OPINION

Keith Bennett (applicant) v Iain Skene (respondent)
119 and 121 Menzies Road, Aberdeen

Introduction

1. This is an application under section 91 of the Title Conditions (Scotland) Act 2003 (“the 2003 Act”) by Mr Keith Bennett who is a proprietor at a tenement building. The application is to vary community burdens under respective title conditions which currently apportion common charges. This is 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 (the “1992 Act”). At present the applicant’s property is responsible for a significantly larger share of the charges, and he seeks to alter the position which reflects the fact that his flat is smaller and of lesser value than the other flat in the tenement. The other proprietor is Mr Iain Skene who objects to the variation and has entered the proceedings as respondent.

The Subjects

2. Both the properties in the tenement are registered in the land register. The applicant’s property is registered under title KNC5113. It comprises the ground floor flatted dwellinghouse at 121 Menzies Road, Torry, Aberdeen, formally 121 Menzies Road and 1 Grampian Place. The subjects include certain outbuildings at the rear including a cellar, a greenhouse or former greenhouse, a store and water closet. Although the street name for the whole flat is 1 Grampian Place, the title sheet describes it as 121 Menzies Road (formerly 121 Menzies Road and 1 Grampian Place) and we have retained the latter terminology for the purposes of this opinion. The property formerly comprised a shop or shops.

3. The respondent’s property comprises the upper flat namely 119 Menzies Road, Aberdeen registered under title KNC13537. The title description for his flat is essentially a residual description and includes everything within the red line area not falling within the applicant’s title. It thus includes the upper flat as well as certain other outbuildings and the rear yard.

Title Conditions

4. The respective burden details do not have identical wording, but entry number 2 in both title sheets refers to a disposition in 1950 of the shop 1 Grampian Place containing the following:-

“… a share along with me and my successors as proprietors of the remainder of the whole subjects … in proportion to the assessed rentals of the respective subjects of the burden of maintaining the roofs, walls, chimney heads, gutters, rhone pipes and all gas, water, drainage and electrical pipes or cables of the shops, dwellinghouses and … buildings … so far as common to the subjects hereby disponed and the remainder of the said whole subjects.”

5. The respective title sheets also contain the following burden detail as entry number 3, based upon a disposition in 1961 of the shop 121 Menzies Road. Again the wording is not identical, but each contains the following:-

“… a share along with … proprietors … of the remainder of the whole property …in proportion to the assessed rentals of the respective subjects comprising the same of the burden of maintaining the said concrete pathway tinted yellow on the said plan and the gateway giving entrance from Grampian Place, the roofs, the outside walls and gables (but not the boundary walls except that part of the north boundary wall either forming part of or lying ex adverso of the said greenhouse), the gutters, rhone pipes and all gas, water, drainage and electrical pipes or cables of the said shops, dwellinghouses and outbuildings so far as common to subjects hereby disponed and the remainder of the whole property.”

6. In terms of the respective titles, 119 and 121 Menzies Road and 1 Grampian Place are regarded as the “whole subjects” and the “whole property.” There is a number of further clauses for apportioning certain minor items on a different basis to assessed rentals with which we are not concerned.

Legislation

Local Government Finance Act 1992

“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.”

Title Conditions (Scotland) Act 2003

“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.”

Tenements (Scotland) Act 2004

“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 those 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…

Schedule 1

4.2 Maintenance and running costs

…, if any scheme costs mentioned in rule 4.1(a) to (d) relate to–

(a) the scheme property mentioned in rule 1.2(a), then those costs are shared among the owners in the proportions in which the owners share ownership of that property,

(b) the scheme property mentioned in rule 1.2(b) or (c), then–

(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, and each owner is liable accordingly.”

Case referred to

Patterson and others v Drouet and others LTS/TC91/2012/1, 14.11.2012

Procedure

7. The application was intimated to the respondent as the proprietor of the upper flat 119 Menzies Road. He has objected to the application. We determined the case by means of written submissions and a site visit held on 20 March 2018. The applicant was represented by Mr Archibald Millar of MacRae Stephen & Co, solicitors, Fraserburgh. The respondent represented himself.

