OPINION

Patterson & Others v Drouet & Others

Introduction and summary

[1] This is an application by three proprietors at a tenement building under Section 91 of the Title Conditions (Scotland) Act 2003 (“the Act”), to vary community burdens under a Deed of Conditions which currently apportions common charges on the basis of values fixed under the rating system and ‘frozen’ as at April 1989 under section 111 of the Local Government (Finance) Act 1992. They seek an order varying the burdens in line with Rule 4.2(b)(i) of the Tenement Management Scheme (Tenements (Scotland) Act 2004, Schedule 1, viz. according to floor areas, the largest property being in this case more than one and a half times the size of the smallest.

[2] Two of the applicants previously applied individually under Section 90(1)(a)(i) of the Act, seeking to achieve the same result (LTS/TC/2010/09,11). In an Opinion dated 20 January 2011, the Tribunal gave reasons for deferring a decision on the applications because it had not heard full argument on their competency under that provision, there being in the Tribunal’s view doubts about the competency of applications under that provision which would have the effect of imposing additional obligations on other proprietors. We did, however, in that Opinion indicate and explain our view that if the applications were competent they should succeed, i.e. in the particular circumstances it would be reasonable to allow these applications.

[3] We have decided this application as follows:-

(i) The application is competent;

(ii) The application succeeds, i.e. the applicants have satisfied us that it is reasonable, having regard to the factors listed in section 100 of the Act, to grant the application;

(iii) The Tribunal’s order is to vary Condition (Eighth) in the relevant Deed of Conditions, as it affects all the properties at the tenement in question, by deleting the reference to values as appearing in the Valuation Roll and substituting reference to floor areas; and

(iv) No compensation is payable to any other owner.

[4] These cases touch on an issue which could be of widespread significance because such provisions in title were in the past common and it is not uncommon for ground floor properties in tenements to be used commercially, so that, at least on 1 April 1989, they were, under the rating system, valued very much higher than the flats above. However, as we pointed out in our previous Opinion, the situation in the present cases involves a more unusual situation because the ground floor and basement properties, having originally been residential, were used commercially over a period including April 1989, when the common charges apportionment was frozen, but have (or at least two of them have) since that date reverted to residential. Accordingly, while issues of competency may be general, the merits of this application have been considered in its own particular circumstances. We must also point out that we have not in this case had full submissions on all questions which might arise in such circumstances, particularly because the respondents, two individual proprietors of upper floor flats, have not been legally represented and – we mean no disrespect to them – appeared to us to be struggling with somewhat complex legal issues. It will also be seen that we have reached a decision on compensation on which, again, the respondents led virtually no relevant evidence and made only the most basic submissions. Although we are clear that the claims for compensation do not succeed in this case, it is a potentially difficult issue requiring deeper consideration.

The Title Condition

[5] A Deed of Declaration of Conditions by Trustees of Robert Gourlay and Others recorded in the Division of the General Register of Sasines for the County of the Barony and Regality of Glasgow on 14 October 1948 provides inter alia:-

“(EIGHTH) all insurance premiums, expenses and charges incurred for upholding and maintaining in good order and repair and from time to time renewing or for painting or decorating the common subjects or for the preservation or cleaning thereof or for any other work done or services rendered in terms of or in furtherance of the provisions herein contained and the remuneration if any of the factor shall be payable by the proprietors of the said dwellinghouses whether consenters thereto or not, in the proportion which the gross annual value as appearing in the Valuation Roll then current of each house owned by them respectively bears to the total annual value of the said tenement as appearing in the said Roll.”

The title condition is a community burden which is narrated in the Burdens Sections of the applicants’ registered titles, viz. Land Certificates Title Numbers GLA154289 (Flat 0/2, 146 Holland Street, Glasgow), GLA154288 (0/1, 146 Holland Street) and GLA66011 (inter alia, basement premises at 146 Holland Street). The burden applies also to the other properties in the community at 146 Holland Street, viz. Flats 1/1, 1/2 , 2/1, 2/2, 3/1 and 3/2, all of which are upper floor flats.

[6] The applicants are Emma Patterson, owner of the ground floor property, Flat 0/2, 146 Holland Street, Glasow, Let’s Direct (Scotland) Limited, owner of the ground and basement property, Flat 0/1, 146 Holland Street, and Purewal Enterprises Limited, owner of basement premises at 146 Holland Street (now occupied as part of premises at 256 Bath Street, Glasgow, but at the date of the Deed of Conditions forming, along with the Flat 0/1, another ground and basement property).

Title Conditions (Scotland) Act 2003, Section 91

“91. Special provision as to variation or discharge of community burdens

(1) Without prejudice to section 90(1)(a)(i) of this Act, an application may be made to the Lands Tribunal under this section by owners of at least one quarter of the units in a community for the variation (“variation” including imposition) or discharge of a community burden as it affects, or as the case may be would affect, all or some of the units in the community.

