyers of the units and flats had not been precise enough to validly create those rights in the first place – the open space areas remained fully in control of the developer as a matter of title and, therefore, it could transfer title to PMP without issue. PMP Plus should get a Land Certificate to the area of land fully backed by the Keeper’s indemnity. The Tribunal’s opinion makes it clear that it is not possible, under a map based land registration system, to create rights in common areas where the identification of those areas depends on an event in the future which may or may not take place and that, where a disposition or title sheet contains wording which says that common and amenity areas will be fixed at some point in the future, that wording is meaningless and cannot create the rights of shared ownership which it attempts to do.
New policy
From 3 August 2009, the Keeper will not give effect to rights of shared ownership in common areas in Land Certificates unless the common areas can be identified on the ground either by precise wording or by reference to a plan.
Ongoing developments
For existing developments i.e. those developments on which the developer has already sold a unit, the policy which has applied for the last thirty years will continue. This decision aims to ensure consistency and equality of treatment of titles within existing developments. So if a developer has already sold a unit on a development which has a deed of conditions in place which says that the owners of the units will have a right of shared ownership in those areas which are not used up for housing by the end of the development, then there is no need to change the documentation already being used for that development.
New developments
For new developments, the Keeper’s policy has changed. A new development is one where the first split-off disposition of an individual house or flat within the development is presented for registration in the Land Register on or after 3 August 2009 and the disposition tries to convey rights in common or amenity areas to buyers which are not clearly defined or fixed at the point of transfer. The Keeper will only include, in Land Register title sheets, the words of conveyancing for those common areas where the identification of those common areas does not depend on an event which is to take place in the future – such as fixing the areas when the development is completed. If the Keeper receives a disposition which refers to a deed of conditions in which the common amenity areas are not precisely described then the Keeper will simply leave out the rights of the buyer to the common areas. This, in essence, means that the buyer does not get something that it has paid for and something which its bank thinks that its borrower is getting and over which the bank will have security - a situation which developers will want to avoid in these difficult times.
Deeds of conditions
Often, the common amenity areas (and any rights to be created in, and title conditions or burdens affecting common areas) are set out at length in a developer’s deed of conditions. The disposition to the buyer then normally says that the buyer is to get its title to its unit and is to benefit from any rights granted to it as an owner on the development in the deed of conditions. The owner will also be required to use its property in accordance with the rules and conditions set out in the deed of conditions. Where a buyer tries to register a disposition which gives rights to common areas which are set out in a deed of conditions but precisely what those areas are remains be decided some way down the line, the Keeper will simply edit out those rights from the buyer’s title sheet. Again, this is something that a buyer and a lender will not take kindly to.
Where the common amenity areas (and any rights to be created in, and burdens over common areas) are set out at length in a disposition, the Keeper will not include, in the property section of the Land Register title sheet, any rights to common areas where the identification of those areas is dependent on an event which may or may not take place in the future. However, the Keeper will continue to set out, in the burdens section of a Land Register title sheet, any burdens which affect those common areas. Where the disposition tries to bring in rights by reference to a registered deed of conditions, the Keeper will not attempt to delete the reference to the deed of conditions, but will restrict any rights referred to in the property section of the title sheet so as to exclude rights to common areas where the identification of the common areas is dependent on a future uncertain event.
Developers selling off parts of sites
Where a developer sells an area of a development which could already form part of a common amenity area (but that common amenity area is described by reference to a future uncertain event), the Keeper may require satisfactory evidence to demonstrate that the buyer’s title is not open to challenge. The evidence needed will depend on the particular circumstances involved but will range from a confirmation that the future uncertain event has not occurred or that the developer has not previously indicated that the future uncertain event has occurred, to a court order confirming the validity of the title. If this type of evidence is not produced, the Keeper may, depending on the circumstances, proceed with registration of the buyer’s title with exclusion of his indemnity (for any loss resulting from the buyer’s title being challenged or court order saying that the disposition is void).
