FIFE COUNCIL
Policy & Resources Committee
16 September 2004
Agenda Item
REFORM OF THE FEUDAL SYSTEM - SALE OF COUNCIL PROPERTY
1.0 Background
1.1 The Scottish Parliament has introduced legislation which provides a
wholesale reform of land law in Scotland. The relevant Acts are the
Abolition of Feudal Tenure etc. (Scotland) Act 2000 ("the 2000 Act") and
the Title Conditions (Scotland) Act 2003 ("the 2003 Act").
1.2 The main purpose of the 2000 Act is to abolish the feudal system of land
ownership whereby a feudal superior who sold property by means of a
Feu Disposition could control future use of that property. Often such
feudal superiors lived far from the property and had no interest in it other
than obtaining payment in return for granting consent to the property
being altered or used for a new purpose. The intention of the 2000 Act
is that people who have been sold properties by way of a Feu
Disposition can use them for any purpose provided the new purpose has
planning consent.
1.3 The 2000 Act deals only with feudal burdens i.e. those created in Feu
Dispositions, Feu Charters or Feu Contracts. The 2003 Act deals with
non-feudal burdens i.e. those contained in Dispositions. Both Acts come
fully into force on 28 November 2004.
1.4 The main provisions in the 2000 Act are that it:
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abolishes the feudal system
extinguishes feuduties
extinguishes a superior's right to enforce burdens
provides a mechanism to preserve certain burdens
creates new classes of conservation and maritime burdens
provides a mechanism for compensation in relation to development
value burdens
removes rights of irritancy whereby a superior could recover a
property which had previously been sold without having to pay
compensation if the purchaser broke any of the feudal burdens
prohibits leases in excess of 175 years
allows firms to take title to land
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1.5 As the Council and its predecessors have sold substantial areas of land
and property by means of Feu Dispositions the new legislation may have
a significant impact on the Council's interests. The remainder of this
report sets out in greater detail the options open to the Council with
recommendations as to the steps which should be taken.
2.0 Feudal Burdens
2.1 From 28 November 2004 the Council's right to enforce feudal burdens
will be extinguished. The following are exceptions to that rule:2.1.1 Facility and Service Burdens
Facility burdens are positive in nature and are concerned with the
maintenance and management of common facilities such as footpaths
and boundary walls. Service burdens are burdens on one property to
supply services e.g. water or electricity to another property. All of these
burdens will survive feudal abolition. The only change will be that it will
not be the Council, as Superior, who can enforce them but rather the
owners of the properties which benefit from the facilities or the services
to be provided. The Council does not need to take any steps regarding
such burdens.
2.1.2 Amenity Burdens
These are negative in nature and generally prevent an owner from doing
something in order to preserve the amenity of an adjoining property,
such as a prohibition on trade or keeping unruly pets. On 28 November
2004 the Council, as Superior, will lose the right to enforce these
burdens. The 2000 Act does allow the Council to preserve enforcement
rights but only if it owns neighbouring land which becomes the new
benefitted property and it registers a notice in the prescribed form
against both the original property which was sold and the new benefitted
property. The Council can only register such a notice if certain preconditions are all satisfied. A considerable amount of preparatory work
would require to be undertaken to establish whether these pre-conditions
are satisfied and there will be a charge for registering each notice in the
Land Registers. The aim of the new legislation is that the planning
process provides sufficient safeguards to prevent undesirable
developments proceeding which would destroy the amenity of properties
still owned by the Council. The Head of Housing and representatives
from Service Support and Law & Administration have all been consulted
on this and their unanimous view is that the likely gain from registering
appropriate notices would not justify the massive amount of work and
expenditure which this would require. It is therefore recommended that
no action be taken to preserve amenity burdens.
-32.1.3 Pre-emption Rights
These are burdens which give the Council an option to purchase back a
property when the owner wishes to sell it. The Council can preserve
such burdens by registration of a notice in the Land Register. In the
present economic climate there are unlikely to be many of such burdens
which the Council would want to preserve. The Housing Service,
howver, is presently identifying housing properties which have been sold
subject to a pre-emption burden. Once identified the Law &
Administration Service will arrange to register the required notices.
2.1.4 Development Value Burdens
These are burdens restricting the use to which a particular property
which has been sold can be put in return for the purchaser paying a
reduced purchase price. The 2000 Act enables a Superior to reserve a
right to claim compensation for loss of development value burdens which
are extinguished on 28 November 2004. Development Value is defined
in the 2000 Act as being any significant increase in the value of land
arising as a result of it becoming free to be used in a way not permitted
under the original feu grant.
At first glance this does appear to be an attractive provision. However in
practice they are likely to be of limited value. This is because they will
not apply unless a significantly lower price has been paid at the time the
property was first sold and no account is taken of inflation. The Council
reserves the right to claim compensation by registration of a statutory
notice and the right to compensation only applies if the development
which triggers a payment occurs during the 20 years immediately after
28 November 2004. Also the compensation paid is not to exceed the
difference in value of the land at the original date of sale and its value
were there no restriction on use on the same date.
Obviously in older transactions the value of properties will be less and as
no account is taken of inflation the compensation recoverable will be
significantly less. It is therefore suggested that in the main only
transactions within the last 10 years be considered. Only where there
has been a substantial change in value will there be any benefit in
registering the required notices. A substantial change in value
principally relates to land which has changed from agricultural to
development land or from industrial to retail or housing. In other cases
any difference in value would not be significant.