(2) In the case of an application made by owners of some only of the units in the community, the units affected need not be the units which they own.

(3) Subsections (6), (7) and (9) of section 90 of this Act shall apply in relation to an order made by virtue of subsection (1) above varying or discharging a community burden as they apply to an order under subsection 1(a)(i) of that section discharging a title condition.”

(Section 90(6)(7) and (9) provide for awards of “such sum as the Tribunal may think it just to award” in respect of “any substantial loss or disadvantage suffered by” owners of benefited property in consequence of the discharge or variation.)

Local Government Finance Act 1992, Section 111(1)

“111. Statutory and other references to rateable values, etc

(1) Where-

(a) in any deed relating to heritable property executed before 1st April 1989 there is any provision which apportions any liability according to the assessed rental or, as the case may be, the gross annual, net annual or rateable value of any properties; and

(b) all the properties involved in the apportionment appear in the valuation roll in force immediately before 1st April 1989; and

(c) one or more of the properties constitute dwellings,

then, with effect from 1st April 1989, any reference to the assessed rental or, as the case may be, to any of those values in any such deed shall, unless the context otherwise requires, be construed as a reference to the net annual value, or, as the case may be, to the gross annual, net annual or rateable value which appears in relation to any of those properties in the valuation roll in force immediately before that date.”

Tenements (Scotland) Act 2004, Section 4

“4. Application of the Tenement Management Scheme

(1) The Tenement Management Scheme (referred to in this section as “the Scheme”), which is set out in schedule 1 to this Act, shall apply in relation to a tenement to the extent provided by the following provisions of this section.

(6) Rule 4 of the Scheme shall apply in relation to any scheme costs incurred in relation to any part of the tenement unless a tenement burden provides that the entire liability for these scheme costs (in so far as liability for those costs is not to be met by someone other than an owner) is to be met by one or more of the owners.”

Rule 4.2(b) of the Tenement Management Scheme

“ … (i) in any case where the floor area of the largest (or larger) flat is more than one and a half times that of the smallest (or smaller) flat, each owner is liable to contribute towards those costs in the proportion which the floor area of that owner’s flat bears to the total floor area of all (or both) the flats,

(ii) in any other case, those costs are shared equally among the flats.”

Procedure

[7] The application was intimated to the owners of the upper floor flats comprising the 6 other properties forming part of the tenement at 146 Holland Street. Two proprietors, Germain and Fiona Drouet, owners of Flat 1/2, and Ali and Parveen Liaquat, owners of Flat 2/2, made representations opposing the application. The application was heard at an oral hearing on 28 September 2012. The applicants were represented by Barbara Watson, Solicitor, of ELP, Solicitors, Edinburgh. She called as witnesses Robin Grant Williamson BSc, FRICS, a chartered surveyor with residential valuation and property management experience, of Messrs Sharp and Fairlie, Glasgow; Gordon Patterson, father of the first applicant; and Mohammed Vaseem Iqbal, a director of the second applicants. Mr Drouet and Mr Liaquat represented themselves and did not formally give evidence but made oral submissions in addition to their written pleadings. The application was heard by the same Tribunal members as at the hearing of the applications LTS/TC/2010/09,11. The primary facts were agreed to be generally as set out by the Tribunal in its Opinion dated 20 January 2011 in those applications. The applicants lodged further documentary productions, which were also not the subject of any substantial factual dispute.

[8] The question whether Section 111 of the 1992 Act applied in the particular circumstances, had been considered, under the Tribunal’s jurisdiction in section 90(1)(a)(ii) of the Act, in the previous applications and was not put in issue in this application, which proceeded on the footing that, as the Tribunal had decided, Section 111 does apply (subject of course to the Tribunal’s jurisdiction).

Authorities referred to:-

Kennedy v Abbey Lane Properties LTS/TC/2009/26, 29.3.2010
Patterson & Let’s Direct (Scotland) Ltd v Drouet & Others LTS/TC/2010/09,11, 20.1.2011

Relevant Circumstances

[9] 146 Holland Street is a typical tenement building, built around the 1860s and entered from the street, with no substantial area of ground to the rear. It is situated between Bath Street and Sauchiehall Street, in a mixed commercial (office and retail) and residential area close to the centre of Glasgow.

[10] The 1948 Deed of Conditions narrates that the properties at 146 Holland Street and two adjoining tenements had been in the same ownership and were now to be sold or otherwise dealt with separately. 146 Holland Street was said to consist of two ground and basement houses, each entered from the common stair, and six flats on the three upper floors. The properties were then all residential. Although the deed applied also to two other tenements, its apportionments of liabilities were for each separate tenement and therefore covered common charges liabilities of the (then) 8 properties, all residential, at 146 Holland Street.

