OPINION

Iain Stewart and Others v Mary Sherwood and Another

Introduction and Summary

[1] This is an application under Section 91 of the Title Conditions (Scotland) Act 2003 (“the Act”) by around half the owners at a retirement or sheltered housing development to vary a community burden so as to prohibit letting of retirement flats. The applicants in fact suggest that that was the “real intention of the existing burden” and so understood by the proprietors from the outset of the development in 1986 but that one owner has recently let her property and that it would now be reasonable to clarify the position in this way so as to make clear that letting is prohibited. The respondents are the attorney of the owner of the let flat and one other owner. The application is being disposed of on the basis of written submissions and without an oral hearing, with the consent of all parties, in terms of Rule 26 of the Lands Tribunal for Scotland Rules 2003.

[2] For the reasons set out below, the Tribunal is not satisfied that it would be reasonable to grant this application. The application is refused. We have also referred to a possible further difficulty which, as it seems to us, might arise, under Section 3(6) of the Act, in relation to real burdens prohibiting letting, although this has not formed part of our decision as we did not receive submissions on it.

The Title Condition

[3] The relevant title condition is Condition 7.12 of a Deed of Conditions by Derek Crouch (Scotland) Limited, recorded in the General Register of Sasines for Stirlingshire on 28 July 1986, being also narrated in the Burdens Sections of Land Register title sheets such as that of the first applicants, STG18007. Condition 7.12 provides:-

“7.12 None of the Dwellinghouses shall be let or used for any purpose or in such a way as may in the opinion of the Mid-Superior constitute a nuisance or affect adversely the amenity of the Development. The Proprietors shall not do or permit or suffer to be done in or upon the Development or any part thereof anything whereby any insurance for the time being effected on the Development (including any Dwellinghouse) may be rendered void or voidable or whereby the rate of premium on such insurance may be increased.”

Procedure

[4] The owners of 14 of the 23 individual flats at Inverallan Court, Bridge of Allan, signed this application, specifying the variation sought as deletion of the first sentence of the title condition, substituting the following:-

“7.12 None of the Dwellinghouses shall be let. None of the Dwellinghouses shall be used for any purpose or in such a way as may in the opinion of the other Proprietors constitute a nuisance or affect adversely the amenity of the Development.”

One of the 14 applicants, Thelma McGill, Flat 7, also submitted, and has maintained, representations opposing the application. The second respondent is Mary Sherwood, the owner of the let flat, Flat 3, through her attorney, Irene Cremin. A letter was also received by the Tribunal from Maisie Davidson, Flat 9, also one of the applicants, asking for it to be noted that she is happy for owners to be allowed to rent out their properties and no longer supports the application. As discussed further below, further doubt has been raised as to the level of support for the application. The Tribunal accepts, however, that it has been raised by the owners of at least one quarter of the units in the community and is accordingly in that respect competent.

[5] The applicants and Mrs McGill were unrepresented. Mrs Sherwood’s attorney was represented by Pollock, Ross & Co, solicitors, Stirling. Following a process of adjustment of the application and representations, the applicants and the two respondents agreed, in terms of Rule 26 of the Lands Tribunal for Scotland Rules 2003, to disposal of the application without an oral hearing on the basis of written submissions. The Tribunal proceeded on that basis, allowing parties an opportunity for final written submissions. Having regard to the nature of the issue and the submissions made, the Tribunal did not consider it necessary to carry out a site inspection.

Authorities referred to:-

Sheltered Housing Management Limited v Bon Accord Bonding Company Limited [2010] CSIH 42
Rennie, ‘Land Tenure in Scotland’, Para 5-14

The Facts

[6] On the basis of the parties’ pleadings and submissions, the following facts are undisputed.

[7] Inverallan Court is a retirement or sheltered housing development built in around 1986 incorporating an older house, ‘Inverallan House’, and comprising 23 retirement flats, manager’s office, ancillary buildings and common parts.

[8] The title condition is contained in a 1986 Deed of Conditions executed by Derek Crouch (Scotland) Limited, the developer. This deed reflects feudal tenure, with the developers maintaining a role as ‘Mid-Superiors’ and with a ‘Factor’ and a ‘Secretary’, i.e. managing agent or manager, appointed by the Mid-Superior. The present managers are Bield Housing and Care.

[9] Clause 7.04 of the deed requires each flat to be occupied by at least one ‘Qualifying Person’, i.e. person at least 55 years old and capable of leading an independent life within such an environment, with the Mid-Superior having the power to determine whether a person meets that requirement and to relax it on cause shown.