Taking these factors into consideration it is recommended that sales of
land in industrial estates and within the area formerly covered by
Glenrothes Development Corporation are most likely to be affected by
Development Value burdens. In many ex-GDC Feu Dispositions the
Development Value burdens are protected in other ways by Clawback
-4Standard Securities and the Council also has the alternative of relying
upon its planning powers to stop developments with an increased value
taking place if this is considered appropriate. For all of these reasons it
is recommended that only Feu Dispositions in industrial estates and
within Glenrothes which are not protected by other means be examined
and that this examination be restricted to the last 10 years. In cases
where there may be a substantial change in value an appropriate notice
should be registered.
3.0 Extinction of Feuduty
On 28 November 2004 feuduty falls automatically but the Council, as
Superior, can claim compensation for loss of its right to collect feuduty
by serving notice on a former feuar within two years of 28 November,
2004. Most feuduties are of very small sums and if the amount of
compensation which a former feuar is to pay to the Council is more than
£50 the former feuar must be allowed to pay in instalments. If the
Council were to serve notice on all former feuars the cost of serving the
notices would, in many cases, exceed the compensation recoverable. It
is therefore recommended that a letter be issued to all former feuars
inviting them to voluntarily redeem the feuduty which they currently pay
prior to 28 November and advising them that if they do so they will
receive a 10% discount on the sum payable to the Council. If feuars do
not take up this option it is recommended that further steps to claim
compensation be taken only in those cases where it is cost effective to
do so.
4.0 Future Sale of Council Houses
4.1 The main provisions of the 2003 Act are to provide a restatement and
clarification of the law of burdens other than feudal burdens. The 2003
Act stipulates rules for the creation, enforcement and extinction of such
burdens and special rules for community burdens and manager burdens.
It also provides a mechanism for getting rid of obsolete burdens and
reduces the number of outdated burdens by making it easier to
discharge or vary them. It is not intended in this report to summarise the
provisions of the 2003 Act in detail.
4.2 Until the start of 2003 all Council houses were sold by means of a Feu
Disposition. As outlined in paragraph 2.1.1 above, facility and service
burdens contained in these Feu Dispositions will survive feudal abolition
and as detailed in paragraph 2.1.2, it is not recommended that steps be
taken to preserve amenity burdens. Future sales of Council houses will
be by Disposition.
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4.3 Section 53 of the 2003 Act provides that where burdens are imposed
under a common scheme all units comprised within a group of related
properties and subject to the common scheme shall be benefitted
properties whose owners are able to enforce such burdens.
Unfortunately, neither "common scheme" nor "related properties" are
defined in the 2003 Act and this has led to a difference of opinion in the
legal profession as to the best way of creating amenity burdens in
Dispositions.
4.4 Opinions have been sought from the Professors of Conveyancing but
even they differ in the course of action recommended. Whichever
recommendation is followed this will involve the Council in incurring
expenditure and drafting and recording additional documentation. So far
as facility and service burdens are concerned, there is no requirement to
do anything as such burdens survive feudal abolition automatically and
are enforceable by all owners who make use of the facilities or services
concerned. The amenity burdens which cause the problem (such as
those prohibiting trade, business, profession or pets) may be of
significance in the managing of a housing estate but there are other
powers available to Councils such as planning powers, the law of
nuisance and anti-social behaviour orders to prevent such activities
being carried out. The Head of Housing has consulted with
representatives of the Law & Administration Service and it is the view of
both the Housing Service and the Law & Administration Service that
uncertainty in this area of law, the additional cost and effort to be
undertaken in imposing amenity burdens in future Dispositions, the fact
that the Council has not previously taken steps to enforce such burdens
due to practical and procedural difficulties and that there are adequate
and equally effective remedies elsewhere all mean that future
Dispositions by the Council for the sale of Council houses should not
include any burdens other than facility and service burdens.
5.0 Proposals
5.1 It is proposed that no further action will be taken to either preserve
amenity burdens or impose amenity type burdens in future sales of
Council houses.
5.2 It is proposed that before 28th November, 2004 the necessary Notices
be registered by the Law and Administration Service to preserve those
pre emption burdens which the Housing Service identify.
5.3 Resources are not available to carry out a comprehensive title audit of all
previous sales of Council properties. In line with the parameters
suggested in paragraph 2.1.4 it is further proposed that only a limited
-6review of the Council's sales be carried out which would focus on
development value burdens in feudal titles in industrial estates and
within Glenrothes and that in those cases where there may be a
substantial change in value the Law and Administration Service take all
appropriate steps to register the necessary notices before 28th
November, 2004. No further action will be taken regarding other
disposals though it is acknowledged that staff will be aware of other
transactions which should be examined and this will be done.
5.4 It is also proposed that those who currently pay feuduty to the Council be
written to inviting them to voluntarily redeem the feuduty before 28th
November, 2004 and that, for those who do not exercise this option, the
Law and Administration Service take all appropriate steps to claim
compensation where it is cost effective to do so.
6.0 Recommendation
6.1 It is recommended that the Committee approve the limited consideration
of previous feus granted by the Council as detailed in the body of this
report and authorise the Head of Law & Administration in conjunction
with the Head of Service Support and the Head of Housing to take the
appropriate limited action detailed in part 5 of this report to protect the
Council's interests where necessary.
John McHugh
Head of Service Support
Harry Tait
Head of Law & Administration
Alan Davidson
Head of Housing
Contact Officer:
Gary Westwater
Operations Manager
Service Support - Facilities
Kingdom House
Kingdom Avenue
Glenrothes
KY7 5LY