Background facts and circumstances

8. The subjects are at the corner of a tenement between Menzies Road and Grampian Place. They were built around the turn of the 19th/20th century. They lie adjacent to the busy Wellington Road in the Torry part of the city. It is predominantly a residential area. The adjacent former prison building has been demolished and residential flats are being constructed in its place.

9. The title deeds indicate that the whole subjects were in the same ownership in 1950. A shopkeeper lived in the flat 119 Menzies Road above the shops, which flat appears to have been designed for residential use. The ground floor shop 1 Grampian Place was sold off in 1950. The shop 121 Menzies Road was separated from ownership of the flat in 1961. The documents indicate that by 1989, 1 Grampian Place and 121 Menzies Road were back in the same occupation, we understood as a post office. The apportionment of common charges fixed under the rating system was “frozen” as at immediately before 1 April 1989, when rates for domestic dwellings were abolished.

10. We were provided with an excerpt of the valuation roll as it stood in the period prior to 1 April 1989. The “Shop 121 Menzies Road” is entered with a net annual value of £1,450 and the flat 119 Menzies Road was entered with a net annual value of £669. By applying section 111 of the Local Government Finance Act 1992 to the relevant burdens clauses, the shop (i.e. now the lower flat) is thus responsible for approximately 68% of the cost of the common repairs and the upper flat 32% of that cost.

11. The ground floor flat is entered from 1 Grampian Place. A former doorway numbered 121 Menzies Road has been converted into a window. The street pavement is directly outside. The flat comprises a kitchen/utility room with a small seating area, a sitting/dining room, one bedroom and a bathroom, with a utility cupboard off the bedroom. It appears to have been furbished fairly recently. We understood that the applicant has let it out to a tenant. There is a separate access to the rear outbuildings from the pavement through a door in an outside wall facing Grampian Place. There is no direct access from the flat to the outbuildings.

12. The entrance to the upper flat number 119 is via a separate front door on Menzies Road leading to a staircase. It comprises a sitting room, two bedrooms, a bathroom, and kitchen/dining room. There is a separate cupboard at the top of the stairs. There is also a small laundry area – partly a passage - off the kitchen leading to another staircase leading down to the rear yard. Leading from the kitchen there is access/ balcony across the main stairs to a small staircase leading to an attic. The attic comprises two small rooms, a shower room and a small storage area adjacent to the staircase. There are four skylights. The yard includes a further number of outhouses pertaining to 119, as does the remainder of the yard itself which includes a small parking area with a sliding door to Grampian Place at the rear.

13. The upper floor subjects are somewhat larger than the lower floor subjects. This is because it has it the exclusive use of the staircase from Menzies Road which results in one of the bedrooms being able to occupy space above the staircase. It has higher ceilings. It also has the benefit of the small laundry area (above a cellar pertaining to No. 121) and the internal stairs down to the yard and the small parking area there. It also has the attic.

14. There is a complication regarding the attic of No. 119. It is a loft conversion. It would appear that the works had been undertaken without a building warrant. Aberdeen City Council were recently alerted of this matter, by whom we were unclear. The upper rooms potentially include sleeping accommodation and are accessed by stairs which are open to the kitchen. The council considers that this layout constitutes a fire hazard. They have sent the respondent a letter of 12 March 2018 indicating there are three options namely (1) returning the loft back to its original condition (2) using the loft space for storage only with no power points, no heating and only one lighting socket or (3) to apply for a building warrant. The letter refers to the possibility of an enforcement notice under the Building (Scotland) Acts. The position is currently unresolved.

15. It would appear that the issue of apportionment for common repairs emerged when works were carried out in 2014, following storm damage. The respondent carried out the works himself, but had to take the applicant to court to obtain payment.

16. We carried out measurements of each flat. We measured gross internal area (“GIA”) which in general terms means the area of the building measured to the internal face of the perimeter walls at each floor level, as defined by the RICS Code of Measuring Practice (1st ed 2015.) This generally excludes storage outbuildings. The GIA of 121 Menzies Road is approximately 575 sqft. This figure does not include a fairly large cellar, which shares a roof extension with No.119, but to which No. 121 does not have internal access. It is only possible for No. 121 to access the cellar and other outbuildings via a separate gate from the pavement outside. The GIA of 119 Menzies Road is approximately 661 sqft plus 288 sqft for the attic.