[10] Clause 7.06 provides:-

“7.06 In the event of any Proprietor wishing to dispose of or sell his Dwellinghouse or to make any change in the use or occupancy thereof he shall be bound to notify the Mid-Superior of his intention. Such notification must be in writing sent by registered post or recorded delivery to the Factor on behalf of the Mid-Superior. No Proprietor shall proceed with the proposed sale, disposal or change without the Mid-Superior’s prior written approval which approval will not be unreasonably withheld or delayed subject to it being satisfied that the Dwellinghouse will be used and occupied in accordance with the provisions contained in Sub-Clause 7.04 hereof. The Mid-Superior’s consent shall only be effective with regard to transfer of title if it is a party to the transfer document.”

[11] There were no lets at the development until 2012, when, after Mrs Sherwood had moved to a care home, Flat 3 was let and tenants moved in, apparently without any process of prior approval as provided in Clause 7.06. Thereafter a number of owners, while apparently having no complaint against the tenants of Flat 3 themselves, raised the issue as to whether letting was prohibited. A legal opinion was obtained from Bield’s solicitors, to the effect that there was no separate prohibition of letting although the contrary argument could be made.

[12] Flats at Inverallan Court come on the market from time to time when residents die or move into care. During the current recession values have reduced and flats have taken longer to sell.

Parties’ Submissions

[13] In summary, the applicants contend that from 1986 until 2012 the flats were all occupied by owners or members of their families. Under reference to the factors listed in Section 100 of the Act, the letting of Flat 3 was a change of circumstances, allowing the possibility of more properties being let unless Clause 7.12 was worded so as to make clear that letting was prohibited (factor (a)). Allowing the clause to be open to the interpretation that letting was permissible would be detrimental to the continued value of the applicants’ properties, to the general perception of the development and to the enjoyment of living there, and living with uncertainty was an unanticipated added worry (factors (b) and (c)). Clause 7.12 was a negative burden, the purpose of which was to prevent letting; ensure no nuisance caused by use of the property; ensure no adverse effect on the amenity and ensure that insurances would not be compromised (factor (f)). There was no planning or regulatory authority to let properties (factor ((g)). No compensation was required or necessary (factor (h)). The applicants were anxious about properties coming up for sale, with the rental ‘door’ opened and a fear of ‘buy-to-let’ investment. Owners having difficulty selling had to lower the price or wait longer: no properties at the development had ever not sold. Allowing letting would alter the nature and the balance of the development, with rentals perhaps eventually dominating. The development would become a less desirable place to purchase, irretrievably devaluing the properties. Most residents would not have purchased if they had known that there would be such a mix in the future. If letting was permitted at other developments, that was irrelevant. Tenants could not be appropriately vetted in the same way as purchasers prior to the conclusion of a sale. Bield could not possibly manage the process in the way envisaged by the respondents. The applicants’ request was reasonable and would benefit the development as a whole, both for the present and for the future, rather than a temporary solution for one or two individuals.

[14] Neither of the respondents referred specifically to the factors listed in the Act. Their general position was that the flexibility of an option to rent was acceptable in the current climate, perhaps enhancing the marketability of the properties, provided that the managers applied their current policy to tenants as well as prospective owners. There would then be no negative impact on residents or amenities.

[15] The first respondent, Mrs McGill, explained that she had written a letter agreeing to participate in the application but also noting the argument for a short term solution during the present difficulties of allowing renting to prevent properties lying empty, with a factoring burden on owners, provided that Bield had a clear policy in place and conducted the usual process for anyone moving in. She had understood that her letter to that effect would be submitted along with the application. Other residents supported the view that there was no objection to letting so long as Bield monitored the process. A copy letter from Miss Paterson, Flat 5, another signatory of the application, expressed that view.

[16] The second respondent explained the circumstances of the letting of Flat 3, after, they say, a significant period when the property was unoccupied. A sale “below value” would have a detrimental effect on valuations. The managers had first confirmed their understanding that letting was permitted. Letting in no way affected the managers’ role and the community burdens as a whole provided more than adequate protection. Any perceived ambiguity in the clause could have been addressed by owners at the time of purchase.

[17] Both the applicants and the first respondent had canvassed the views of a Mr MacInnes, Owner Services Manager at Bield. Bield’s position was that it was for the owners to determine what conditions should be included in their deeds. In Mr MacInnes’s opinion, it was within Bield’s powers to apply the conditions on owner occupiers to anyone renting, i.e. insisting on at least one person over 55 and “suitable for this type of housing”. It was within both his and Bield’s experience that it was better to have properties occupied rather than lying empty for long periods of time. In his opinion based on 12 years’ experience, the “nuisance clauses in the conditions” could be applied against tenants and in fact it would be easier to deal with this in a rented as opposed to an owner occupied situation, and renting would not lead to an adverse impact on the ambience at Inverallan Court. Mr MacInnes also explained that owners at another development had in the process of changing their deeds decided to add a prohibition against letting, although there had not been any problems caused by a tenant there. This, he said, had been agreed by all the owners as had been required in that situation.

