Although development activity in Scotland is significantly quieter at the moment for obvious reasons, a new resource will soon be available that it is hoped will simplify some of the managment elements of developments, and will be available to developers from 1 June 2009.
A model management scheme
Part 6 of the Title Conditions (Scotland) Act 2003 set up provisions for a model Development Management Scheme. For technical reasons it was not possible for the Scottish Parliament to bring these provisions into force, given it had to wait for an Order under the Scotland Act to be produced by Westminster before the provisions could be enacted. The Order has now been passed, some four and a half years after the Act came into force, and only time will tell whether it was worth waiting for.
The Development Management Scheme consists of a set of rules, similar to real burdens, that can be applied to land, which it is intended to develop with a number of units that will be subject to the same provisons, i.e. as you would do in a Deed of Conditions.
The rules will regulate a number of what can loosely be described as "administrative matters" such as appointment of, and duties of a manager; convening meetings, and procedures at such meetings, including what will constitute a quorum and voting arrangements; instructing emergency work; and financial matters such as fixing a budget and applying a service charge.
Functionally, these rules will operate like real burdens, and in particular, community burdens. Specific provisions of the Title Conditions Act will apply to these rules, in the same way as they apply to real burdens.
Owners' Associations
One of the more significant elements of the DMS is that, if used, it establishes an Owners' Association for the development, which will be a body corporate, and thus able to own land in its own name, enter into contracts and conduct other juristic acts of an entity with legal personality, which previous owners' associations were not able to do without incorporating or setting up some form of trust arrangment.
All owners of units in the development will be members of the Owners' Association, and the Owners' Association must have a manager.
The Rules
There are 22 Rules in the Scheme which are listed in full in a schedule to the Order:
- Rule 1 provides definitions of some of the words used in the DMS;
- Rule 2 provides for the establishment of the owners' association;
- Rule 3 states its functions and powers;
- Rule 4 provides the powers and main duties of a manager;
- Rule 5 provides how the owners' association will sign documents;
- Rule 6 concerns the winding up of the owners' association.
None of these rules may be varied.
- Rule 7 sets out how a manager is to be appointed;
- Rule 8 specifies the manager’s duties;
- Rules 9 to 13 concern annual and other general meetings, what will constitute a quorum at such meetings and voting and procedure;
- Rule 14 allows a member of the association to instruct or carry out emergency work and to be reimbursed by the association;
- Rule 15 provides that the association may form an advisory committee;
- Rule 16 relates to signing of deeds of variation;
- Rule 17 provides how any funds will be distributed if the association is wound up;
- Rule 18 relates to preparation of a budget by the manager which has to be submitted to the association for consideration and approval;
- Rule 19 concerns the setting and collection of service charge;
- Rule 20 permits additional service charge to be set when required;
- Rule 21 sets out how funds are to be held for the owners' association; and
- Rule 22 provides arrangements for the sending of notices or other documents.
How is the Development Management Scheme applied?
The owner of land can apply the DMS to a development, by registering a Deed of Application in the Property Register. There is no statutory form of Deed of Application and there would appear to be no reason why it could not be incorporated within the traditional Deed of Conditions. The effect of the Deed of Application will be to apply all, or only those which are identified in the Rules to that development. It would seem therefore, that this can be achieved by stating that the DMS will apply, without having to narrate all the Rules verbatim in the Deed. If that is correct, this is a departure from the rule that all of the burdens affecting a property should be contained in the four corners of the Deed, so that an owner has notice of the conditions that affect him and with which he must comply.
From a practical point of view, drafters of Deeds of Conditions or Deeds of Application of the DMS may want to incorporate the text of the Rules, or those that they want to apply, perhaps as a schedule to the Deed of Application, so that all owners in the development can see easily a statement of the management rules that will apply.
The Owners Association has rights to enforce the rules under the DMS, although the deed of application may also confer enforcement rights on a member either in respect of specific units, or all of the units in the development. The ability to enforce will still be subject to establishing interest to enforce, applying the same test as for real burdens.
Variation of the Development Management Scheme
It will be possible to apply the DMS to a development with variations. Only the provisions relating to the constitution and powers of the Owners' Associaton may not be varied (Rules 1 to 6). This means that the developer could otherwise pick and choose which provisions to apply, or possibly even avail himself of just the Owners' Association provisions, and disapply the rest.
Once the DMS is in place, its provisions can also be varied in a manner similar to the provisions for variation of community burdens contained in the Act. The Owners' Association may vary a rule in respect of individual units, subject to intimation to the members, who have a period of time in which to object. A style of notice is included in Schedule 2 of the Order.
Owners of 25% of the units in a development can apply to the Lands Tribunal to vary or discharge a rule. All interested parties have to be notified and the owners' association and any member are entitled to make representations. The Tribunal must consider applications for variation, discharge or preservation on their merits. The Act provides that the owners' association can disapply the DMS in its entirety.
Tenements
Where the DMS has been applied to a development which consists of or includes tenements, the Tenement Management Scheme under the Tenements (Scotland) Act 2004 does not apply to the tenement. Where that is the case, then the Rules in the DMS about emergency repairs, and application of service charge (Rules 14 and 19) will apply to the tenements, whether or not the DMS for the development actually includes Rules 14 and 19.
To access the Title Conditions (Scotland) Act 2003 (Development Management Scheme) Order 2009 click here.