Acts of the Scottish Parliament

2003 Chapter 9

© Crown Copyright 2003

TITLE CONDITIONS (SCOTLAND) ACT 2003

EXPLANATORY NOTES

INTRODUCTION

1.     These Explanatory Notes have been prepared by the Scottish Executive in order to assist the reader of the Act. They do not form part of the Act and have not been endorsed by the Parliament.

2.     The Notes should be read in conjunction with the Act. They are not, and are not meant to be, a comprehensive description of the Act. So where a section or schedule, or a part of a section or schedule, does not seem to require any explanation or comment, none is given.

BACKGROUND

3.     The first part of the Executive's programme of property law reform, the Abolition of Feudal Tenure etc. (Scotland) Act (the "2000 Act"), received Royal Assent on 9 June 2000. The 2000 Act will abolish the feudal system of land tenure, that is to say the entire system whereby land is held by a vassal on perpetual tenure from a superior. Land previously held feudally will be owned outright. Superiority interests will disappear.

4.     The abolition of feudal tenure will have a profound effect on the way in which property is held in Scotland. The vast majority of land is held at present under feudal tenure and many real burdens were created in feudal deeds. Together with the second Act in the programme of property law reform, the Title Conditions (Scotland) Act 2003, the 2000 Act will provide a modern and simplified framework for property ownership in Scotland.

5.     Most feudal burdens (i.e. obligations in title deeds to perform a particular act such as to maintain a common facility or a prohibition not to do a specific thing) will cease to be enforceable by superiors. The rights of enforcement of third parties, for example other proprietors in the same housing estate or tenement whose properties are protected by the same burdens, will not be affected. In most cases, however, the superior's right to enforce burdens will be ended. The feudal burdens that survive abolition will be converted into ordinary, non-feudal burdens. As a result, there is a close interaction between the 2000 Act and the Title Conditions (Scotland) Act.

6.     The Scottish Law Commission estimate that only around half of all real burdens affecting property in Scotland are imposed in feudal deeds. Equivalent real burdens can be and are created in ordinary dispositions. These non-feudal real burdens will not be affected by abolition of the feudal system. The Title Conditions (Scotland) Act will reform the general law on all real burdens for the future and for all existing burdens, whether or not they were always non-feudal ordinary burdens or have survived feudal abolition by conversion into ordinary real burdens.

7.     Although the 2000 Act has been passed, much of it has not yet been commenced. Feudal burdens will disappear along with the feudal system, but the 2000 Act allows some feudal burdens to be converted into ordinary burdens. They will be assimilated into the law of real burdens, and it is desirable that this assimilation forms a single process along with the reform of the law on title conditions. Most of the Title Conditions (Scotland) Act and the remaining parts of the 2000 Act will be commenced simultaneously on a date which is referred to as the appointed day. This will result in a significant clarification of the law. Time is required for transitional arrangements to be put in place, and the Deputy First Minister, Mr Jim Wallace, announced on 21 November 2002 the Executive's intention for the appointed day to fall on 28 November 2004.

THE ACT

8.     The Act largely implements the recommendations of the Scottish Law Commission Report on Real Burdens (Scot Law Com No 181), published on 26 October 2000. It provides a re-statement and clarification of the law of real burdens. The Act stipulates rules for the creation, enforcement and extinction of real burdens, and special rules for community burdens and manager burdens. Burdens validly created under the old law will remain valid burdens - the legal effect will remain the same. No valid burdens will disappear as a result of the Act, though it provides a mechanism for getting rid of obsolete burdens. It should become easier to find out who has the right to enforce burdens.

9.     The Act achieves greater clarity in the law. It reduces the number of outdated burdens by making it easier to discharge or vary them. It creates a framework for the way in which individuals may impose their own controls on property. The Act provides default rules for a number of areas where property may not be fully regulated by title deeds. This is intended to improve the management of property in order to allow repair work to be carried out when required.

10.     The Act is in 11 Parts:

Part 1: Real burdens: general

11.     This Part codifies the existing law and introduces some changes such as a 'sunset rule' (with the option of renewal) for burdens over 100 years old. It sets out how to create a real burden, what its contents may be, and how it may be terminated. These rules apply to existing burdens as well as burdens to be created in the future.