Tribunal’s Consideration

[18] We should start by mentioning that, although the point has not been raised, there seems to us to be room for doubt, based on Section 3(6) of the Act, whether a real burden prohibiting letting can be competently created at all. It might be “repugnant with ownership”. We have added some further explanation of this matter at Para [33] below. Had we been minded to grant this application, we would have required to ask for further submissions on this specific point. However, we are able to decide the case without further delay on the basis of assuming for the purposes of our decision that a competent real burden prohibiting letting can be created and, under our jurisdiction in Section 91, “imposed”. (The further competency problem about imposition of community burdens considered in Sheltered Housing Management Limited v Bon Accord Bonding Company Limited does not appear to arise in this case, because this would appear to be an imposition of a new burden among already mutually benefited and burdened proprietors.)

[19] We should also make clear that this is an application to vary a title condition and not an application to interpret it. Our decision is not an interpretation of the existing provision. It would accordingly be open to either side, if so advised, to apply, either to the Tribunal under Section 90(1)(a)(ii) or in some form of court proceedings, for an interpretation. However, we think it right to add that in construing Clause 7.6 regard would have to be had, not only to Section 3(6), but also to the effect of the “presumption for freedom” when construing an ambiguous provision.

[20] Further, we do not think that we can give effect, in this application to vary, to certain of the applicants’ arguments, to the effect that the intention of the condition is clear and there is no ambiguity, i.e. the condition does not require to be varied. We do appreciate the alternative suggestion that there is uncertainty which it would be reasonable to remove, but the difficulty with that is that that in itself does not point any more to prohibition of letting than to freedom to let.

[21] The applicants are therefore asking us to impose a prohibition on letting where it cannot be said that one was in place before. Regardless of the issue of competency, prohibition of letting would be a substantial restriction on the normal rights of ownership.

[22] The factors listed in Section 100 of the Act can be quite difficult to gauge when the application seeks to impose a burden, rather than relaxing or removing it altogether.

[23] As regards factor (a), we agree with the applicants that there has been a change of circumstances in respect that one property has been let. Looking at that, however, we cannot see it as itself pointing to the reasonableness of the application. We could understand a suggestion that something happening for the first time might show the reasonableness of prohibiting it for the future, if it were shown to have an adverse effect, but the applicants have not suggested that. They of course consider it to be an unwelcome development but only, we think, as a result of their assertions as to the long term effect of permitting letting. This would seem to be part of the consideration of the relative benefit and burden of the title condition, rather than as a separate material change of circumstances. We do not, however, regard the absence of any suggestion of any complaint against the tenants as a circumstance pointing against the reasonableness of the application, because the applicants’ argument relates to the longer term. To the extent that the respondents’ position also reflects a change of circumstances in the shape of the current recession, we also do not regard that as material. Circumstances which are (hopefully) temporary might justify temporary relaxation of a prohibition but they do not point in favour of long-term freedom from prohibition. So we regard factor (a) as in this case neutral.

[24] We turn to the relative benefit and burden from the title condition as it stands (factors (b) and (c)). If letting is not prohibited (or there is uncertainty), owners have the option of letting (unless of course it is determined that there is at present a prohibition). The option of letting property is a substantial natural element in ownership, a substantial benefit at any time and not just when the selling market is difficult.

[25] The corresponding burden on other owners of having to accept lettings at the development is said by the applicants to be likely to have adverse long term effects on marketability and indeed the whole character of the development. It appears to us that, although letting may change the character of the development to an extent, there are competing views on any effect on marketability and the applicants have not established their contention. They have not advanced any support which can be seen from the materials to be based on either experience or expertise. They have not advanced any real evidence of any deleterious effect at such a development of tenancies compared to owner-occupation or occupation by elderly members of owners’ families. The submission by the first respondent, in particular, with some reference to relevant research, appears to us at least as cogent. Mr MacInnes’s opinions also go at least some way against the applicants’ position. He has of course not been tested in oral evidence, and there is no information about his qualifications, but he clearly has some experience in the field. He was, to an extent, tested in a series of e-mails from the applicants’ Mrs Stewart. He does not advance any specific view on marketability but does offer the view that renting will not adversely affect the amenity of the development. He also supports the view that it is better to have flats occupied rather than empty. The applicants’ counter that owners should be prepared to drop their asking prices below “valuation” is somewhat double-edged although perhaps consistent with their position about the longer term effect.

