The problem
It has long been common practice for developers to dispose of the common parts to developments by selling individual plots with a right of common property in whatever is left at the completion of the development. (This has the advantage that the developer does not have to decide on the ultimate layout of the development before it starts and has the flexibility to change the layout as building proceeds).
However, in terms of both property law [1] and registration law [2], it is incompetent to convey an area that is indeterminate. Although there have long been doubts about the competence of the practice [3], the practical benefits to developers have meant that it was nevertheless common practice and the common areas of many developments have been described in this way.
PMP
In 2008 the case of PMP Plus Ltd v The Keeper of the Registers of Scotland and others [4] confirmed that the practice is not competent. In that case a developer sold plots in a development with a share in the common areas (which were described as being those areas not exclusively alienated to the home owners) but decided prior to the completion of the development to sell a part of the development (which would otherwise have formed part of the common areas) to PMP for the building of a health centre. The Keeper excluded indemnity in respect of PMP’s title on the grounds that the home owners may have acquired title to the common parts as a result of the conveyances in their favour. However, the Lands Tribunal for Scotland decided that the home owners did not have an effective title to the common areas due to the absence of a sufficient description.
Update 27
In response to PMP, the Keeper issued update 27 which contained guidance on how the Keeper would deal with applications relating to such developments post PMP. It made it clear that, for developments where the first split off deed/plot sale occurred on or after 3 August 2009 (described as “new developments”) there was a change in policy and, where identification of the common areas depended on completion of the development (or other future uncertain event), the Keeper would no longer show the conveyance of the common areas in the title sheet.
However, for developments where plots had been sold before 3 August 2009 (described as “existing developments”), the Keeper would continue to reflect the terms of the conveyancing showing the conveyance of common areas in the title sheet even where identification of the common areas was dependent on completion of the development (or other future uncertain event). This approach was intended to ensure consistency and equality within developments. It was also intended to take account of the possibility that rights in the common areas may be created when the last plot is sold[5].
Lundin
In June 2013, the Lands Tribunal for Scotland issued the decision in Lundin Homes v Keeper of Registers of Scotland[6]. Lundin went a step further than PMP as it made it clear that the identity of the common areas does not become fixed merely because the last plot in the development has been sold and, where the common parts have been insufficiently described in the original purchases from developers, subsequent sales of the properties will not cure the defect[7].
AI27
Following Lundin, rather than issue a replacement for Update 27, the Keeper issued an “additional information” paper (referred to here as “AI27”) to be read alongside it. This approach can be slightly confusing as some of the guidance in AI27 conflicts with Update 27. The following is an attempt at consolidating the provisions of Update 27 and AI27.
New developments (First registrations)
AI27 makes no change to the guidance issued in Update 27 in respect of “new developments”. In such cases, the Keeper will continue to take steps to remove wording from the title sheets which identifies the common areas by reference a future uncertain event.
Existing developments
First Registrations and transfers of part
As noted above Update 27 takes account of the possibility that rights in the common areas may be created when the last plot is sold. AI27 acknowledges that, following the decision in Lundin, the occurrence of a future event/sale of the final plot by itself will not create rights in the common areas.
However, AI27 also makes the point that, if a deed is drafted so as to properly identify the common areas, it may[8] (along with the positive effect of registration/“the Midas touch”) have the effect of creating rights in the common areas. The Keeper will therefore consider applications for a first registration or transfer of part within an existing development where there is an attempt to identify the common areas and recommends that solicitors considering this approach should contact pre-registration enquiries.
AI27 makes it clear that, where there is no attempt to identify the common areas, the Keeper will continue to reflect the terms of the conveyancing. This is the same approach as Update 27. However AI27 goes on to suggest that, where a solicitor considers that rights in common have not been validly created in a split off disposition, he or she may wish to reflect that in the deed submitted for registration.
Dealing of a whole
The hierarchy of the headings in Update 27 is slightly confusing and may at first sight seem to indicate that the guidance relating to applications for the registration of the dealing of a whole falls under “new developments”. However, as noted above, the Keeper will remove wording transferring rights in common areas from the title sheets to new developments where it refers to a future uncertain event[9]. Such wording will not therefore arise on a “dealing” occurring in a “new development”. On the dealing of a whole within “existing developments”, Update 27 made it clear that the Keeper’s policy (as with first registrations) will be to make no changes to wording relating to common areas (and not to exclude indemnity). That does not change. However, Update 27 did indicate that completion of the development may create rights in common areas. Whereas, AI27 makes it clear that it will not.