Part 2: Community burdens

12.     This Part deals with burdens which apply to communities in the sense of groups of properties which have a common scheme of burdens. These communities have common or similar burdens which apply to all the units within them, and which can be mutually enforced.

Part 3: Conservation and other personal real burdens

13.     This Part sets out the rules for conservation and other personal real burdens. These burdens are of public benefit.

Part 4: Transitional: implied rights of enforcement

14.     Part 4 abolishes enforcement rights implied by common law but provides a preservation procedure and recreates some of these rights with a statutory basis. In future it will not be possible to create implied rights.

Part 5: Real burdens: miscellaneous

15.     This Part deals with a variety of different issues. They include the power to create a new legal category of burden called a manager burden. This burden will allow a developer to keep control of a group of properties while they are being developed.

Part 6: Development Management Scheme

16.     This Part makes provision for a model Development Management Scheme, based upon the Management Scheme B contained in the Law Commission's Report on the Law of the Tenement (Scot Law Com No. 162). The Scheme is not confined to tenements, and can be adapted for use in other developments with shared facilities.

Part 7: Servitudes

17.     This Part of the Act realigns the boundary between servitudes and real burdens.

Part 8: Pre-emption and reversion

18.     This Part of the Act modifies the rules for pre-emption, and rights of reversion arising under various statutory provisions.

Part 9: Title conditions: powers of Lands Tribunal

19.     This Part of the Act sets out the powers of the Lands Tribunal. The existing jurisdiction is restated, with some modifications.

Part 10: Miscellaneous

20.     This Part of the Act contains miscellaneous provisions, including provision on compulsory purchase powers. It also amends the existing legislation on the ranking of standard securities.

Part 11: Savings, transitional and general

21.     This Part of the Act lists the various savings and transitional arrangements pertaining to the Act, and the interpretation, short title and commencement provisions.

COMMENTARY ON SECTIONS

PART 1: REAL BURDENS: GENERAL

Section 1: The expression "real burden"

22.     Section 1 defines 'real burden', and introduces the terms 'benefited property', 'burdened property' and 'personal real burden'.

23.     Subsection (1) re-states, but does not change, the current law concerning real burdens. A real burden is an obligation affecting land or buildings. It is a condition of ownership which runs with the land. The word 'real' is used to distinguish this sort of obligation from a 'personal' obligation, such as a contract. A personal real burden is, despite the name, not a 'personal' obligation: it is a real burden and as such must be an obligation affecting land or buildings. A personal real burden is an encumbrance on land but, unlike other real burdens, is constituted in favour of a person rather than in favour of the owner of other land in that person's capacity as owner of that land.

24.     The land that benefits from the condition, and whose owner is able to enforce the burden, is called the benefited property. Except for personal real burdens which are limited to the special types of burden listed in subsection (3), there must always be a benefited property; and the holder of a burden is the person who for the time being is the owner of that property. Viewed from the position of the holder, a real burden is a real right. The benefited property must be 'land' (defined in section 122(1)). The benefited property will commonly be neighbouring land. The definition of 'land' does not generally include a superiority interest, the estate of dominium directum, however for the purposes of the definition of real burden does include the estate of dominium utile. This is to include feudal burdens created before the appointed day within the provisions of the Act. Following the abolition of the feudal system it will no longer be possible for real burdens to be created for the benefit of feudal superiorities. In terms of section 2 of the 2000 Act not only do all existing superiority interests in land cease to exist but it becomes impossible to create a new feudal estate.

25.     Subsection (2) gives names to the properties affected, or benefited, by real burdens. The land subject to the burden will be known as the 'burdened property'.

26.     Subsection (3) provides 8 exceptions to the rule expressed in subsection (1) that burdens must be in favour of other land. It will be possible in future to create burdens that directly favour a person without reference to a benefited property. These are personal real burdens. Personal real burdens represent a new category of right but the category is limited to the types of burdens set out in subsection (3), namely: conservation burdens, rural housing burdens, maritime burdens, economic development burdens, health care burdens, manager burdens, personal pre-emption burdens and personal redemption burdens.

