12 Apr 2019

In Scotland, there are two models used for property maintenance of common ground, for example over a central green area in a residential housing development:

  1. The common-ownership model: where the individual plot owners each have a share in the ownership of the common areas, and share the responsibility, and associated costs, of their maintenance.
  2. The land-owning model: whereby the individual plot owners in a development do not own the common areas of the development, yet they share the costs of maintenance of those common areas which are the responsibility of a third party owner.

The legal validity of the second of these models came into sharp focus in the recent decision of the Sheriff Appeal Court in Greenbelt Group Limited v John Walsh & others [2019] SAC (Civ) 9.

Greenbelt owns a common area within a residential housing development (the Open Ground). Under the land owning model Greenbelt undertook (and undertakes) maintenance of its property and charges the costs associated with that to individual owners of adjacent plots which are entitled to use it. This is all provided for in a Deed of Conditions which attaches to the title of each individual property. Specifically, Clause 13 of the Deed of Conditions obliged Greenbelt to maintain in accordance with defined specifications and the homeowners were burdened by an obligation to pay a pro rata share of the maintenance costs.

The maintenance costs remained unpaid by certain homeowners who, by way of defence in the context of debt recovery proceedings, sought to challenge the validity of the land owning model. The issue of precisely what area of land the homeowners had to pay for (if the land owning model were found to be valid) was also considered.

Validity of Clause 13 of the Deed of Conditions

At First Instance the Sheriff found that Clause 13 was invalid as it had the effect of creating a monopoly, in express contravention of Section 3(7) of the Title Conditions (Scotland) Act 2003 ("the 2003 Act"). Given that 'monopoly' is not defined in the 2003 Act, the Sheriff identified that the question for the Court was whether the effect of the burden in Clause 13 created a situation where a party (Greenbelt) had exclusive control of, or trade in, a commodity or service.

Clause 13 provided that only Greenbelt, or their successor in title, could provide the maintenance services for the Open Ground, for which the homeowners, or their successors in title, must pay. The Sheriff concluded therefore that the exclusivity of this relationship created a monopoly. A landowner maintaining its own land is not providing a service to anyone else, but as soon as someone becomes obliged to pay for the maintenance services, the services can be described as for the benefit of another. Without the specific wording imposing payment obligations in the Deed of Conditions Greenbelt would have no right to charge the homeowners for payment of the maintenance costs, therefore it was the burden itself, namely Clause 13, that created a monopoly in contravention of the 2003 Act.

So to the Appeal. Following consideration of the submissions by Senior Counsel on behalf of Greenbelt, it was held that the monopoly in the present case was created purely by virtue of Greenbelt's ownership of the Open Ground, and not by Clause 13 of the Deed of Conditions. Clause 13 of the Deed of Conditions in essence created two burdens, the burden on Greenbelt to maintain the Open Ground, and the burden on the homeowners to pay a share of the costs of that maintenance.

If Clause 13 were not to apply, Greenbelt would still be able, if it wished, to maintain the Open Ground but they would not be obliged to carry out such maintenance. The homeowners would still have no say in the maintenance of the Open Ground, but they would not be obliged to pay the costs if any were carried out. Therefore, Clause 13 did not create a monopoly, it simply created an obligation to maintain and an obligation to pay for that maintenance.

Extent of Land covered by the Deed of Conditions

The burden at Clause 13 was in relation to Open Ground including "other open spaces or areas which have been or may in the future be designated as open space within" the development. This wording meant that the extent of the Open Ground, for which the homeowners were obliged to pay a share of maintenance costs, was not certain and could not be determined by reference only to the plan annexed to the Deed of Conditions. Taken at face value the Open Ground could, in the future, extend far wider than originally envisaged. At First Instance the Sheriff found that this burden was invalid, under Section 2(4) of the 2003 Act, insofar as it related to land not identified in the plan attached to the Deed of Conditions.

Due to the uncertainty as to the extent of the land covered by the burden(s) (being the obligation to maintain and the obligation to pay) the Sheriff Appeal Court approved the original decision, that the extent of the land covered by the burden(s) was and is restricted to the Open Ground as identified on the plan attached to the original Deed of Conditions. The homeowners must have certainty, from the title condition itself, as to the exact definition and boundaries of land for which they are responsible to pay maintenance costs.

Conclusions

  • Ownership of land is inherently monopolistic in nature. In order for a title condition to be held as independently monopolistic, in contravention of the 2003 Act, the conditions imposed must be entirely unrelated to the ownership of the land
  • The extent of land covered by a title condition is unchangeable from what is clearly defined, or can be determined, by an examination of only the title condition itself and any annexed plan. The use of vague wording in relation to land that may or may not be covered by a title condition is invalid to the extent that the land cannot be identified by reference to the title condition and plan
  • The moral of the story is to check carefully the intention behind a Deed of Conditions. Do the developers envisage a land owning model (with the associated requirement to maintain forever more) or a common ownership model? It is of course only the words that will be relevant if disputes arise at a later date so those need to clearly reflect the intentions at the time. If purchasing a new home, be sure to take account of the fact that there may be additional costs hidden in plain sight.