The new law of real burdens

The Abolition of Feudal Tenure etc (Scotland) Act 2000 received the Royal Assent on 9 June 2000, on which date only two provisions of substance came into effect, sections 53 (cancellation of rights of irritancy of the feu and 67 (prohibition on commercial leases exceeding 175 years).  The main provisions dealing with the abolition of superiorities, compulsory redemption of all existing feuduties and limited provisions with respect to the reallotment of former feudal burdens will not come into force until the appointed day fixed by Scottish Ministers. An Order has now been made confirming that not only these provisions but also the main provisions of the Title Conditions (Scotland) Act 2003 will come into force at the term of Martinmas (28 November) 2004.

These two Acts when taken together constitute the most significant reform of land law in Scotland during the last 100 years, and particularly in the case of the Title Conditions Act are of formidable length and complexity. Inevitably landowners and their solicitors will require to embark on a steep learning curve between now and 28 November 2004. Abolition of feudal tenure is dealt with in Professor Kenneth Reid’s book of that name (Butterworths, 2003). See also Brymer and Wortley, “Preparing Superiors for Feudal Abolition”, Greens Property Law Bulletin 2002, Issues 60 and 61.

The 2000 Act – the main provisions

Section 1 of the 2000 Act states: “The feudal system of land tenure, that is to say the entire system whereby land held by a vassal on perpetual tenure from a superior is, on the appointed day, abolished.”

Section 2 then specifies the consequences of abolition which are, first, that the dominium utile will cease to exist as a feudal estate “but shall forthwith become the ownership of the land”; secondly, every other feudal estate in the land shall, on the appointed day, cease to exist, which means that all estates of superiority right up to and including that of the Crown as paramount superior will cease to exist; and thirdly, on the appointed day, it will cease to be possible to create a feudal estate in land, that is to say it will no longer be competent to dispose of land or buildings by way of a grant in feu, with the result that all transfers of land after the appointed day will be transfers of outright ownership.

Extinction of feuduties

Part 3 of the Act deals with the extinction of feuduties and section 7 provides that any feuduty which has not been extinguished (redeemed either voluntarily or compulsorily) before the appointed day, will thereafter cease to be recoverable (section 13 excepts arrears outstanding at the appointed day). Section 56 makes it clear that also extinguished on the appointed day are analogous payments such as ground annual, skat, teind, stipend and “any other perpetual periodical payment in respect of the tenure, occupancy or use of land or under a land obligation”.

Superiors or their equivalents will, however, where feuduties or other periodical payments have not been redeemed prior to the appointed day be entitled under section 8 to recover a compensatory payment from their former vassals by serving a notice at any time within two years of the appointed day specifying the amount of the compensatory payment.  Section 9 provides that the compensatory payment is to be calculated in the same way as redemption monies under the present system, that is by reference to the price of 2 1/2% Consolidated Stock on the last business day prior to the appointed day. The same multiplier will therefore apply to every unredeemed feuduty. Provided the compensatory payment does not exceed £50, the former vassal is required to make payment within 56 days of service of the notice on him. Where the compensatory payment amounts to £50 or more, the former superior when issuing the demand requires to include an “instalment document” in terms of which the former vassal has the option of settling the payment by instalments, but only if within the period of 56 days from receipt of the notice by him he sends the former superior an additional sum equal to 10% of the compensatory payment – intended to provide further compensation for loss of the interest which the former superior would otherwise have earned on the lump sum. Thereafter the compensatory payment requires to be settled in equal half yearly instalments over the ensuing terms of Whitsunday and Martinmas (28 May and 28 November), ranging from five equal payments where the compensatory payment does not exceed £500 to 20 equal payments where it amounts to more than £1,500. In addition, by section 10(3) and (4)(ii), where the former vassal who is paying by instalments sells or transfers for valuable consideration the property in respect of which the feuduty is exigible the outstanding balance “shall fall due on the seventh day after the day on which the former vassal ceases to have right to the land”, which presumably means seven days after settlement of the sale or transfer. It should be noted that the compensatory payment is the personal liability of the vassal as at the appointed day and does not transmit to singular successors.

Feudal burdens

Part 4 of the 2000 Act deals with the extinction of the superior’s right to enforce real burdens, and it should be stressed that the provisions of the Act are restricted to burdens which were created in a feu disposition, feu charter, feu contract or other grant in feu and do not in any way affect the continued enforceability of real burdens created in dispositions of the dominium utile, deeds of conditions or servitudes created in feudal grants. The new law in relation to these real burdens is covered by the Title Conditions Act which as stated above will come into force and provide a new statutory code for the creation, enforcement, variation and extinction of real burdens on the appointed day.

As regards feudal burdens, section 17 provides that subject to a number of important exceptions, any real burden which immediately before the appointed day was enforceable only by the superior is to be extinguished on the appointed day, and any other real burden which immediately before the appointed day was enforceable by the superior along with other parties (for instance all the residents of a modern purpose-built housing development) will cease to be enforceable by the superior on the appointed day but otherwise will continue in force in accordance with its terms. By subsection (2), no proceedings for enforcement of feudal burdens may be commenced on or after the appointed day, any proceedings for enforcement already commenced are to be deemed to have been abandoned on the appointed day, and any court decree or interlocutor is to be deemed to have been reduced or recalled on the appointed day under exception of any proceedings, decree or interlocutor relating to a right to recover damages or to the payment of money. The Act therefore has the effect of retrospectively nullifying a decree of specific implement or an interdict preventing the former vassal from using his property for a purpose which was prohibited in terms of his title deeds because that obligation or prohibition was created in a feudal grant as opposed to some other deed.

It should be mentioned at this juncture that section 75 of the 2000 Act makes it clear that all the obligations contained in a grant in feu remain enforceable as between the original parties to the deed by contract. The original feuar can of course easily circumvent this provision by transferring the title to the property to a nominee or another member of the same group of companies in the case of a corporate body or by the equally simple expedient of a husband transferring the family home to his wife or children.

Next month John McNeil discusses reallotment of feudal burdens, and development value burdens