27.     Personal pre-emption burdens and personal redemption burdens cannot be created in the future. They exist as a limited category of former feudal burdens converted by notice registered under section 18A of the 2000 Act. Some personal pre-emption burdens may become rural housing burdens if held by a rural housing body (see the note on section 43). Personal real burdens are the subject of Part 3 of the Act, although manager burdens are primarily regulated by section 63.

Section 2: Affirmative, negative and ancillary burdens

28.     Section 2 is concerned with the type of obligation which can be created as a real burden. In future all real burdens will be either affirmative burdens, negative burdens or ancillary burdens.

29.     Subsections (1) and (2) provide that in future new real burdens must be either obligations to do something (an affirmative burden), such as to use the property for a particular purpose, or to maintain a building, or obligations to refrain from doing something (a negative burden), such as to build on the property, or to use it for commercial purposes. It is rare under the current law for a real burden to take the form of any other type of obligation than affirmative or negative. It is possible under the current law, to create a real burden as a self-standing right to enter or make use of property. This could be to walk or drive over property, or to run a pipe through it. It is more usual for such rights to be constituted as positive servitudes. In future it will only be possible to create this sort of obligation as a positive servitude, and any existing real burdens in this form will be converted into positive servitudes by section 81.

30.     Subsection (3) provides a degree of flexibility to the rule in subsection (1). It is sometimes necessary for a burden to reserve a right of access or use. This is not a right of access of itself: that would be a servitude. It is instead a right to enter or use a burdened property for a purpose ancillary to other obligations imposed by real burdens. For instance, a burden might oblige an owner to maintain property. An ancillary part to this burden could be to allow the benefited proprietor to access the property to inspect the maintenance work.

31.     Subsection (5) prevents the rules set out in section 2 being avoided by labelling a burden as something that it is not. Whether an obligation falls within the permitted categories will be judged by the effect of the words rather than the words themselves.

Section 3: Other characteristics

32.     Section 3 sets out the rules that a burden must comply with concerning the content of an obligation. Real burdens affect land. Subsections (1) to (4) re-state what is known as the praedial rule. This rule provides that real burdens must affect, and relate to, a burdened property for the benefit of the benefited property.

33.     Subsections (1) and (2) re-state the rule that a real burden must affect the burdened property. This is the first aspect of what is known as the praedial rule. The praedial rule requires that the burden must in some way relate to the burdened property. Subsection (2) makes it clear that if the only link between the burden and the property is that the burden is imposed on the person who owns that property, the praedial rule is not complied with. The other aspect of the praedial rule is that the burden must benefit the benefited property. This second requirement of praedial benefit does not apply to personal real burdens as there is no benefited property in these cases (see subsection (3)). All real burdens, including personal real burdens, must in terms of subsection (1) comply with the first aspect of the praedial rule.

34.     Subsection (4) makes a special provision for community burdens so that the praedial test for a community burden will be satisfied if it confers a benefit on the community or any part of the community. Community burdens are defined in section 25. Certain burdens, such as for management structures and service charges, will clearly be in the community's interest, and subsection (4) will accordingly make them praedial, regardless of their relationship with an individual property. The subsection also allows for an exception for communities in special circumstances. In a normal housing estate a prohibition on occupation by residents over the age of 60 would probably not normally be praedial because it would not benefit the property. It would consequently be invalid. However, the special needs of certain types of community, such as a sheltered or retirement housing complex where the housing is specifically adapted for occupation by the elderly, would allow for an exception. This sort of condition would be for the benefit of the community as a whole.

35.     Subsection (5) provides that a right of pre-emption is the only type of option to acquire land that may be created as a real burden in the future. The present law also allows redemption and reversion options to be constituted as real burdens. Pre-emption entitles the holder to first refusal in the event of the property coming up for sale. The decision by the owner to sell is the only thing that can trigger the pre-emption. Redemption does not depend upon the decision of the owner. It is a right to repurchase triggered by a specified event such as death of an owner or the granting of planning permission. Reversion is similar, but does not necessarily require the payment of money or value. Further provision for rights of pre-emption is made by sections 82 to 84. Although the Act (section 1(3)) recognises personal pre-emption burdens and personal redemption burdens it is not possible to create such burdens under the Act. These burdens are by definition (see section 122) only capable of arising by the conversion of a former feudal burden under section 18A of the 2000 Act, introduced by section 114 of the Act.

