OPINION

Jane Pettigrew (Applicant) v River Clyde Homes (Respondents)

Introduction

[1] This is an application for a finding under section 71(2)(b) of the Housing (Scotland) Act 1987 in which the applicant seeks an order that the respondents serve an offer to sell in proper form in compliance with section 63(2) of the 1987 Act. The application states that there has been failure to provide a completion certificate for certain sound insulation work. The applicant who is unrepresented refers to “Section 64(c)” – we think this is a reference to section 64(1)(c) - which requires an offer to sell under section 63(2) to contain such conditions as are reasonable, including such terms as are necessary to entitle the tenant to receive a good and marketable title to the house. The respondents who are a company limited by guarantee and a registered social landlord point out that the formal offer of sale was issued on 24 June 2011, had lapsed, and that the application to the Tribunal was made on 11 July 2016, over five years later. They point out that the completion certificate issue is not relevant to the question of a good and marketable title. In any event the respondents had procured a letter of comfort from the local authority stating that the latter would not take any action in respect of the failure to obtain a completion certificate for the work.

Legislation

The Housing (Scotland) Act (“the 1987 Act”), prior to repeal of the right to purchase provisions on 1 August 2016, provided as follows:

“63.— Application to purchase and offer to sell.

(1) A tenant who seeks to exercise a right to purchase a house under section 61 shall serve on the landlord a notice …

(2) Where an application to purchase is served on a landlord, and the landlord does not serve a notice of refusal under sections 68 to 70 it shall, within 2 months after service of the application to purchase, serve on the tenant a notice (referred to in this Part as an “offer to sell”) containing—

(a) the market value of the house determined under section 62(2);

(b) the discount calculated under section 62(3);

(c) the price fixed under section 62(1);

(d) any conditions which the landlord intends to impose under section 64 …

64.— Conditions of sale.

(1) … an offer to sell under section 63(2) shall contain such conditions as are reasonable, provided that—

(a) the conditions shall have the effect of ensuring that the tenant has as full enjoyment and use of the house as owner as he has had as tenant;

(b) the conditions shall secure to the tenant such additional rights as are necessary for his reasonable enjoyment and use of the house as owner (including, without prejudice to the foregoing generality, common rights in any part of the building of which the house forms part) and shall impose on the tenant any necessary duties relative to rights so secured; and

(c) the conditions shall include such terms as are necessary to entitle the tenant to receive a good and marketable title to the house.

65.— Variation of conditions.

(1) Where an offer to sell is served on a tenant and he wishes to exercise his right to purchase, but—

(a) he considers that a condition contained in the offer to sell is unreasonable; or

(b) he wishes to have a new condition included in it;

he may request the landlord to strike out or vary the condition, or to include the new condition, … , as the case may be, by serving on the landlord within one month after service of the offer to sell a notice in writing setting out his request; and if the landlord agrees, it shall accordingly serve an amended offer to sell on the tenant within one month of service of the notice setting out the request.

(2) A tenant who is aggrieved by the refusal of the landlord to agree to strike out or vary a condition, or to include a new condition, … or by his failure timeously to serve an amended offer to sell under the said subsection, may, within one month or, with the consent of the landlord given in writing before the expiry of the said period of one month, within two months of the refusal or failure, refer the matter to the Lands Tribunal for determination.

(3) In proceedings under subsection (2), the Lands Tribunal may, as it thinks fit, uphold the condition or strike it out or vary it, or insert the new condition … and where its determination results in a variation of the terms of the offer to sell, it shall order the landlord to serve on the tenant an amended offer to sell accordingly within 2 months thereafter.

66.— Notice of acceptance.

(1) Where an offer to sell is served on a tenant and he wishes to exercise his right to purchase and—

(a) he does not dispute the terms of the offer to sell by timeously serving a notice setting out a request under section 65(1) or by referring the matter to the Lands Tribunal under subsection (1)(d) of section 71; or

(b) any such dispute has been resolved;

the tenant shall serve a notice of acceptance on the landlord within 2 months of whichever is the latest of—

(i) the service on him of the offer to sell;

(ii) the service on him of an amended offer to sell (or if there is more than one, of the latest amended offer to sell);

(iii) a determination by the Lands Tribunal under section 65(3) which does not require service of an amended offer to sell;

(iv) a finding or determination of the Lands Tribunal in a matter referred to it under section 71(1)(d) where no order is made under section 71(2)(b);

(v) the service of an offer to sell on him by virtue of subsection (2)(b) of section 71

(2) Where an offer to sell (or an amended offer to sell) has been served on the tenant and a relative notice of acceptance has been duly served on the landlord, a contract of sale of the house shall be constituted between the landlord and the tenant on the terms contained in the offer (or amended offer) to sell.

71.— Reference to Lands Tribunal.