Submissions

17. The applicant submitted that the current basis of apportionment was unfair and sought an apportionment such that two thirds common repair costs be apportioned to the first and attic floor flat and one third to the ground floor flat. Alternatively the apportionment should be on the basis of the relative floor space of the respective properties or on such basis as the Tribunal saw as fit and proper. The applicant referred to sub-paragraphs (a) (b) (c) (d) (e) (f) (h) and (j) of section 100 of the 2003 Act. He also referred to section 98(b)(ii).

18. The respondent opposed the application. His position was that the titles only required him to pay for one third of the upkeep of the communal areas. In his view this should not be changed. The property had the same footprint and his share of the building had never increased. He had previously offered the applicant to let him pay only one half of the common repairs. He made much of the fact he had had to pursue the applicant for the latter’s share of the 2014 repair costs. Moreover the attic area could not be taken into account since the council’s building standards department were only allowing this area to be used for storage.

Tribunal’s consideration

19. We are satisfied that in general terms flat No.119 is both larger and has a higher value than flat No. 121. Had both subjects continued to have been assessed for rates, or been valued for rental purposes, we are confident that No. 119 would likely now be assessed with a value of not less, and probably more, than No. 121.

20. In terms of factors (a) and (f), we agree that there has been a change of circumstances since 1989 and that this change is material. As the Tribunal thought in Patterson v Drouet, the purpose of a similarly worded title condition under factor (f) was to ensure that the apportionment of common charges would stay in line with current values of the relevant properties. The abolition of domestic rates with the resultant “freezing” of values in 1989 could thus be seen as a change in circumstances. Added to this was the conversion from commercial to residential use of the lower property, resulting in frozen values bearing no relationship to current use values as intended by the conditions. Thus we think, primarily on the basis on factors (a) and (f), that the application has merit.

21. We should also mention factors (b) and (c). As we are dealing with community burdens each property is both a burdened and benefited property. Inasmuch as the condition can be said to impede the enjoyment of 121 Menzies Road, it can be said equally to confer benefit upon 119 Menzies Road. Should the apportionment change, then the higher charges will result in an increased burden upon No. 119 to the same extent as there will be an increased benefit to No. 121. So it is certainly arguable that these factors tend to cancel each other out. However, as the Tribunal concluded in Paterson v Drouet, where there is an inequitable apportionment between the flats it 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. Therefore the “benefit” in favour of the flat which the conditions treat unduly favourably, can be said to be in fact rather limited. We do not think the other factors cited to us have much bearing on the matter.

22. We agree that the imbalance is sufficiently large such that in terms of the factors it would be reasonable to grant the application in terms of section 98(a) of the 2003 Act. We do not think section 98(b)(ii) is applicable and disagree with the applicant in this respect.

Remedy

23. Although not binding upon us, we have considered whether any of the default positions in the Tenements (Scotland) Act 2004 may be of assistance. Rule 4.2 of the statutory tenement management scheme in Schedule 1 to the 2004 Act sets these out.

24. Under head (a) of rule 4.2, which we understand applies where the scheme property is common property, the relevant costs are shared among the owners in proportion to which they share ownership of that property. In this case, as we read the respective titles, it appears that the parties are common owners of the relevant common parts. Subject to one or two minor exceptions, the titles indicate the main items of common property – the roofs, foundations, outside walls and gables, gutters and rhone pipes are divided between three owners, namely the proprietors of the (former) shop 121 Menzies Road, the (former) shop 1 Grampian Place and the dwellinghouse 119 Menzies Road. That would mean, now, that the applicant would be responsible, as owner of two of those properties, for two shares of the burden as opposed to the respondent’s single share. In our view such an apportionment would not do substantive justice to the situation.

25. The other default positions are mentioned in rule 4.2(b) and would apply in any other case. Sub-para (i) would apply where the floor area of the larger flat is more than one and a half times that of the smaller flat, so that each owner is liable to contribute towards the costs in proportion to which the floor area of that owner’s flat bears to the total floor area of both flats. Otherwise under sub-para (ii) the costs are shared equally among the flats.