36.     Subsection (6) re-states the rule of the common law that a real burden must not be illegal nor contrary to public policy. The illegality requirement would include a purported burden that attempted to breach race or sex discrimination laws. There are 3 main categories of public policy prohibitions. A burden cannot be repugnant with ownership, i.e. it could not be so restrictive that the value of ownership would be lost. In addition, a burden cannot form an unreasonable restraint of trade. There is no bar, however, on a general prohibition, for example from carrying on a business in a housing estate. The third category is that a burden must not create a monopoly. This is dealt with by subsection (7).

37.     Subsection (7) makes clear that a real burden cannot create a monopoly, except where the contrary is expressly permitted by the Act. Despite the reference in paragraph (a) to manager appointment, a temporary monopoly is permitted elsewhere in the Act: see sections 26(1)(d) and 63.

38.     Subsection (8) provides that a provision which purports to allow a person who is not the holder of a real burden to waive compliance with or vary the terms of a burden is not competent after the appointed day. The holder of a burden will most commonly be a benefited proprietor but could include the holder of a personal real burden. Subsection (8) prevents a person who cannot enforce the burden from being able to waive or vary the burden. The new subsection (2A) inserted into section 73 of the 2000 Act by paragraph 13(c) of Schedule 13 makes an equivalent provision for feudal burdens.

39.     Subsection (9) ensures that there is no conflict between the terms of subsection (8) and section 33(1)(a). Section 33(1)(a) permits the terms of a community burden to be varied or discharged without the need for all holders to sign the deed of variation or discharge. In terms of subsection (8) "the holder" would, where there is more than one holder, mean all the holders. Subsection (9) therefore clarifies that subsection (8) does not prejudice the operation of section 33(1)(a).

Section 4: Creation

40.     Section 4 explains how a real burden is created after the appointed day. In summary, a burden is created by a deed (known as a 'constitutive deed') granted by the owner of the burdened property and registered in the Land Register or Register of Sasines against both the benefited and the burdened properties.

41.     Subsection (1) restates the current law that a real burden is created by registration of a constitutive deed. By section 122(1) "registration" means registration of the real burden in the Land Register or recording of the constitutive deed in the Register of Sasines. These property registers record ownership of land in Scotland. The time of creation is usually the time of registration, but where the constitutive deed is a deed of conditions, it is permissible under the present law to prevent the creation of burdens on registration of the deed of conditions by disapplying section 17 of the Land Registration (Scotland) Act 1979 (section 17 is repealed by schedule 15 to the Act). In this case the burdens are created on the date of registration of a subsequent conveyance into which the deed of conditions is incorporated. For instance, a builder might create a deed of conditions over an entire development, but choose to postpone the activation of the real burdens on each unit until it is sold. The sale of the unit is the subsequent conveyance: that is the point at which the burdens will affect that part of the development. Subsection (1) allows the continuation of this practice (by paragraph (b)) but by different means and also allows (by paragraph (a)) a more straightforward postponement to a specifically specified date. After the appointed day the constitutive deed must itself provide for a delay in the effectiveness of a real burden. The postponement must be in accordance with subsection (1). If the deed is silent, the burden will take effect immediately upon registration.

42.     Under the current law the terms of a real burden must be set out either in a conveyance or a deed of conditions. Subsection (2) abandons this limitation. In future it will be possible to create a real burden using any deed, provided that the deed complies with the three conditions set out in paragraphs (a) to (c).

43.     Paragraph (a) of subsection (2) should be read together with section 5 (which qualifies the rule that the terms of the burden must be set out in full). The requirement that the term "real burden" (or "community burden" etc.) be used is new.