(1) Where—

(a) a landlord who has been duly served with an application to purchase fails to issue timeously either an offer to sell (even if only such offer to sell as is mentioned in paragraph (d)) or a notice of refusal; or

(b) the Lands Tribunal has made a determination under section 65(3) (variation of terms of offer to sell) and the landlord has failed to issue an amended offer to sell within 2 months thereafter; or

(c) the Lands Tribunal has made a finding under section 68(4) (refusal of right to purchase) or has made an order under subsection (2)(b) of this section and the landlord has not duly progressed the application to purchase in accordance with that finding or, as the case may be, order, within 2 months thereafter; or

(d) a landlord has served an offer to sell whose contents do not conform with the requirements of paragraphs (a) to (e) of section 63(2) (or where such contents were not obtained in accordance with the provisions specified in those paragraphs), the tenant … may refer the matter to the Lands Tribunal by serving on the clerk to that body a copy of any notice served and of any finding or determination made under this Part, together with a statement of his grievance.

(2) Where a matter has been referred to the Lands Tribunal under subsection (1), the Tribunal shall consider whether in its opinion—

(a) any of paragraphs (a) to (c) of that subsection apply, and if it so finds it may—

(i) give any consent, exercise any discretion, or do anything which the landlord may give, exercise or do under or for the purposes of sections 61 to 84; and

(ii) issue such notices and undertake such other steps as may be required to complete the procedure provided for in sections 63 and 65 to 66C;

and any consent given, any discretion exercised, or anything done, under the foregoing provisions of this subsection shall have effect as if it had been duly given, exercised or done by the landlord; or

(b) paragraph (d) of that subsection applies, and if it so finds it may order the landlord to serve on the tenant an offer to sell, in proper form, under section 63(2)within such time (not exceeding 2 months) as it may specify.

…”

Cases referred to

Graham v Northern Joint Police Board 2000 SLT (Lands Tr) 7
Ogg v Perth & Kinross Council LTS/TR/ 2003/01, 2.8.2004
Fletcher v South Lanarkshire Council 2006 SLT (Lands Tr) 51
Mark v City of Edinburgh Council 2015 SLT (Lands Tr) 157

Textbooks referred to

Halliday, Conveyancing Practice in Scotland (2nd Edition) paragraph 36-02
Reid & Gretton, Conveyancing (4th Edition) paragraph 6.01.
Sinclair & Stewart, Conveyancing Practice in Scotland (6th Edition) paragraphs 7.02, 8.02

Procedure

[2] Parties agreed to the case being determined by written submissions. The applicant was unrepresented. The respondents were represented by Mr James Bauld of T C Young LLP, Solicitors, Glasgow.

[3] The applicant pointed out that the respondents’ answers were five days late, having been received on 7 September 2006 instead of the timetabled date of 2 September 2016. She also pointed out that the respondents’ written submissions were only received on 26 November 2016 instead of timetabled date of 25 November 2016 and asked that these be excluded from consideration. We did not consider the lateness of these documents to be significant and have allowed them to be received.

Background facts and circumstances

[4] The applicant has a Scottish secure tenancy under the Housing (Scotland) Act 2001 of the subjects at 15 Glamis Place, Greenock. The respondents are her landlords. They have been her landlords since 2007. According to the application to purchase, the applicant has been tenant of the property since 1981 when the landlords were the local authority.

[5] In 2000 the applicant raised an action against Inverclyde Council, her then landlords, in the Sheriff Court. The Sheriff found that noise emitted from the flat above at 13 Glamis Place amounted to a statutory nuisance. He found that the source of the problem was inadequate sound insulation in the common parts between the two properties. He found that a certain “Scheme 1” of proposed works was likely to abate the nuisance but not “Scheme 2”. Scheme 1 appears to have involved the laying of 80mm “Quietex” material below the floorboards above.

[6] On 14 October 2002 the Council issued a building warrant for a proposed acoustic upgrade of the existing floor structure at the building 13/15 Glamis Place. From the correspondence before us it would appear that works were undertaken at about that time, but no completion certificate under the building legislation was applied for or received by the Council. As we discuss, the evidence would not have enabled us to come to a conclusion as to precisely what works were authorised by the building warrant.

[7] The applicant applied to buy her house on 28 February 2011. The respondents (named “The Association”) issued an offer to sell dated 24 June 2011, albeit outwith the two month period required by section 63(2). Clause 7 of the offer contained a provision to the effect that the applicant would accept the subjects in their present condition and that:-

“The Association shall have no obligation to carry out any improvements of or repairs to the subjects after the date of your acceptance hereof, excepting any repairs which the Association is obliged to effect under statute or contract.”

