Biggart Baillie Solicitors

The Development Management Scheme

Wednesday, June 24, 2009

by Geoff Stansfield and Gregor Duthie

The Development Management Scheme, a new and optional scheme for regulating the management of property developments, became available on 1 June 2009.

Purpose and extent of the scheme
The Title Conditions (Scotland) Act 2003 laid the framework for a standardised form of Development Management Scheme.  However, the Order setting out the scheme was made only this year.  The scheme, intended to be applied to land where there are or will be a number of owners having a shared interest in the development (i.e. any development where there are common parts to be owned/maintained by all of the proprietors), sets out a number of rules which govern the management and administration of the development.  These rules are akin to a number of the real burdens that one would previously have seen in a deed of conditions and they are, in fact, governed by the Act in the same way as community burdens. 

The Development Management Scheme can be applied to both residential and commercial developments (including tenements).  Whilst principally aimed at new developments, it may also be applied to existing developments, but in that case the agreement of all owners within the development will be required. 

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Rules of the scheme: Mandatory Rules
Turning now to the rules of the scheme, one of the key innovations is the establishment of an owners’ association, which is to be a body corporate.  Owners of the individual “units” within the development will automatically become members of the owners’ association, and the association must appoint a manager to manage the running of the scheme and the scheme property.  The powers and function of the association are further set out in the scheme, and in particular the association may:-

• own property within the development
• acquire moveable property
• maintain, improve, alter of demolish scheme property
• enter into contracts of insurance in respect of the development
• open and maintain bank/building society accounts
• invest monies held by the association
• borrow money
• engage employees and appoint agents

If the scheme is applied to a development, these particular rules (along with rules governing execution of documents by the owners’ association and specific provisions for winding up the owners’ association) cannot be varied.

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Rules of the scheme: Optional Rules
The remainder of the rules of the scheme are optional.  These rules deal with management and financial matters (such as the calling, and procedure, of general meetings); the setting of the budget and service charge; powers to elect an advisory committee; and provisions to deal with emergency work.  The developer (or owners) can decide whether or not they wish to apply these rules to their scheme.  Since the key feature of the scheme is that the owner’s association is established as a separate legal entity, it may well be that developers choose to apply the scheme to take advantage of this, but simply disapply the remainder of the optional rules, making their own rules to cover the finer detail of administrative matters.

It is important to note that the Development Management Scheme only relates to the logistics of managing the development e.g. how the service charge budget is to be calculated. It does not, for example, include any guidance as to what services should be carried out by the owner’s association in relation to the common parts; nor does it provide any default position regarding e.g. use restrictions, or requirement for insurance of individual units. A developer cannot, therefore, elect simply to apply the statutory scheme as a substitute for a Deed of Conditions to regulate a development. Rather, the two must sit side by side to govern a development.

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Variation of the Scheme
Where the scheme has already been applied, the Order sets out the procedure that must be followed in order to effect variation by the owners’ association (requiring intimation to the unit owners) or by unit owners themselves, with rights of objection and application to the Lands Tribunal. The required procedures resemble those required for variation of community burdens.

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Application of the scheme
The scheme in its entirety, or varied in a manner permitted as aforesaid, is applied to a development by the owner (or owners) registering a “deed of application” in the Land Register or Register of Sasines, as appropriate.  It is effective from the date of registration or on (1) such later fixed date as is specified in the deed of application or (2) the date of registration of such other deed as may be so specified in the deed of application.  There is no prescribed form of deed of application and in those circumstances the question arises as to whether these can be incorporated in other deeds recorded against the whole of the development, such as a Deed of Conditions.  It will be interesting to follow the Keeper’s practice in this respect as take up of the scheme progresses. Even if the deed of application is registered as a stand alone deed, the scheme is likely to sit side by side with Deeds of Conditions in regulating individual developments.

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Enforceability of the scheme
The owners’ association is entitled to enforce the provisions of the scheme, and this function cannot be varied.  The scheme may also confer rights to enforce all or some of the rules on a member in respect of specified units, or all units in the development, but in such a case that member still has to show that they have an interest to enforce.

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Benefits of the scheme
One might ask why the developer should apply the statutory scheme, if he must still enact his own Deed of Conditions, and the answer lies in the status of the owner’s association. Previously, an owner’s association established under a Deed of Conditions would be an unincorporated body and could not own property in its own right. Under the Development Management Scheme, however, an owner’s association my indeed hold title to property, with the result that it is now possible for the common parts of a development to be owned and managed by a single legal entity.

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Summary
The explanatory notes to the Order setting out the scheme indicate that it is intended for use in more complex developments, with the aim of minimising conflict over administrative and management matters, such as the maintenance of common parts.  Only time will tell how popular the scheme is amongst developers, and to what degree the scheme does actually achieve these aims.

Click here to view the Title Conditions (Scotland) Act 2003 (Development Management Scheme) Order 2009.

For further information on the issues raised by this article, please contact Geoff Stansfield (gstansfield@biggartbaillie.co.uk or 0141 228 8331) or Gregor Duthie (gduthie@biggartbaillie.co.uk or 0141 228 8093)

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