Most modern developments, both commercial and residential, will be governed by a number of conditions, designed to regulate the amenity of the development, set out arrangements for management and decision making in relation to common parts, and provide a framework in which owners of units have both a responsibility towards the other owners, and an entitlement to enforce compliance with these conditions against other owners.
Drafting such Deeds of Conditions, particularly in multi-use developments, can be a complicated business, but even in apparently straightforward single use sites, setting up the relevant terms and conditions can prove to be challenging, particularly in respect of the treatment of common external areas, as the circumstances of the recent Lands Tribunal case of Turnberry Homes Limited v The Keeper of the Registers of Scotland demonstrate.
How to dispose of common external areas
A frequent issue for developers is the question of what to do with the bits of the development that are left over after individual plots or units have been sold to purchasers. Invariably these consist of external common parts: roads, footpaths, landscaped areas and so on. One popular approach is for these portions of a development to be conveyed in common amongst all of the plot or unit owners, usually by way of pro indiviso shares (that is, shares in an undivided whole) of the whole of the common areas. More often than not, the Deed of Conditions will refer to this approach, and define the specifica areas that are to be included. The individual conveyances of each unit or plot will then convey a pro indiviso share in the common parts to the purchasers, usually by reference to the definition of them contained in the Deed of Conditions.
How to define common external areas
The best way to identify the areas that are to be the common parts and subjected to this treatment, is to attach a suitable plan to the Deed of Conditions, on which the areas concerned are clearly shown. Often however, and particularly in the early stages of a development, the developer may not have finally identified the precise extent and location of the common areas, and the practice has developed over the years of describing the common parts by reference to those parts of the development of this type e.g. roads, grassed areas, footpaths and others which are not otherwise conveyed as plots or units to individual purchasers.
Readers who are familiar with Deeds of Conditions and their application, will be aware that this approach is, in fact, currently under review in any event, and while it is not within the scope of this article to comment on that review, which is ongoing and not yet complete, it is the case that in the circumstances of the Lands Tribunal case of Turnberry Homes Limited v The Keeper of the Registers of Scotland, this is the approach that was adopted by the developer, and as the facts as reported bear out, treated as effective for the purposes of conveyances of pro indiviso shares to individual plot owners, in 2001 and subsequently.
Briarwood and Beechwood - two adjoining developments
The case concerned an appeal by Turnberry against the Keeper’s exclusion of indemnity in respect of title to a strip of ground which Turnberry used in a housing development known as Briarwood in Motherwell.
Turnberry had acquired the site from the developers of the adjoining development known as Beechwood, which had originally included the strip of ground. The Keeper, in registering Turnberry's title to the development site at Briarwood, had taken the view that their title to this strip of ground was open to challenge by proprietors of houses in Beechwood, on the basis that the dispositions in favour of the Beechwood proprietors had already conveyed pro indiviso rights in the common parts of the Beechwood development, which would have included the strip of ground, before it was sold to Turnberry as part of Briarwood.
What were the Common Parts?
The argument concerned conflicting interpretations of the provisions of a Deed of Conditions which had been registered in respect of the Beechwood development. That Deed of Conditions provided that the development “Common Parts” would consist of the development under exception of all of the plots conveyed or to be conveyed to individual proprietors, and would include any amenity play areas, boundary fences, walls, railings and hedges and common access roads, pavements, footpaths, visitor car parking spaces, and all sewers, drains, pipes, cables and common lighting.
The Deed went on to provide that each proprietor in the development would have an equal pro indiviso right of property in common with all the other proprietors, to the Common Parts, except to the extent that they were taken over by, or sold or conveyed to the Local Authority or other party, with a view to the maintenance obligations being taken over by them. Dispositions of houses in Beechwood conveyed the pro indiviso shares to individual owners.
So far, so good. However, the Deed of Conditions also contained provisions specifying that it would be possible for the developer to convey open areas to the Greenbelt Group of Companies, with detailed arrangements for maintenance of these areas by Greenbelt, subject to reimbursement of their costs by the owners of plots.