[26] That brings us to the argument on ‘vetting’. If it is significantly more difficult to apply the ‘vetting’ and nuisance conditions in the case of tenants, that would appear to support the applicants’ concerns. The deed of conditions follows what would now be regarded as an old-fashioned approach to retirement housing or sheltered housing developments, insofar as it purported to place the developer, rather than the body of proprietors, in control. Whether or not the developer (or factor on his behalf) ever exercised these functions, he clearly does not any longer do so and matters are apparently left in the hand of the managers (a not uncommon situation, we think, at older developments of this kind). There is, however, no suggestion that Bield, who are apparently experienced in this field, are not able to fulfil the general functions of managers. The question, in this application, in relation to these ‘vetting’ and related ongoing powers is, rather, whether they could be applied as effectively in a situation of letting rather than sale.

[27] Condition 7.06 clearly applies to every change of occupancy, which would include both sale to an investment purchaser and also the introduction of a tenant or new tenant. Further, Mr MacInnes’s opinion is that the managers could apply the conditions just as well to tenants. The picture about ‘vetting’ of the tenants of Flat 3 is not clear and it may be that, in the absence of such formal procedure on a change of tenancy as at a change of ownership, a clearer procedure has to be established, but we do not accept the applicants’ assertion that tenants could not be ‘vetted’ in the same way as purchasers. The applicants’ position on this seems to us to be based on assertion rather than evidence. Problems seem to us to be just as likely, or unlikely, in the case of changes of ownership.

[28] The purpose of the title condition (factor (f)) is often important. Is it still capable of fulfilment? If so, what effect will the proposed variation or discharge have? The applicants argued for a fourfold purpose, based really on the matters set out in the title condition itself. We could not accept that the purpose was to prohibit letting without deciding the interpretation question. The other three purposes suggested by the applicants can be accepted, so that the question becomes whether, or how, they are or would be affected. For the reasons already discussed, we do not think that the applicants have established that letting would have any effect in relation to nuisance or amenity, and they have done nothing to indicate any adverse effect on insurances required to be kept in place over the development (as opposed to individual flats).

[29] Neither side seeks to make anything of the age of the title condition (factor (e)). Factor (g) has no particular application. Nothing is submitted to bring factor (h) into play. Factor (i) has no application.

[30] We consider the extent of support for the applicants’ proposal to be of some significance (factor (j)), particularly in a case where the applicants are proposing a significant limitation of the ordinary powers of ownership. In this case, 14 out of 23 owners signed the application, but at least two have since turned against it. A copy letter from another applicant seems to show that she too no longer supports. Of the other 9, one, the second respondent, opposes; another wrote to the Tribunal indicating her opposition but has not formally opposed, and 7 have not opposed. We cannot draw precise conclusions on the level of support, but this does indicate that in this case it is not established that a majority of owners positively supports this proposal. A significant minority opposes it. The opposition depends to quite a large degree on the basis that the managers can and should carry out the ‘vetting’ procedure laid down in the deed of conditions for prospective tenants as well as prospective owners. The applicants have not in our view successfully countered that argument.

[31] Weighing these factors together, as we are required to do, we are not satisfied that this application is reasonable. The applicants have not, to our mind, made out their assertions about relative benefit and burden. They have not successfully countered the argument that the ‘vetting’ procedure could be applied to tenants. Further, their proposal, which involves a significant restriction on ownership, is some way short of commanding full support.

[32] We should perhaps add that had we been minded to grant the application, we would have required to consider the other specific alteration sought, viz. substitution of ‘proprietors’ for ‘Mid-Superior’. In principle, that would appear appropriate, but in the absence of any provision elsewhere in this deed which might assist in relation to the procedure, or majority required, for obtaining the owners’ opinion, some further provision might have been required (subject, possibly, to the provisions in Part 2 of the Act).

Section 3(6) of the 2003 Act

[33] Section 3(6) of the Act provides:-

“A real burden must not be contrary to public policy as for example an unreasonable restraint of trade and must not be repugnant with ownership (nor must it be illegal)”

A burden, including a mutually enforceable ‘community burden’, must not be ‘repugnant’, i.e. fundamentally inconsistent with ownership. The right to let has always been regarded as one of the fundamental powers of an owner, prohibition of which has been referred to as a clear example of what is struck at by this provision – see, e.g., Rennie on Land Tenure in Scotland at Para 5.14. That seems to us to raise an issue for consideration, although we understand that such prohibition has been introduced in some other sheltered housing situations. In Sheltered Housing Management Limited v Bon Accord Bonding Company Limited, where the proposed provision was of a slightly different nature, the Court of Session recognised some difficulty with the concept of repugnancy with ownership and declined to pronounce any concluded view on the submissions in that case – see Paras 19, 23 and 35. However, as we have said, we did not in this case receive any submissions on this issue and have not required to express a view.

Decision

[34] For the reasons given at Paras [19] to [31] above, this application is refused. In the event of any issue arising in relation to the expenses of the application, that can also be considered on the basis of written submissions in accordance with the Tribunal’s practice.


Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 7 June 2013

Neil M Tainsh – Clerk to the Tribunal