[11] Prior to the abolition of domestic rates in 1989, each of the ground and basement properties had been altered to commercial use, 0/1 as a salon and 0/2 as an office. A Valuation Roll, apparently that in force immediately before 1 April 1989, showed the Salon at 0/1 with net annual and rateable values each of £4,000; the office at 0/2 with net annual and rateable values each of £2,200; and the upper floor flats at 1/1, 1/2 , 2/1, 2/2 and 3/2 with gross annual values respectively of £525, £590, £510, £590 and £585 and rateable values of £378, £437, £364, £437 and £432. The other top floor flat, Flat 3/1, although also subject to the burden, was for some unknown reason not shown on the same page of that roll.

[12] The tenement has had factors for some years. The current factors, Messrs Hacking and Paterson, currently apportion common charges among these 8 properties as shown in Column 1 below. This apportionment has apparently subsisted for as long as that firm’s records can confirm, and is said by them to be “based on historic gross annual, or rateable, values at the property.” During the 5 year period ending 28.11.2011, these apportionments resulted in the charges shown in Column 2.

Column 1 Column 2
0/1 43.10% £9,535.60
0/2 32.60% £7,212.55
1/1 3.76% £831.88
1/2 4.42% £977.90
2/1 3.64% £805.33
2/2 4.42% £977.90
3/1 3.64% £805.33
3/2 4.42% £977.90
100% £22,124.39

[13] The property at 0/1, owned by Let’s Direct Limited, has since 1989 reverted to a ground and basement house with residential use, currently multi-occupancy under an ‘HMO’ licence. These applicants purchased in 2005.

[14] The property at 0/2, owner-occupied by Miss Patterson, has also since 1989 reverted to residential use, except that the basement area pertaining to this property was at some stage sold separately and annexed into the kitchen part of a neighbouring restaurant. It now enters through these premises at 256 Bath Street. It is in the separate ownership of Purewal Enterprises Limited. These owners have not been charged separately by the factors but currently share payment of the common charges equally with Miss Patterson under an informal, interim, agreement.

[15] The upper floor flats are all residential, with Flat 2/2, and possibly others, also in multi-occupancy. Flats 1/2, 2/2 and 3/2 apparently have one more bedroom and have slightly larger floor areas than Flats 1/1, 2/1 and 3/1.

[16] The internal floor areas, and approximate percentages of the total (subject to some slight uncertainty in the measurement of the basement part of 0/2), are shown respectively in Columns 1 and 2 below.

Column 1 Column 2
0/1 (ground and basement) 158.46m2 18.0%
0/2 (ground) 87.41m2 9.9%
0/2 (basement) (estimate) 64.00m2 7.3%
1/1 87.57m2 9.9%
1/2 102.74m2 11.7%
2/1 87.57m2 9.9%
2/2 102.74m2 11.7%
3/1 87.57m2 9.9%
3/2 102.74m2 11.7%

[17] The building is apparently in a reasonable state of repair, with no indication of any extraordinary repairs outstanding. It will need repairs and renewals from time to time.

Opinion Evidence

[18] Mr Williamson is a chartered surveyor with around 30 years’ experience of residential property valuation and property management. He provided the floor area measurements set out above, and also a factual analysis of the differences which changing to a floor area basis would make to the common charges apportionment currently being applied. This was based on the five years’ figures supplied by the factors. The ground and basement, 0/1, would have paid on average £796.04 per annum, compared with the actual average of £1907.12 (£1111.09 less); the ground and basement, 0/2, taken together, £760.04, c.f. £1442.51 (£681.87 less); and the upper flats figures between £493.83 and £515.94, c.f. between £161.07 and £195.58 (£293.46 to £320.36 more). The analysis also showed the results which would follow from simply dividing the shares on a unit basis, i.e. 0/1 and 0/2 at 20% each and the upper floor flats at 10% each, which would produce in comparison with floor area apportionment slightly higher payments for the applicants’ properties and the smaller upper floor flats and slightly lower payments for the larger upper floor flats.