General descriptions of common amenity areas
There may be occasions when a title document contains a verbal description of common areas which is legally sufficient but not capable of allowing the Keeper to plot the areas concerned on the Ordnance Survey map. The Keeper has been willing, up to now, to simply repeat the words used in the title documents in the title sheet without insisting that the buyer gives him a full and detailed description of, or a plan showing, the common amenity areas. Consequently, there will be existing title sheets which include references to rights in common areas (typically as “lying within the land edged red on the site plan”), but the common areas have not been specifically identified on the title plans. The Keeper is not proposing to change this policy at the moment. However, he is aware that the Lands Tribunal commented that it was crucial to a map based system of registration of title that anyone looking at a title sheet can see precisely what property is owned outright or held in shared ownership. Developers should be aware that it is safer to identify common amenity areas on a plan attached to the disposition of the unit or the deed of conditions for the development. In so far as existing title sheets are concerned, unless he is specifically asked to do so, the Keeper will not amend the property sections, or title plans, of existing title sheets where there is a basic verbal description of common areas. If a property owner asks the Keeper to map an existing written description of common areas on to the title plan for his or her interest, the Keeper will require either a certified plan or deed plan, outlining the common amenity areas. His indemnity is likely to be excluded for the identification of those common areas unless all the proprietors in the development, as well as the developer, sign the plan.
Advice to developers
For new developments on which the first unit will be sold and transferred after 3 August 2009:-
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Best practice is to show common amenity areas clearly on a plan to be attached to deeds of conditions or dispositions.
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If flexibility is required in the course of larger developments because changes to planning permissions, house types or site layouts may be required, best practice is to use separate deeds of conditions with detailed plans attached for different phases of the development.
Our specialist residential and commercial development teams can advise you on all aspects of development conveyancing. Do get in touch with John Gallacher, Partner, in our Housing and Regeneration Team.
Case referred to PMP Plus Limited v The Keeper of the Registers of Scotland, 20 November 2008, LTS/LR/2007/02.
A full text of the decision is available on the Lands Tribunal website accessible here.
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News |
Landlords and “pre-pack” administrations
The UK’s largest retail landlords have asked administrators to clarify the use of and procedures involved in “pre-pack” administrations since the Insolvency Service admitted that a third of “pre-packaged” administrations do not comply with its own regulations.
The “pre-pack” administration is a “fast-track” insolvency procedure that avoids a failing business being sold on the open market. An insolvency practitioner arranges for an advance purchaser to take over the profitable parts of the business, with the company going into administration at the same time. The procedure can be controversial, especially where the buyer is closely linked to the existing management of the failed business.
The British Property Federation (BPF) has issued a “pre-pack” administration questionnaire (the SIP 16 Questionnaire) to help get answers for landlords. The questionnaire, in essence, takes the list of information required to be disclosed under paragraph 9 of the Insolvency Service’s SIP 16 and turns it into a set of targeted questions which focus on landlord and tenant issues - Who is the buyer? What does the buyer plan to do with the property? Is the buyer occupying as unauthorised licensee or subtenant? Has the insolvent tenant's lease been assigned without consent?
Administrators are bound to comply by the rules of the Insolvency Service, their governing body, to provide the answers which the questionnaire aims to elicit. The answers to these questions will help the landlord understand the state of play with his property or properties and could give him information which may enable him to challenge the decision to “pre-pack”.
The SIP 16 Questionnaire can be accessed on the BPF website accessible here.
Surveyors and pubco property valuations
RICS has invited parties with an interest to contribute to a forum group looking into the role of chartered surveyors in the calculation of rents between pub tenants and their pub company landlords.
Discussions will be held during August 2009 which will allow a cross section of industry bodies and interested parties to have the opportunity to individually present their views to RICS and to explore how RICS can assist in the process of rent calculation in the pub sector.
The forum group plans to explore key issues such as:
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The role of chartered surveyors acting for landlords and tenants at arbitrations.
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Whether better disclosure of rent calculations at rent review would lead to more accurate and cost effective settlements.
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Whether there would be greater transparency in the sector if chartered surveyors had full access to business trading data.
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Whether access to fuller comparable information would help the rent setting process.
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Whether the profits method basis of valuation causes differentiation and/or disadvantage to any particular party to a rent review.
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Whether the pub sector has any unique characteristics which should be reflected in rental valuation and rent review conduct.
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Whether all sides of the industry would support a low cost alternative dispute resolution procedure.
Details of the forum group are available on the RICS website accessible here.
VAT option to tax rules amended
The Value Added Tax (Buildings and Land) Order 2009 (SI 2009/1966) which amends the option to tax rules came into force on 1 August 2009.
HMRC has published Revenue & Customs Brief 44/09 which explains the changes.
The Order is effective for supplies of property made on or after 1 August 2009. The changes are intended to simplify certain aspects of those rules relating to relevant associates, revocation of an option, real estate elections and excluding new buildings constructed on opted land and to ensure that state-controlled companies, such as banks, are not connected with one another for the purposes of the option to tax. They also tighten up one aspect of the anti-avoidance rules to remove tax avoidance opportunities identified by HMRC.