The offer contained a provision in clause 8 providing for the delivery of a valid disposition of the subjects containing a grant of absolute warrandice in exchange for the price. Under clause 24 the offer provided that unless earlier withdrawn it shall remain open for acceptance for a period of two calendar months, and failing acceptance that it would lapse.

[8] No acceptance was given by the applicant in respect of the offer. There followed certain correspondence with Inverclyde Council regarding the lack of the completion certificate. On 10 August 2011 Inverclyde Council issued a “letter of intent,” headed “Building (Scotland) Act 1959 and 1970” in respect of the property. The letter confirmed that the local authority would not take any action in respect of the failure to obtain a completion certificate for the works. We shall describe this letter as a letter of comfort. The applicant suggests that the works which were in fact carried out might not have amounted to what had been envisaged by the Sheriff or had complied with the building warrant.

Applicant’s submissions

[9] In her closing submissions the applicant contended that the offer she received on 24 June 2011 was invalid since it was issued outwith the statutory timescale. It was also incomplete since no completion certificate accompanied it for the noise insulation works. The letter of comfort was lacking in specification. A completion certificate would confirm that the work complied with the terms of the building warrant and the scheme of works required by the court. The Council of Mortgage Lenders were becoming increasingly reluctant to accept letters of comfort and there might also be insurance problems without the completion certificate. There was no explanation why a completion certificate had not been sought at the time. The respondents had not provided evidence showing that the insulation work was of the quality required by the court in 2000. The 80mm Quietex achieved a better insulation rating than the “minimum standard” 60mm. The applicant sought various ancillary orders, some of which are not in our express powers under the 1987 Act to make, e.g. to find that the respondents have failed to provide an explanation why Inverclyde Council omitted to submit a completion certificate for acceptance.

[10] At its heart, however, we think the application is seeking us to make a finding that the offer to sell should have contained an obligation upon the respondents to obtain the completion certificate. Although not expressed in such terms, the application to us fairly implies that there should have been such an obligation. In substance, if we were of the view that the respondents had made an offer whose contents did not conform with the requirements of paragraphs (a) to (e) of Section 63(2) we could treat the matter as an application under section 71(1)(d) so as to invoke our powers under Section 71(2)(b).

Respondents’ submissions

[11] The respondents submitted that the offer of 24 June 2011 complied with all relevant statutory requirements under section 63(2) and section 64(1). The only case being made against the respondents was in terms of section 64(1)(c) that the respondents were not in a position to provide the applicant with a good and marketable title and the only reason put forward for this was the inability of the respondents to provide a completion certificate.

[12] The respondents submitted that “good and marketable title” related to the ability of a seller to make a purchaser the owner of the property, and that the ownership would not be subject to any third party rights other than title conditions of an ordinary nature and that the title would be in such a condition as to allow the Keeper to issue a land certificate showing a purchaser to be the proprietor of the property. The respondents referred to various definitions and commentary on the concept of good and marketable title: Conveyancing Practice in Scotland (6th Ed) by Sinclair & Stewart; Conveyancing Law & Practice in Scotland, Halliday (2nd Ed) and Conveyancing (4th Ed) Professors Reid and Gretton.

[13] It was submitted that the lack of a completion certificate was not a title matter. In any event if a completion certificate had not been obtained, conveyancing practice required the solicitor to insist on a letter of comfort to ensure the Council would not take enforcement action in that respect. The provision of the letter of comfort was standard accepted practice throughout Scotland.

[14] The terms of the Sheriff’s decision were irrelevant to the question of a good and marketable property. The lack of a completion certificate did not affect the fact that works were undertaken. There was no duty upon the respondents to ensure that the works had been done or to provide information about the works.

[15] The fact that the respondents had issued the offer to sell outwith the statutory two month period was of no consequence. The applicant would have been entitled to refer the matter to the Lands Tribunal to require the respondents to issue an offer to sell, but since an offer had been made it was not necessary to invoke section 71(1)(a).

[16] The respondents also pointed to the delay in lodging the application to the Tribunal, but noted there was no time limit set in the Act. Nevertheless they sought the Tribunal to take into account the delay, albeit without articulating any particular legal doctrine applicable.

Discussion by Tribunal

[17] This case invokes section 71(2)(b) seeking an order for the landlord to serve an offer to sell, in proper form, under section 63(2). The relevant sub-section refers to section 71(1)(d), which provides for a reference to the Tribunal where the contents of an offer do not conform to paragraphs (a) to (e) of Section 63(2). Section 63(2)(d) refers to any conditions which the landlord intends to impose under section 64, and section 64(1) provides for a test of reasonableness of those conditions. Thus the applicant has proceeded upon a mechanism which entitles her to come to the Tribunal seeking redress where the offer conditions appear unreasonable.