26. In this case the floor area of the upper flat No. 119 is larger than the ground floor No. 121. If one adds the converted attic to the GIA of No. 119 (661 + 288 = 949 sqft) that is more than one and a half times the area of the No. 121 (575 x 1.5 = 826 sqft.) However, the quality of the attic floor area is very different to the remainder of No. 119 in that its permitted use has a parlous future. There is every likelihood of the council taking enforcement action in respect of its constituting a fire hazard. We cannot second guess whether there may be some imaginative way around the problem which would allow the attic area to become habitable living space. On the face of it, we are doubtful this can be achieved and the council, having stated its position, does not seem very likely to be willing to grant a building warrant endorsing the present arrangement. In these circumstances, we cannot assume the attic has any long term use other than for storage. Thus an apportionment under sub-para (i) based upon floor space, if requiring a large and potentially superfluous storage area to be treated in the same way as habitable living space, would also be unfair.

27. As we have indicated, the purpose of the title condition was to ensure that the apportionment of common charges would stay in line with current values. This was the principle upon which the titles were drafted, and we think it is appropriate that we should continue to bear that principle in mind. The final default position, namely equal sharing under sub-para (ii), would not sit easily with this as a basis for resolution, if one flat were to be of significantly greater value than the other.

28. We have not been provided with detailed valuation evidence of the respective properties. However, as we have said, we consider that the upper flat is a more valuable property and this is mainly because it has more living space and, in particular, a second bedroom. It benefits more from the roof and the walls of the whole building, since it has exclusive use of the staircase which allows one of the bedrooms to fly over the staircase. We therefore think an apportionment based upon useful living space directly affecting value is the most appropriate way to proceed in this case.

29. The upper flat comprises what we would consider to be a habitable floor area extending to about 661 sqft, all making use of the common parts. In this we have excluded the attic which we have assumed is not living space. Although a large storage space could be one of a number of selling points, we do not think its impact on value would be anything like as much as the impact of the existence of habitable space. Absent detailed evidence we would expect its effect on value to be limited. We have also excluded the parking area which does not make use of the common parts. The lower flat has a floor area of about 575 sqft which is all habitable. This excludes the large cellar which makes use of the common parts (a roof) but which is not living space. These figures would bring out an upper/ lower apportionment of 53.5%/ 46.5%. Given the disparity in storage space in favour of the upper flat (i.e. large attic as opposed to the cellar), both making use of a common roof, we would round these figures up to a 55% share obligation for the upper flat and down to 45% for the lower flat.

Compensation

30. The applicant indicated under factor (h) that he was not willing to pay compensation. He adopted the position that he had already been forced to pay a disproportionate share of a large bill in respect of common repairs and so an award of compensation would not be equitable. The respondent mentioned compensation in his correspondence with the Tribunal. However there has been no evidence led by either party to suggest that should the apportionment for common repairs be altered to a more equitable basis that this would devalue the property No. 119.

31. In terms of section 90 (7)(a) there would require to be “substantial loss or disadvantage” suffered as a consequence of the discharge or variation. As the Tribunal observed in Patterson v Drouet, any benefit to the applicant, such as if the value of his property were to be increased as a result of the Tribunal’s order, would not go to establish this necessary starting point. It would need to be shown that the value of the upper floor flat will have been reduced. In that case the Tribunal accepted evidence to the effect that it did not follow that the values of certain upper flats would be reduced when their “generous” shares were reduced to equitable shares. The Tribunal did not find there was any good competing view in general and thought a negative effect would be unlikely where there was a benefit to the whole tenement in replacing a scheme which had become inequitable with an equitable scheme. Accordingly we are not prepared to make any finding for compensation to the respondent in this case.

Decision

32. We propose to alter the title sheets such that the reference to apportionment for the burden for maintenance of the relevant common items in proportion to the assessed rentals of the respective subjects shall be varied to a burden in which the upper flat 119 Menzies Road shall be responsible for 55% of the whole burden and the lower flat 121 Menzies Road (formerly 121 Menzies Road and 1 Grampian Place) shall be responsible for 45% of the whole burden.


Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 11 May 2018

Neil M Tainsh – Clerk to the Tribunal