[19] Mr Williamson had considered the issue as to whether the apportionment of common charges (and any changes in the basis of apportionment) affected (or would affect) sale values. In this connection, he had not prepared any written opinion but did produce a schedule of sale prices of properties at Holland Street (136, which he said was all residential and had equitable apportionment, and 146), West George Street, West Regent Street, Douglas Street and Bath Street in the centre of Glasgow. He had also considered tenement properties in Shawlands, Partick and Dennistoun where he had some knowledge of the apportionments under the titles of common charges, including tenements at which the residential flats’ shares were as low as 1.5%. He was aware of, and described, situations where adjoining tenements had differing apportionment schemes. He said that he had not been able to see any evidence which would imply any effect on capital values of a difference between on the one hand, ‘equitable’, and on the other hand, ‘onerous’/‘generous’, apportionment bases. It was very difficult to isolate any single factor of this kind. His opinion was not based on any case in which there had been an actual change in the basis. A purchaser would take into account factors such as location, type of property, size and layout and general condition, and the market tended to override particular factors, such as neighbour disputes and personal matters. He did not think that purchasers would pay more for a property with a ‘generous’ apportionment. He thought that there might be a general assumption in the market that charges would be shared equitably. He could not imagine this making any difference in a mortgage valuation, but such valuations typically assumed that burdens were apportioned equitably. He did indicate that a change from an equitable basis to a very onerous apportionment might be referred to in a commercial property rent review. Shares of 30% to 40% of common charge liabilities would be onerous, and in his opinion such a situation would affect the value.

[20] Mr Williamson said that for a property manager inequitable apportionment definitely created problems collecting charges and raising funds for exceptional repairs. It created conflicts of interest amongst owners.

[21] In cross-examination, Mr Williamson said it was common for shops to pay a higher proportion of charges. Relative values had completely changed over the years and ground floor properties had tended to go into residential use because values would be higher. A solicitor acting for a lender might flag up an onerous apportionment. He said that he was only looking at areas like Dennistoun because he had relevant experience there, in order to see whether the issue of allocation had any effect on value. He did not know whether there was any expectation in City Centre areas of lower apportionments because of the shops underneath or whether that would affect values.

[22] Mr Williamson said that the property insurance premium might be higher where there were ground floor commercial premises, e.g. night clubs.

[23] In answer to questions by the Tribunal, Mr Williamson said that if major repairs were outstanding that would increase the problems caused by inequitable apportionments. Values would be affected equally in that situation if apportionment was equitable, but differentially if not. This tenement looked to be in generally average condition and he would not expect any imminent requirement for substantial refurbishment or major repairs. He did not think that there would be much difference in value levels among the flats at this tenement.

[24] Mr Iqbal and Mr Liaquat, whose properties in this tenement are each let out with HMO licences and each have some experience of this market, had differing views on the question whether the value of the ground and basement property, 0/1, had been diminished by the inequitable apportionment. Mr Iqbal accepted that his company had paid a lower price, but related this to outstanding water damage at the time, an insurance recovery being payable to the seller. He had only become aware of the allocation of common charges on the day before settlement of the purchase. Mr Liaquat repeated a submission, to which he had spoken in oral evidence at the previous hearing, that the value of that property had been reduced because of the apportionment: it had been advertised at a very attractive price and he had viewed it but decided against offering because of the apportionment.

Issue (i): Competency of Present Application

[25] Submissions. The Tribunal did not understand Mr Drouet to challenge the legal competency of this application. Mr Liaquat made a number of points on competency in his written representations. Firstly, he referred to section 98 of the Act. Secondly, he argued that the applicants had failed to address the issues of competency brought out in the Tribunal’s Opinion on the previous applications, in which there had been no further procedure. They could not raise two different applications for the same purpose and seeking the same variation. At the hearing, as we understood it, Mr Liaquat also questioned the use of the basement property at 0/2 as a unit in considering whether the required percentage of 25% of owners had made the application.

[26] Tribunal’s Consideration. The Tribunal accepts that this application is competent under Section 91 of the Act. On the 25% requirement, there might perhaps be an issue as to whether sub-division since the title condition was created produces another “unit” for the purposes of this provision, the charges not having been formally apportioned yet despite the undoubted legal split of ownership of the properties. ‘Unit’ is defined in Section 122(1) of the Act, “unless the context otherwise requires”, as “any land which is designed to be held in separate ownership (whether it is so held or not)”. We have not heard full submissions on this and do not feel it necessary to decide the point, because if the basement part is not a separate unit, this application has been made by the owners of two of the 8 units, i.e. 25%; if it is, by 3 out of 9.

[27] Section 98 is concerned with the test on the merits of the application, not its competency.

[28] We do have some sympathy with the respondents’ frustration that the other applications have simply been left in limbo while this one has been pursued, but do not consider that that renders this application incompetent. Ms Watson did not suggest any reason why the other applications should continue and accepted that steps should be taken to bring them to an end, reserving the matter of the expenses of those applications. Prima facie, the respondents have succeeded in those applications and will be entitled to the expenses, if any, involved in resisting them.