In addition AI27 acknowledges that it may be possible in some cases to fix the problem with some remedial conveyancing. In this regard we are advised that the Keeper will consider applications which attempt to identify the common areas[10].
Vague verbal descriptions (no reference to future uncertain events)
PMP made reference to deeds containing verbal descriptions of common areas which do not specifically identify the common areas by reference to the OS map. Update 27 advises that the Keeper’s policy is, and will continue to be, to reflect the terms of the conveyancing without requiring a full bounding description of or plan delineating such common areas[11]. However, Update 27 also notes comments in PMP to the effect a description without reference to extraneous material might well be thought to be a central feature of a map based registration system and suggests that applicants consider those comments. This advice proved to be well founded as Lundin makes it clear that reference to extraneous material (with the possible exception of other publicly accessible registered titles) for description is incompetent. Consequently, where such wording appears on a registered title it will be superfluous and ineffectual. (However, see comments on prescription below.)
Update 27 also suggests than an applicants may want to request (with the support of a certified plan or deed plan) to have such areas mapped on to the title plan for its interest (albeit indemnity is likely to be excluded unless the other owners and developer are also parties to the plan). No further guidance on this issue was given in AI27.
Sale of potential common areas by developer
Registered titles
This policy on the sale of potential common parts by a developer perhaps represents the biggest change in policy. Update 27 provides that, where a developer was attempting to convey possible common areas, the Keeper would require evidence that the developer’s title to the land being sold was not void or voidable. That is changed in AI27. In cases where the developer’s title is registered in the Land Register the Keeper will no longer require such evidence and will register titles without exclusion of indemnity.
Sasine titles
However, where the developer’s title and subsequent plots sales have been recorded in Sasines the situation is treated differently as prescription may play a role in creating rights to the common areas[12]. Where the relevant split off deed has been recorded in Sasines, and the title is habile[13] prescription may have cured defects in the title thus giving the owners of individual units in the development title to the common areas. Thus, where a developer is attempting to sell parts of a development in which the dispositions conveying individual plots have been recorded in the Register of Sasines, the developer will require to provide evidence that there is no conflicting possession by persons other than the developer.
Superfluous wording
The Keeper’s policy with regard to “existing developments”[14] will result in superfluous and ineffective wording in registered titles and we are again told that no steps will be taken to remove such wording at present due to the effect of prescription. In addition to its role with regard to Sasine titles, AI27 also refers to the impact of prescription on Land Register titles.
Land Registration (Scotland) Act 2012 and prescription
Whilst prescription does not currently play a part in Land Register titles[15], the Land Registration (Scotland) Act 2012[16], changes that and will allow prescription to run on deeds presented for registration[17]. AI27 advises that the Keeper is currently considering the implications of the 2012 Act. She will not therefore take steps to rectify the Register (unless she receives an application for rectification) until that consideration is complete.
It may be that the operation of prescription under the 2012 Act helps to shore up titles in need of fortification. However, we should bear in mind that it will also bring about an end to the “Midas touch” (which, where common areas are correctly identified, can presently cure defective descriptions).
Prescription as a cure
Whether under Land Register titles or Sasine titles, it will seldom be that prescription provides a complete fix for the problem and we should also bear in mind some of the limitations of possession to demonstrate title. Whilst a proprietor is likely to be able to show prescriptive possession of the common areas it uses regularly (e.g. a communal bin store), there will be other areas for which it may be hard to show (and harder yet to prove) possession (e.g. communal flower beds). And others that may prove more useful to some people than others (e.g. communal parking bays may not be of too much to a plot owner who doesn’t own a car). Consequently relying on prescription is therefore likely to lead to patchy, inconsistent and unclear ownership of the common areas in developments.
The lack of a share in a communal flowerbed will most likely not be of huge importance to most owners. Carless proprietors are unlikely to be overly concerned about the parking bays until they come to sell the property to someone with a car. However, in all cases a lack of ownership in the common areas is likely be more of an issue if they come to be sold by the developer and used for something the plot owners find undesirable.