Revenue & Customs Brief 44/09 is available on HMRC’s website accessible here.
Capital allowances: anti-avoidance measure announced
On 21 July 2009, the UK Government announced that it is taking action to counter tax avoidance schemes involving capital allowances on plant and machinery. HMRC has issued a technical note which gives examples of schemes of which it is aware involving the transfer of latent capital allowances. Draft legislation, to be included in the Finance Bill 2010 with effect from 21 July 2009, will be published as soon as practicable.
The HMRC technical note is available on its website accessible here
Planning etc. (Scotland) Act 2006
The main changes to development management in Scotland came into force on 3 August 2009. Provisions of note are the following:-
Consultation
Any plans for national or major developments require a consultation with local residents before the application is submitted.
Applicants must demonstrate how they will consult with the community and hold at least one, well-advertised, public event where residents can make comments.
Developers must also submit a report on the consultation with the application - failure to do this means the application is not considered by the planning authority.
Temporary stop notices
Temporary stop notices come in allowing planning authorities to call an immediate halt to any activity - primarily urgent cases such as building demolition or where a river has been polluted - which breaches regulations. Breaching an order carries the risk of criminal prosecution, with a fine of up to £20,000, and there is no right of appeal against one. Temporary stop notices remain in force for up to 28 days, giving planning chiefs time to prepare a case to shut down work altogether.
Separately, planning authorities can hit anyone failing to comply with an enforcement notice with a fixed fine, or seek a prosecution as an alternative.
Neighbour notification
The responsibility to notify neighbouring landowners about applications falls on planning authorities, rather than developers.
Local authorities are expected to do this "as soon as possible" after an application is validated, while neighbours now have 21 days, rather than the previous 14, to raise any concerns.
Local review bodies
These new bodies consisting of elected members and officials, aim to help planning appeals for small developments move more swiftly through the system, rather than the matter having to be referred to the Scottish Ministers.
Applicants have the right to request a review through one of the new bodies, which have the power to change or endorse decisions taken by council officers.
Timescales for determination
Any applications made before 3 August, but which will be determined on or after that date, will be subject to the new timescales allowed for determination of the application (i.e. 2 or 4 months).
Rights of appeal
Any right of appeal arising before 3 August will be preserved. The applicant in such cases will have six months to raise the appeal. Where the right to appeal is exercised only after 3 August, the new appeals procedures will be applied. A disgruntled applicant has 3 months from the date of a decision in which to appeal. If an appeal has been taken before 3 August, it will be processed in accordance with the procedures applying at the time of the raising of the appeal.
Notices of initiation and completion of development
Planning permission granted on or after 3 August will be subject to a requirement for the developer to serve notice of initiation of development and notice of completion of development on the planning authority.
Details of the changes can be found in the Scottish Government’s Guide to the Planning System in Scotland which is available on its website accessible here
Defra consults on the possible release of an insect to control Japanese knotweed
Japanese knotweed threatens economic development across the UK. The cost of eradication, were it to be attempted nationwide, was estimated at more than £1.5 billion in 2003. This plant can damage drainage systems, concrete and foundations.
At the end of July 2009, Defra issued a consultation on its proposal to release an insect (a psyllid called Aphalara itadori that weakens the plant by sucking its sap) as a biological control agent against Japanese knotweed. Whilst the technique is commonplace in countries outside the EU, biological control of weeds using a non-native insect has never been used officially in any EU country.
This consultation will be of interest to landowners and managers, developers and contractors.
Comments on the consultation must be submitted by 19 October 2009. Details can be accessed on Defra’s website accessible here
Zero carbon homes and non domestic buildings
The Department for Communities and Local Government (DCLG) has issued a summary of responses received to its consultation, Definition of Zero Carbon Homes and Non-Domestic Buildings, which included: the definition of zero carbon new homes that would apply to homes built from 2016; and the Government's ambition that new non-domestic buildings should be zero carbon from 2019.
The summary is available on DCLG’s website accessible here
Reviving town centres
Forty-eight Scottish towns will benefit from a share of millions of pounds of government cash to help revitalise their town centres and sustain jobs.
Nearly £40 million has been allocated in this round of funding out of the dedicated £60 million fund with applications invited for a £20 million second round to be shared out later this year.
It is estimated that the town centre projects will help support 640 jobs in Scotland.
Better retail, business, community and leisure facilities will be created, while many town centres will see public access and transport links improved. The funding will also kick start a number of town centre housing developments.
Details can be found on the Scottish Government’s website accessible here.
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