Issue (ii): Reasonableness

[29] Submissions. The applicants relied on the Tribunal’s previous expression of its views on the merits. In their written application, they set out their position on the factors, so far as applicable, set out in Section 100 of the Act. They referred first to changes in circumstances (Factor (a)) of Section 100), viz. the abolition of domestic rates, rendering fulfilment of the objectives intended in the Deed of Conditions impossible, and the changes in size and/or character of the property over the years. The title condition did not benefit the tenement as a whole (factor (b)) as the applicants were unlikely to agree major expenses, to the detriment of the tenement as a whole. The condition was costly to the applicants as they were obliged to meet an unfair and onerous share of the common charges and decisions could, under the Deed of Conditions, be taken by a majority (factor (d)). The purpose of the condition was to provide a method of allocating common repairs on an up-to-date and fair basis, referring to accurate valuations, but this was no longer capable of being achieved (factor (f)). The condition was unfairly prejudicial to the applicants, 3 out of 9 owners being required to pay a total of 75.7% of the charges. The problems caused by the unfair allocation of charges were not capable of resolution other than by application to the Tribunal.

[30] As we have indicated, the two respondents were not legally represented. From Mr Drouet’s written representations and oral submissions, we understood his position to be as follows. He believed that the ground floor premises were not suited for residential use. He was not prepared to accept a title variation that would not benefit him or other upper floor owners in any way as the tenement had lost value since the ground floor flats had changed to residential use, although he admitted that the current apportionment might be unfair and, as he said at the hearing, he was “not necessarily here to oppose the application.” He was unclear as to how the applicants, Purewal Enterprises Limited, were contributing or exactly what legal position they had as he was not aware of any sale of property or any formal inclusion of this locally agreed division within the tenement. As to the ground and basement 0/1, this was still very much a commercial operation. He also drew attention to the applicants’ lack of negotiation on the issue. He doubted the validity of this application if the basement could not be accurately measured. He resisted any inference that the applicants, Let’s Direct Limited, were, because of the conditions, not making money from the property. The upper flat proprietors had purchased on the basis of the conditions. He suggested that circumstances might change again.

[31] We understand Mr Liaquat’s position on the merits of the application to be as follows. He submitted that the application did not satisfy the requirement in Section 98(b)(i) as it was not in the best interests of all the units. He argued that, while the ground floor properties had some time ago been converted to commercial, giving the tenement a desirable dual use at this city centre location at which ground floor properties were typically used commercially, their conversion back to residential had had a materially detrimental impact on the marketability of the remaining properties. These owners had been unfairly affected by that conversion and this further amendment would substantially affect the marketability of their properties. All current owners must be presumed to have had full knowledge of the title conditions and accepted these in the context of their purchases (c.f. Kennedy v Abbey Lane Properties). Further, at the time when they purchased their ground floor properties, the applicants had been in receipt of a substantial discounton the purchase price. Having decided to convert their properties back to residential use, they had no right to question the current apportionment of charges. Further, the applicants had made “no effort whatsoever” to liaise with all the proprietors to resolve matters without going to the Tribunal. Mr Liaquat did say that he agreed that if the system was fair it would benefit everyone.

[32] Tribunal’s Consideration. We have found it helpful to consider matters in two stages, first, whether it is reasonable to depart from the scheme of apportionment based on ‘frozen’ rateable values, and secondly, if so, whether to make the order applied for, varying the burden as it affects all the units in the community by substituting the scheme provided in the Tenement Management Scheme.

[34] We expressed a view on the issue whether it is reasonable to depart from the scheme currently applicable in our Opinion on the previous applications. However, we considered it appropriate to consider the matter again in this application. The material has, perhaps, been very slightly expanded, but parties’ submissions appear much as they were. At all events, having considered this again, we remain entirely satisfied that in the circumstances of this particular case it is reasonable to end the present scheme, for essentially the reasons summarised in Para 33 of our previous Opinion, where we said:-

“Put shortly, the purpose of this title condition appears to us to have been to ensure that the apportionment of common charges applicable to eight dwellinghouses would stay in line with current values. As we see it, three changes of circumstances in combination would make it reasonable in this particular case to vary the position which has now resulted: firstly, the change to commercial use of the applicants’ properties; then the abolition of domestic rates and resultant ‘freezing’ of values; and then the reversion back to residential use, resulting in frozen values bearing no relationship to current use values as intended by the deed of conditions.”

[35] An underlying factor in questions about the current application of maintenance burdens which were linked to rateable values and therefore became subject to the 1989 ‘freezing’ is, no doubt, the apparently enormous change in relative values of commercial and residential ground floor tenement properties. In this case, however, the striking feature which has arisen as a result of the particular sequence of events and which has defeated the purpose of the title condition is the discrepancies among the residential properties in the tenement. One ground floor flat (0/2) has been paying (apparently in ordinary circumstances, without any issue of extraordinary repairs, etc.) an average of £722 per annum, but the flat immediately above, of the same size, has been paying £166. The ground and basement at 0/1, even dividing its figure of £1907 by two, pays £953, and the flat immediately above £195. So in this case there is an unanswerable case based on material change of circumstances which have defeated the purpose of the title condition.