Where we are now?
The combination of PMP, Lundin, Update 27 and AI27 leaves us in the following situation.
- Many units within developments do not include a share of the common areas[18]. Clients and their lenders will require to be advised accordingly.
- This should be clear from the land certificate on the dealing of property within a “new development”[19]. (Albeit there may be some instances where the applicant has not paid heed to the advice in update 27 and ineffectual vague verbal descriptions which do not identify the common areas by reference to a future event remain on the title.)
- When involved with first registrations, or dealings of properties in “existing developments”, descriptions will need to be examined carefully. Those purporting to identify and convey common areas by reference to a future event[20] will be ineffective[21]. However, AI27 makes it clear that the Keeper will consider attempts to rectify the situation which do correctly identify the common areas.
- On a purchase of potential common areas (identified by reference to a future event) from the developer, the Keeper’s approach, after Update 27 but prior to AI27, was to require evidence that the applicant’s title was not void or voidable and would exclude indemnity if not satisfied. Since AI27:
- The Keeper will not require such evidence nor exclude indemnity for Land Register titles.
- But, where plot sales have been recorded in Sasines, she will require evidence that there has been no possession adverse to that of the developer.
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[1] In terms of the specificity principle, whilst is perfectly competent to acquire a personal right to property which is not yet identifiable, this is not the case with real rights where, to transfer ownership in a thing, there must be an identifiable thing to be transferred (SLC Report on Land Registration Vol.1 at 6.13).
[2] In terms of s4(2)(a) of the Land Registration (Scotland) Act 1979, an application for registration can not be accepted if it is not “sufficiently described” to enable the Keeper to identify it by reference to the Ordnance Map. Section 6(1)(a) also requires the Keeper to make up a title sheet containing a description of the land consisting of or including a description of it based on the map.
[3] See textbooks written before PMP (eg the third edition of Gretton & Reid’s Conveyancing at para 12-10).
[5] I.e. At that point the final plot is sold, the extent and location of the common areas would become fixed – there no longer being any possibility of the areas becoming part of another plot – and so they could not be said to be described by reference to a future event. On that reasoning, subsequent sales of the individual plots in the development may also carry a share of the common areas meaning that, when all of the properties in the development had been resold, each would have a share in the common areas and the problem would effectively be cured.
[7] One reason for this is that Lundin makes it clear that reference to extraneous material, (with the possible exception of other publicly accessible registered titles) in order to establish completion and identify common parts is incompetent. Thus, if the common areas are not sufficiently described in the individual plot sales, completion of the development (and determining when the development is completed in practice may also be difficult) in itself does not assist. Further, although the effect of the “Midas touch” is that an entry on the register cannot be void (meaning that, if a title is registered, that title becomes the actual title even if that does not represent the correct legal position), the Midas principle does not apply to a transfer where there is a failure to comply with the specificity principle. If no attempt is made to identify the common areas, subsequent transfers of the plots will suffer from the same descriptive affliction as the initial sales and, again, the ‘Midas touch’ cannot cure the defect.
[8] Depending on the particular circumstances (including ownership of the common areas at the time of the application – i.e. does the person seeking to transfer title to the common areas have title to them at the date of the transfer).
[9] However, it may be that “new development” nonetheless contain ineffectual wording relating to common parts: see comments on vague verbal descriptionsbelow.
[10] Again solicitors are advised to contact pre-registration enquiries in this regard.
[11] Such description could therefore exist in both new and existing titles.
[12] Prescription, of course, has no role to play on Land Register titles at present unless indemnity has been excluded.
[13] The Keeper considers that a title which identifies the common areas by reference to a future uncertain event may well be habile.
[14] There may also be superfluous and ineffectual wording in “new developments as a result of the policy on vague verbal descriptions.
[15] Unless indemnity has been excluded.
[16] Which is expected to come into force towards the end of this year.
[17] Including those registered without an exclusion of indemnity.
[18] This has not changed since PMP.
[19] In some such cases consideration may be given as to whether it is worth attempting to acquire rights in the common areas.
[20] Or vague verbal descriptions which do not identify the common areas by reference to a future event.
[21] Again, there is no change this since PMP.