The areas that could be conveyed to Greenbelt for this purpose were described as any areas of open space, landscaped areas and play areas within the development, defined as "Open Ground". The Deed stated that in such circumstances, the arrangements for maintenance etc of the Common Parts would be superseded by the specific provisions relating to maintenance by Greenbelt.
As can be seen from the descriptions of parts of the development that are to be included within either "Common Parts" or "Open Ground" there are overlaps, in particular with reference to play areas, but the two definitions are not the same. Both parties accepted that the wording in the Deed of Conditions left something to be desired.
Turnberry wanted the strip of ground to be excluded from the definition of Common Parts, and contended that as it had in fact been part of the Open Ground, it fell outwith the defined Common Parts area and would not therefore have been included in the conveyances of pro indiviso shares of the Common Parts.
In the event, however, there had not been any conveyance to Greenbelt. Instead the strip of ground was in fact incorporated into the title of individual plots in the Briarwood development.
Common Parts or Open Space?
The Tribunal's opinion was that while the strip of ground did physically lie in the Briarwood development, and not the Beechwood development, it did form part of the area that was defined as “the Development” in the Beechwood Deed of Conditions, and was therefore subject to the terms of that Deed, and included within the basic definition of “Common Parts” in that Deed, along with all other open or common areas.
The Tribunal confirmed that the areas included as Common Parts are accordingly owned by the individual proprietors of Beechwood on a pro indiviso basis (except to the extent that they are publicly taken over or transferred to someone else with a view to that transferee maintaining them), and that therefore, the titles to the strip of ground in favour of the owners in Briarwood are potentially at risk of challenge. Of course, if there is no challenge, then there is the likelihood that possession by the owners in Briarwood of the strip of ground areas will cure this problem after the requisite ten year period.
Can developers have their cake and eat it?
Looking at the detail of the conflicting provisions in the Deed of Conditions (full details are in the transcript of the Tribunal's opinion, accessible via the link below) it is problematic to identify how - if the Tribunal's and the Keeper's views are correct, that the conveyances to individual owners of pro indiviso shares in the Common Parts were effective in favour of the proprietors in Beechwood - a subsequent conveyance to the Greenbelt Company could unravel those conveyances, although the Tribunal were at pains to reserve their position on that outcome, which they were not in fact required to address.
The provisions relating to a possible conveyance to Greenbelt provide, as previously indicated, that the other conditions in the Deed of Conditions would be "dissapplied from application to the Open Ground". That would mean that the condition that provided that each proprietor in the development would have an equal pro indiviso right of property in common to the Common Parts, would be disapplied in relation to the Open Gound conveyed to Greenbelt.
But individual plots that had already been sold would have already included these pro indiviso rights in their conveyance - and prior to any conveyance to Greenbelt, the provisions of the Deed of Conditions relating to Greenbelt would not apply to the development - would then a subsequent disapplication of the terms of the Deed of Conditions have a retrospective effect on conveyances already effected? This does not appear to be recognisable law.
Tantalisingly, this opinion leaves questions in this vein unanswered, but clearly the prudent course of action would be to treat arrangements of this type as an either/or situation: if there is a likely prospect of conveying to a management company in the future, then pro indiviso shares should not be transferred to owners; if pro indiviso shares are to be conveyed, to ensure that the developer is not left holding title to bits and pieces of land, then alternative management arrangements, that don't include transferring title, should be put in place.
And as ever, clear and unambiguous drafting is all-important. There were obvious inconsistencies between the two separate arrangements in this Deed of Conditions, so that from either perspective, there would be a lack of cohesion, and unclear outcomes. It is vital to ensure that all operative provisions work together as a whole, and if there is any room for doubt or ambiguity, to spell it out in clear and unequivocal terms. Click here to access the decision in Turnberry Homes Limited v The Keeper of the Registers of Scotland.