[36] The case is thus based primarily on consideration of factors (a) and (f). In our previous Opinion, we did not spell out our views on the other factors listed in Section 100. Broadly, we agree with the applicants’ submissions, summarised above, on the various factors.

[37] These are community burdens, i.e. with mutual benefit and burden, but if the properties whose apportionments are currently ‘generous’, including the Drouets’ and the Liaquats’ flats, are considered as the benefited proprietors, then under factor (b), extent of benefit, they can be seen to be directly benefiting financially (in ordinary years) by amounts of around £300 per annum. Against that, however, there is the disadvantage (we accept Mr Williamson’s evidence on this) that such inequitable apportionment can lead to problems when major repairs are in contemplation, making such situations more difficult to manage, possibly also to the long term detriment of the properties. Overall, although it can be said that the upper floor flats’ payments would increase nearly three fold, in our view the benefit, if any, to these owners is rather limited.

[38] Conversely, whether this is considered under factor (c), factor (d)(ii) or simply as ‘some other material factor’ (j), the burden on the applicants is considerable, both in ordinary years and when major repairs are in contemplation. Mr Liaquat has suggested that the applicants Let’s Direct Limited acquired their property cheaply. Mr Williamson did accept that a grossly inequitable apportionment might affect value, although we did hear another explanation from Mr Iqbal who was involved in an actual purchase of this property. There is no indication of this having applied to the other applicants’ purchases, and there was no quantification of the possible effect in this case. We cannot in any event see this as an argument for maintaining the current inequitable position on a permanent basis.

[39] None of the other factors listed in Section 100 appears to us to be of any significant application in this case.

[40] We accept as a generality that proprietors must be deemed to have known and accepted the title position when they purchased. It is natural to have this in mind when considering whether it is reasonable to discharge or vary the burden. The Tribunal is not generally sympathetic to burdened proprietors who plead ignorance of title conditions about which they should have known or been advised. Such ignorance does not advance their case. However, our jurisdiction is actually to relieve burdened proprietors who, generally, accepted burdens. A purchaser acquires a right to challenge a title condition as unreasonable. Consideration of the factors listed specifically in the Act may, and quite often does, lead to the Tribunal being satisfied that it is reasonable, despite the applicants’ acceptance of a burden, to lift or vary it. In Kennedy v Abbey Lane Properties, to which Mr Liaquat referred, the allocation of maintenance liabilities had been agreed recently, the circumstances had not changed in any way and the other factors were not considered to support the application by a purchaser who was or should have been aware of the provision in question to be relieved of it. Consideration of the statutory factors here clearly gives a different result.

[41] It might be added in this case that the current iniquity of the apportionment would not be immediately obvious until a late stage in a purchase transaction. The wording of the burden would not immediately raise alarm bells, although no doubt it would be wise to enquire further. It is therefore possible to have some sympathy for owners, two of whom told us in evidence that that they had only discovered the actual mathematical apportionment very shortly indeed before settlement of their purchase transactions. We can accept it as credible that that could happen in practice. However, it is the consideration of other factors in this particular case which satisfies us of the reasonableness of the application.

[42] We should briefly mention two slight twists. Firstly, there is non-residential use of a (now separately owned) part of one of the original residential properties. In our view, that does not alter the inequitable working of the scheme. Secondly, the current use of two – or possibly more than two – of the residential properties, which are let out, is in one sense commercial as opposed to purely private residential. There again, however, whatever might be the position, either under present non-domestic rating rules (we were not told whether or not these properties fall under that regime) or if that situation had pertained in 1989, or indeed in 1948 when the title condition was created, the current position, following the particular sequence of events in this case, is plainly inequitable even among these properties: 0/1 is let out and pays (the equivalent of) £953; 2/2, also let out, pays £195.

[43] The respondents complained of the applicants’ failure to do more to try to reach agreement on an appropriate new apportionment of common charges. This does not really affect the reasonableness of the application, although in some cases it might possibly affect any issue of expenses. Having seen some of the correspondence, however, we can say that we are not really surprised that the applicants did not make more effort in this direction. They wrote to each of the other owners. Several did not reply, so the prospects of getting agreement from all of them, as would be necessary, would have seemed remote. Mr Drouet, Mr Liaquat, and also a Mr Banks who had appeared as a respondent in the previous applications (but who has since sold his property) all did reply, in reasonable enough terms, but, between them, made a number of points from which, again, the applicants might well take the view that reaching agreement might not be straightforward.

[44] Mr Drouet pointed out, quite correctly, that circumstances might change. We accept that the Tribunal might appropriately look beyond the current position if there was a real likelihood that it would not endure. However, the slight possibility of further changes of circumstances (which could be met by agreement of owners or, if necessary, another application to the Tribunal) does not alter our view that it is reasonable now to change arrangements which have clearly become inequitable. We should perhaps add that it is by no means clear that any reversion to retail or office use should lead to any further change. However, the possibility of changes in circumstances should be kept in mind when considering the form of apportionment scheme to adopt.