44.     Paragraph (b) of subsection (2) restates the rule that only an owner can burden land. "Owner" includes a person who has right to the property but has not completed title by registration (section 123(1)(a)). Where title has not been completed and the land is not already on the Land Register, there must be a deduction of title. This is further explained in the note on section 60. Where property is owned in common, both (or all) pro indiviso owners must grant. This is indicated by the use of the definite article ("the" owner). If the constitutive deed is a conveyance of the burdened property, the granter satisfies paragraph (b) on the basis that he continues to own until the time of registration, and in such a case transfer of ownership and creation of the real burden occur simultaneously. An owner "grants" a deed by subscribing it in accordance with section 2 of the Requirements of Writing (Scotland) Act 1995, and in practice the deed will also be witnessed under section 3 of that Act.

45.     Paragraph (c) of subsection (2) requires nomination and identification of both the benefited and the burdened property. With personal real burdens, there is no benefited property, and the requirement is merely to identify the person in whose favour the burden is created. Subsection (4) contains an exception in respect of community burdens where it is only necessary to identify the community. Where this is done section 27 provides that each unit in the community is both a burdened and benefited property.

46.     Many burdens are given special names by the Act. Subsection (3) makes clear that such special names can be used in the constitutive deed instead of "real burden". Examples of these include community burdens, facility burdens, conservation burdens, maritime burdens and manager burdens. The word "purports" ensures that where a constitutive deed states that it creates a nameable type of real burden but does not in fact do so that the real burden is not invalid. This situation may typically arise where community burdens are created on the sequential sale of units. The burdens will not in fact be community burdens in terms of section 25 until at least four units are both burdened and benefited properties.

47.     In community burdens, each benefited property is also a burdened property. Taken together, each of these units forms the "community" which is being regulated by the burdens (section 26(2) defines 'community' as any units subject to community burdens). Since it would be pointless to describe the same land twice, subsection (4) modifies subsection (2)(c) by requiring merely that there is nomination and identification of the community to which the burdens are to apply.

48.     Subsection (5) provides for dual registration of the constitutive deed. At present registration is required against only the burdened property. It will now be required that registration occurs against both the burdened and the benefited property (or properties). Registration against the benefited property is excused where there is no such property (as with personal real burdens) or where the property is not in Scotland (for which see section 116). This subsection should be read in conjunction with section 120, which makes it clear that in future a deed creating a new burden cannot be registered against one property only: it will have to be registered against both properties.

49.     It is unclear at present whether a real burden can be created over, or in favour of, a mere pro indiviso right to land that is where land is undivided but held in common by more than one owner. Subsection (6) puts the position beyond doubt by disallowing such burdens.

50.     In certain circumstances real burdens can be created by the Lands Tribunal (section 90(8)). Section 4 does not then apply. Section 73(2) permits the creation of real burdens in a deed of disapplication of a Development Management Scheme. In this case section 4 would generally apply other than the requirement for the deed to be signed by all the owners of the burdened properties. Section 73(2) permits the deed to be signed by the owners association. These exceptions are acknowledged by subsection (7).

Section 5: Further provision as respects constitutive deed

51.     Section 4(2)(a) restates the common law rule that the terms of a real burden must be set out in full in the constitutive deed. Section 5 introduces an exception to that rule.

52.     Section 5 means that it should not be necessary to specify the amount payable towards an obligation to pay some cost provided that some method is provided for calculating liability. This is applied to existing burdens. Although this may not in fact change the existing law, it will remove a current uncertainty. The provision is retrospective in order to ensure the validity of existing burdens which make this sort of provision.

53.     Subsection (1) makes a distinction between an obligation to defray the whole of some cost and an obligation to contribute towards some cost. In the case of an obligation to defray paragraph (a) removes any question that it is necessary for a real burden to specify the actual amount payable. It is sufficient (the other terms of the burden being adequately specified) if, for example, the burden is simply stated to be an obligation to pay for the cost of maintaining some item of property. Paragraph (b) removes any doubt as to the validity of a real burden which provides for the burdened property to pay a proportion or share of some cost. If no proportion or share is set out in the deed itself then it may be ascertained by a means specified in the deed. In terms of subsection (2) the deed may, as a way of arriving at the proportion or share due, make reference to another document. This document however must be readily available to the public. If, for example, the method of calculating liability makes reference to extrinsic material, for example the valuation roll, this will not invalidate the burden. This is a change to the current law.