The new law of real burdens

The 2003 Act – the main provisions

The 2003 Act is an even more formidable piece of legislation than the 2000 Act, extending as it does to 112 pages and comprising 129 sections and 15 schedules. The Act effectively codifies with some important modifications the existing law relating to real burdens and introduces new statutory provisions for the creation, enforcement, variation and extinction of real burdens created in a constitutive deed executed on or after the appointed day. While the great majority of the Act deals with real burdens, it is called the Title Conditions (Scotland) Act because it contains a number of important new provisions with regard to positive and negative servitudes, sporting rights, the School Sites Act 1841 and other miscellaneous matters.

Although the new code for creation, enforcement, variation and extinction of real burdens will not come into force until the appointed day, a number of provisions of the Act came into force on 4 April 2003, notably the cancellation of all rights of irritancy created in dispositions (section 67), the ability to create manager burdens (section 63), amendment of section 13 of the 1970 Act to facilitate the creation of standard securities securing clawback arrangements (section 111), amendment of the School Sites Act 1841 so as to remove the reversion from the title and replace it with the market value of the site to be paid by the education authority on a sale (section 86) and a bar on the creation of pecuniary real burdens in the future (section 117).

Real burdens defined

Sections 1-6 deal with the meaning and creation of real burdens in general and subsection (1) of section 1 defines a real burden as “an encumbrance on land constituted in favour of the owner of other land in that person’s capacity as owner of that other land”. Subsection (2) states that the encumbered land is known as the “burdened property” and the other land is known as the “benefited property”. Subsection (3) then goes on to provide that notwithstanding the provisions of subsections (1) and (2) to the effect that there must be a burdened and a benefited property, the expression “real burden” includes a personal real burden, that is to say a burden constituted in favour of a person “other than by reference to the person’s capacity as owner of any land”. There are eight categories of personal real burdens, namely (1) conservation burdens, (2) rural housing burdens, (3) maritime burdens, (4) economic development burdens, (5) health care burdens, (6) manager burdens, (7) personal pre-emption burdens, (8) personal redemption burdens.

Section 2 goes on to provide that a real burden may be created only as either an obligation to do something including an obligation to defray, or contribute towards, some cost or an obligation to refrain from doing something. The obligation to do something is an “affirmative burden” and an obligation to refrain from doing something is to be known as a “negative burden”. Real burdens may also be created which consist of a right to enter or otherwise make use of property or make provision for management or administration, but only for a purpose which is “ancillary to those of an affirmative burden or a negative burden”. The additional category is accordingly known as an “ancillary burden”.

Section 3 then goes on to define in modern terminology the main characteristics of a real burden of any kind other than community burdens, which are mentioned below. These characteristics are:

A real burden must relate in some way to the burdened property.

In a case where there is a benefited property, a real burden must be for the benefit of that property.

A real burden may consist of a right of pre-emption, but in the case of a constitutive deed executed on or after the appointed day, it will not be possible to create a real burden consisting of a right of redemption or reversion or any other type of option to acquire the burdened property.

Real burdens must not be contrary to public policy, for example an unreasonable restraint of trade, and they must not be repugnant with ownership or illegal.

Except as expressly permitted elsewhere in the Act, a real burden must not have the effect of creating a monopoly and the provision (subsection (7)) gives as examples providing for a particular person to be or to appoint either the manager of property or the supplier of any services in relation to the property.

The creation provisions

Section 4 deals with the creation of new real burdens and subsection (1) restates the existing law that a real burden is created by “duly registering the constitutive deed”, but it also goes on to provide that the burden may not come into effect until a date specified in the constitutive deed. At present it is permissible to postpone the date of effectiveness of a real burden created in a deed of conditions to the date of registration of a subsequent disposition into which the deed of conditions is incorporated by reference. (See section 17 of the Land Registration (Scotland) Act 1979, which will be repealed on the appointed day.)

Under the existing common law, real burdens other than feudal burdens can only be constituted in a disposition of the land to be burdened or in a deed of conditions. Subsection (2) of section 4 of the 2003 Act makes it clear that this is no longer necessary and that real burdens can be created in any form of constitutive deed, provided that the expression “real burden” is used, the deed is granted by or on behalf of the owner of the land to be burdened and the deed, except in the case of community burdens, specifies either the land which is to be the benefited property or in a case where there will not be a benefited property the person in whose favour the real burden is to be constituted. In the case of community burdens all the properties within the identified community are automatically burdened properties.

By far the most important change is to be found in subsection (5), which provides that the constitutive deed in respect of a real burden created on or after the appointed day must be registered not only against the burdened property but also against the benefited property except where there is no benefited property or the benefited property is situated outwith Scotland. The principal exception is in relation to community burdens where the same land is both the benefited property and the burdened property, thus rendering dual registration a pointless exercise. Community burdens are defined in section 25 as those which are imposed under a common scheme on four or more units designed to be held in separate ownership and each of these units is in relation to some or all of the burdens both a benefited property and a burdened property. The specific requirement in the case of creation of community burdens is therefore that the constitutive deed must nominate and identify the community as well as imposing the burden on the members of the community.

There is a significant body of case law to the effect that under the existing common law a real burden is unenforceable if it refers to extrinsic material, that is to say the terms of a burden must be capable of ascertainment from the constitutive deed itself or by reference to a formula contained in the deed. This is the case despite the fact that in literally hundreds of title deeds of tenements in Scotland apportionment of the liability for common repairs to the roof and other common parts of the tenement is to be ascertained by reference to the rateable values of the individual flats in the tenement. In order to put the matter beyond doubt, section 5 of the Act makes it clear that it does not render the real burden invalid, whether created before or after the appointed day, that either an amount payable in respect of an obligation to defray some cost is not specified in the constitutive deed or that a proportion or share payable in respect of an obligation to contribute towards some cost is not so specified, provided that the way in which the proportionate share can be arrived at is so specified. These general propositions are, however, modified to the effect that if there is a reference to another document which specifies how the liability is to be calculated, the other document “must be a public document (that is to say, an enactment or a public register or some record or roll to which the public readily has access)”. The inclusion of the word “readily” gives rise to some concern because although the old valuation rolls are clearly public documents and accordingly the public theoretically has access to them, how readily that access may be made available by local authorities remains to be seen.

Next month: Duration, enforcement and liability