[45] We remain of the view that the respondents’ feelings about the desirability of commercial use of the ground floor part of this tenement are of no relevance to this issue.

[46] Finally, on this aspect of the case, our clear view of the reasonableness of the application is strengthened by, as we see it, quite a degree of acceptance on the part of the upper floor owners that the current situation is unsatisfactory and unfair. All of Messrs Drouet, Liaquat, and Banks acknowledged that to at least some degree at points during the two hearings which have taken place. Certainly, no-one has suggested that the current position is equitable. Other owners have not opposed this application. There was a suggestion, which we can understand, that this may be a widespread problem which should be dealt with on a national basis rather than by individual applications such as this. We agree that some legislative intervention might well be thought appropriate and possibly preferable, but we are satisfied that we have jurisdiction to allow this application if satisfied as to its reasonableness in the circumstances.

Issue (iii): Remedy

[47] Submissions. The appellants contend that it is reasonable to replace the current scheme of apportionment with the scheme which would apply at this tenement under the Tenement Management Scheme, viz apportionment in proportion to floor area, as this is recognised as being the fairest method of allocating common charges within a tenement. At the hearing, Ms Watson addressed the possibility of some way of basing apportionment on value. Firstly, she said that the Tenements Act makes no distinction between commercial and residential. Secondly, in this case, where there is just one non-residential unit, which in view of its use would be very difficult to value, it would be difficult and in any event there was evidence that such properties used commercially would be worth less. Thirdly, floor areas do link in to values. It was understandably fair to do it on floor areas.

[48] There was no competing submission on the general reasonableness of this proposal. Mr Drouet and Mr Liaquat each indicated a measure of agreement with it, in the event of the application being granted.

[49] Tribunal’s Consideration. We are satisfied that this is reasonable. We have had it in mind that the scheme in the Deed of Conditions was obviously based on relative values, and that the scheme of the Tenements Act is that the Tenement Management Scheme is only a default scheme in the absence of provision in the titles for meeting the entire liability. It might possibly therefore be suggested that one should first look for a new scheme respecting the original purpose and intention to link apportionment to current values, if such could be found. However, apart from any other arguments which might be advanced on this, it does appear that it would be difficult in practice to find such a workable scheme, the joy of the original scheme having been the ready availability of a public record of reasonably current values for all the properties. Clearly, the form of the provisions in the Tenement Management Scheme vouches the reasonableness of apportionment simply on equal shares or, where there is substantial disparity in sizes as in this case, on an area basis.

[50] Had it not been for the existence of one ground and basement property, there might possibly have been more of an issue between equal sharing and floor areas, because the Tenement Management Scheme would have produced equal sharing despite the appreciable difference in size between three flats on one side and three on the other.

[51] We do not require to insert the current measured areas into the varied title condition, merely to set out the revised method. Thus, in the same way as the original scheme enabled changes in values to apply, any changes in areas, for example any further sub-division, is catered for. Presumably, the factors will now recognise the basement, 0/2, as a unit separate from the ground flat 0/2. They might also be expected to apply Mr Williamson’s measurements and resultant percentages, set out above in Column 2 at Para [16], unless it is demonstrated that his estimate of the floor area of that basement is wrong.

[52] There is another aspect of changing over to the Tenement Management Scheme which might have had to be considered. This is that other provisions of that Scheme might not be in line with the provisions in the Deed of Conditions. However, there was no submission to that effect in this case.

[53] We did in fact hear evidence about insurance premiums. Apparently, as at many tenements under current factoring practice, there is at this tenement block insurance covering not just the common parts but also buildings insurance for the whole building. Premiums might be affected by business use or particular types of business use. If, as is apparently the position under this Deed of Conditions, the premiums are included in the common charges, it would not be right for any such weighting of the premium to be charged out on an equal basis. It was suggested that this might be covered by some additional provision or qualification of the position. While that might seem obviously reasonable, and we did not understand Ms Watson to suggest otherwise, we felt that it would be procedurally difficult to bring about at this stage of these proceedings. We think that this matter can be left to the factors to deal with appropriately in their billing if it arises, as a matter of sensible interpretation of the title provisions.

Issue (iv): Compensation

[54] Submissions. Mr Liaquat, with whose submissions Mr Drouet associated himself, advanced an argument for compensation, as he put it in his written representations, for “the increased burden”. At the hearing, he referred also to depreciation or diminution in the value of his property. He also referred to the fact that the applicants would benefit from the variation of the condition. He did not advance any figure for the claim. As has been noted above, he did contend that the value of the ground and basement, 0/1, had been depressed, although he did not suggest any figure for that.