[18] The case however brings into sharp focus the fact that there is no short time limit for applications under section 71. This can be distinguished from applications under section 65(2), which provides a procedure to strike out or vary unreasonable conditions or to insert new conditions. Section 65 does contain strict time limits. Although cases on the point were not cited to us, we note the Tribunal pointed out in Ogg v Perth & Kinross Council that the issue in section 65(2) and section 71 is essentially the same. In Fletcher & Another v South Lanarkshire Council the Tribunal commented upon the anomaly of only the procedure under section 65 being subject to specific time limits.

[19] Nevertheless the Tribunal has indicated that in cases under section 71, despite there being no short time limit, there may be instances where the facts of a case and the actings of parties might give rise to waiver or acquiescence on the part of the tenant: Mark v City of Edinburgh Council at paragraph [29].

[20] In this case the application to the Tribunal was made over five years after the offer to sell by the respondents, and the offer itself bore to lapse if not accepted within two months from its date. Nevertheless, the respondents did not press an argument based upon the fact that the original offer had lapsed. They did not set out to make a case of waiver or acquiescence. So, with some unease, we do not propose to dispose of the application on the basis of the delay. However, unless we were to require a fresh offer to be issued with a new condition inserted, which it will be seen we do not, we do not see how the transaction can be required to proceed upon the basis of an existing offer which has in fact lapsed.

[21] We note the applicant’s position that the offer to sell was made outwith the two month period required by section 63(2) from the date of the application to purchase. We do not understand the point of this argument. Had the respondents failed to make an offer to sell, the applicants could no doubt have sought a remedy from the Tribunal once the two month period had lapsed. However the respondents did make an offer to sell, so any order from the Tribunal in order to make the respondents proceed to make the offer would have been unnecessary.

[22] We now turn to the merits of the application. As we have indicated, we have interpreted the application as one which seeks the imposition of a condition to the effect that the respondents should be under an obligation to provide a completion certificate for the noise insulation work previously carried out. On the face of it, such would not be an unusual condition in any missives. However, it is known that there is no completion certificate in existence. The respondents themselves were not the parties who carried out the work and so the imposition of a requirement upon them to procure a completion certificate could be seen as an onerous if not impossible one to fulfil.

[23] In this case the applicant has only focused upon section 64(1)(c), namely conditions as are necessary to entitle the tenant to receive a good and marketable title to the house. In this respect the respondents are clearly correct that the absence of a completion certificate under the Building (Scotland) Acts is not a title issue. We agree that a conveyancer would understand the idea of good and marketable title as involving two essential elements; first that the buyers are to be made the owners, and second, after acquiring ownership, they will not be subject to any third party rights with the exception of title conditions of an ordinary nature: we find the passages in Conveyancing, Gretton & Reid, para 6.01 et. seq. to be convincing in this respect. We of course accept that normally offers to purchase will contain a clause requiring completion certificates for any work previously done to be exhibited at or prior to settlement. However, this is a matter which relates to the condition and fitness of the property for purpose, not title. So in this respect the applicant’s argument is misconceived.

[24] A case was not made against the respondents in terms of sub-paragraphs (a) and (b) of section 64(1), namely that the applicant was entitled to be offered conditions which were reasonable but which also have the effect of ensuring that she would have as full enjoyment and use of the house as owner as she would have had as tenant; and to such additional rights as are necessary for her reasonable enjoyment and use of the house as owner (subject to any relative duties). Accordingly it is sufficient to dispose of the matter on the basis that sub-paragraph (c) does not apply.

[25] Lest this be seen as a too technical means of disposing of the case, a case based upon sub-paragraph (a) or (b), had it been made, would have required it to be ascertained that the offered letter of comfort as a substitute for the completion certificate was insufficient for the purposes of enabling the owner reasonable enjoyment and use of the flat. Although a copy plan of works was produced, showing the specification of 80mm Quietex material, we were not told whether the plan was part of the building warrant process – there was no docquet for example – and formed part of the specification of works authorised to be carried out under the Building (Scotland) Acts. We would thus have been unable to make any finding as to any potential shortfall between the authorised works and the actual works. Nor could we make any finding on the evidence as to the potential inadequacy of the actual state of the building from the perspective of noise insulation. It did not seem to be suggested, for example, that the actual works carried out might only have been the “Scheme 2” works as criticised by the Sheriff. In these circumstances we cannot gauge the reasonableness of a requirement for a completion certificate as against the adequacy of the letter of comfort as a substitute. We were not addressed upon the relevant sections of the Building (Scotland) Acts. Given the apparent practice of conveyancers to accept letters of comfort from local authorities instead of completion certificates as mentioned in the texts cited to us, absent more evidence we would not have been prepared to find in the circumstances that the offer to sell was deficient for not requiring the production of a completion certificate.

Decision

[26] We refuse the application for the above reasons.


Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 9 January 2017

Neil M Tainsh – Clerk to the Tribunal