[55] When it was pointed out at the hearing that there would really need to be fair notice of how this claim was to be supported, he asked for further time to make a more detailed submission. On consideration, the Tribunal refused that request because we felt that Mr Liaquat had been given adequate information about the position, because he had not shown any reasonable prospect of succeeding with the claim and because we felt it would not be fair to the applicants in all the circumstances to cause them further delay and expense in this matter. This issue of compensation had been flagged up in our previous Opinion, at Para 35, where, after expressing the view that it was possible that the extent of variation might cause the respondents loss or damage for which they should be compensated, we indicated that it might be difficult to establish a loss without expert valuation opinion and attention would have to be concentrated on the effect on the flat owners’ properties of increases in their shares of common charges. Mr Liaquat claimed at the hearing to have been unaware that this matter would arise at this hearing, but the position had been clearly spelt out to him in correspondence from the Tribunal. We have therefore decided this issue in this case on the existing submissions before us.

[56] Ms Watson reminded the Tribunal of three separate questions under Section 90(6) and (7) – whether it was ‘just’; the ‘substantial’ test; and the test of ‘loss or disadvantage’. She referred to Mr Williamson’s evidence that he had not found any evidence of any difference in values. Purchasers did not include this among the factors affecting their bid. If there was any loss, it would be really quite minimal. It would not be ‘just’ to make awards against the applicants who had already been penalised by having to make excessive payments under the current provisions, whereas the respondents had benefited. The variation order would be redressing a wrong. The respondents would get some benefit from it.

[57] Tribunal’s Consideration. It is unfortunate that we have not had fuller submissions on this issue, as we recognise the possibility that compensation might be appropriate in some cases such as this. On the material before us, however, in this case, we do not find it possible to make any award.

[58] Section 90(7)(b) provides for compensation to reflect any effect which the title condition produced, at the time when it was created, in reducing the consideration then paid for the burdened property. Whether or not that could arise in any other case of this kind, it clearly does not arise in this case. If it arises at all, the claim is under section 90(7)(a), i.e. it necessarily relates to “any substantial loss or disadvantage suffered by … the owner of the benefited property”. Benefit to the applicants, such as if the value of their properties will be increased as a result of the Tribunal’s order, does not go to establish this necessary starting point. Any claim based on effect on value has therefore to show that the value of, in this case, the upper floor flats whose shares of common charges are being increased, will be reduced.

[59] It is an obvious theoretical possibility that values might be reduced in some such cases. On the evidence in this case, we cannot find it established, and indeed we think it unlikely. We have no hesitation in accepting Mr Williamson’s evidence, given after a careful attempt to consider this issue. He did go so far as to accept that a very inequitable share of 30% to 40% could start to have a negative effect on value, although we do not think he applied that specifically to this case. Even, however, if it were established that the inequitable shares have had an effect on the value of any of the ground and basement properties at this tenement, so that variation will increase their value, it does not follow that the values of any of the upper flats would be reduced when their ‘generous’ shares are increased to equitable shares. Mr Williamson’s evidence is against such an effect. We do not find any competing view either in general (although we can imagine extreme cases in which it might be established) or in the circumstances of this case. Given the sums involved, and also the undoubted benefit to the tenement as a whole of replacing a scheme which has become inequitable with an equitable scheme, we think such an effect unlikely in this case.

[60] There could be extreme cases – say for example an upper flat proprietor had been liable for the whole cost of maintenance and repair of the roof and there was only one lower flat proprietor, who was now to bear a half share. A particular known exceptional repair need might be another example, but that was negatived here.

[61] Our jurisdiction might possibly allow us to consider awarding sums to compensate, not loss in capital value, but, if this could be separated, some capitalised amount of the additional liability suffered. In the present case, as we have said, restoring equitable apportionment brings some benefit, albeit unquantifiable, to the properties. With that in mind, we are not persuaded that there is a ‘substantial’ loss within the meaning of the statute or that it would be just to make any awards.

[62] Finally, there were no submissions on a question which might possibly be thought to arise in cases like this under Section 91 of the Act, viz. whether, if we considered that compensation was appropriate, it should be awarded to proprietors who had not entered appearance in the proceedings. Our provisional view would be that it would be necessary for any owner claiming compensation to make timeous representations in response to intimation of the application, just as any benefited proprietor seeking compensation for a discharge or variation under Section 90(1) requires to do.

Expenses

[63] If any issue as to the expenses of this application (or indeed of the two previous applications) arises, that can be considered in accordance with the Tribunal’s normal practice, on the basis of written submissions. A broad view might possibly be taken that as the previous applications, involving generally (though not completely) the same parties, failed whereas the present application succeeded, no award of the expenses of any of the three applications would be appropriate.


Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 14 November 2012

Neil M Tainsh – Clerk to the Tribunal