Property: Common parts – a welcome clarification

Even the most experienced property lawyer can find drafting a deed of conditions a daunting prospect. There are many issues to consider, not least of which is the requirement for clear and effective definitions, and their interplay with the operative provisions of the deed.

One of the thorniest definitions that gives rise to a fair degree of anxiety for the drafter, is the description of the common parts of the development, and the rights to them that proprietors are to have.

That anxiety is aggravated by the Lands Tribunal of Scotland decision in PMP Plus v Keeper of the Registers of Scotland in 2008, with which readers will be familiar. PMP Plus cast doubt on many definitions that used a popular formula, intended to provide flexibility for developers, that in effect anticipated what would be built out as common parts in the future. The resulting fallout from that decision is that many purported conveyances of pro indiviso shares in common parts fail to meet the de praesenti principle, i.e. the principle, as expressed in PMP Plus, that “it is not possible to convey an area of land ascertainable only under reference to an uncertain future event”.

In PMP Plus, the common parts were defined as the unbuilt portions of the development which, on completion, have not been exclusively alienated to purchasers of dwellinghouses in the development. The boundaries and extent of the common parts could not be ascertained until completion. Sometimes, however, the boundaries of the common parts are identified in the deed of conditions, but have not yet been formed, and it may not be clear whether the de praesenti principle is met. The recent Inner House decision in BAM TCP Atlantic Square Ltd v British Telecommunications plc and Firleigh Ltd [2021] CSIH 44 (20 August 2021) has provided some welcome clarification on the application of the principle in the context of the conveyance of common property, and gives some useful clarification on the often poorly understood effects of registration under the Land Registration (Scotland) Act 1979.

Common parts or exclusive ownership?

The case concerned ownership of a vehicular access ramp and turning circle located between two buildings and leading from York Street, Glasgow, to an underground car park. BAM, the owners of the northern building, contended that they had sole and exclusive ownership of the ramp and turning circle. BT, the owner of the southern building, and their tenant, Firleigh, argued that those parts were common property and that BT owned a one-half pro indiviso share of them. The buildings were once a single parcel of land. 

A deed of conditions was registered against the land, in 1997, before it was split in two and each part was conveyed. The deed stated that the common parts, including the ramp and turning circle, were to be owned in common by the owners of both buildings. The conveyance to BT (also in 1997) included the “whole rights common, mutual and exclusive pertaining thereto as specified in the Deed of Conditions”. While such a reference may not be entirely helpful, since one must then read through the deed of conditions to identify those rights, it is nonetheless a perfectly competent way of conveying such pertinents. 

At first instance, Lady Wolffe rejected an argument by BAM that the conveyance to BT did not validly include a pro indiviso share of the ramp and turning circle. She determined that it did.

The effect of land registration

However, under the 1979 Act, timing had a critical role to play. BAM’s title to the northern building was registered in 2002, and the title plan showed the ramp and turning circle within the boundary of its property. Lady Wolffe held that the subsequent registration of BAM’s title gave it sole and exclusive ownership, by operation of the Keeper’s “Midas touch”. The effect of registration without exclusion of indemnity under the 1979 Act meant that a bad title could immediately become good. So in this case, even although a one half share had already been conveyed to BT, subsequent registration of the conveyance (originally to predecessors in title of BAM) of the whole of the title to the ramp and turning circle in effect trumped BT’s one half share. In this respect, registration law under the 1979 Act could ride a coach and horses through property law.

But where the application of registration law results in an inaccuracy, rectification could be possible, and the Land Registration etc (Scotland) Act 2012 sets out transitional arrangements for determining whether a 1979 Act inaccuracy has either been extinguished or rectified (sched 4, paras 17-22).

Lady Wolffe held that BAM’s title was inaccurate in showing it as the sole and exclusive owner of the disputed subjects, and that a proof was required to determine whether the inaccuracy could be treated as either having been extinguished or rectified under the transitional provisions.

This was because, in terms of the transitional provisions, only inaccuracies which existed immediately before the designated day (8 December 2014), and which the Keeper had the power to rectify under s 9 of the 1979 Act, are to be treated as having been rectified. Accordingly, if, for example, the Keeper could not have rectified an inaccuracy because it would have prejudiced a proprietor in possession, the inaccuracy would not be treated as having been rectified. There is a rebuttable presumption that a registered proprietor was in possession of the land on the relevant date.

BAM appealed against Lady Wolffe’s decision, and introduced a new argument based on the de praesenti principle.

The appeal and the de praesenti principle

The ramp and turning circle formed part of the “vehicular access”, defined in the deed of conditions as “those structures to be constructed pursuant to the Works”, and shown “indicatively” on plans annexed to the deed. The “Works” were defined as “the works to be carried out to form the Common Parts in accordance with the Approved Drawings and this Deed”. The approved drawings were to be approved by both proprietors and could be amended or varied with the approval of both of them.

By reference to the de praesenti principle, BAM argued that, because the ramp and associated turning circle did not exist at the time of registration of either the deed of conditions or BT’s disposition and were described by reference to “Approved Drawings” that had to be agreed and were subject to change, and because the plans referred to in the deed were indicative only, the disposition could not validly convey a pro indiviso share in the disputed subjects.

By a majority decision, the Inner House rejected that argument. They accepted BT and Firleigh’s argument that the circumstances of this case differed from the circumstances in PMP Plus, in such a way that the conveyance to BT did not offend against the de praesenti principle. The Lord President, Lord Carloway, stated:

“There is no difficulty with the ascertainment of the boundaries of the land which was to form the common parts, even although, at the time of both the deed of conditions and the disposition to [BT], the ramps had not been constructed. The land is clearly delineated in both the basement and ground floor plans attached to the deed… There is, in short, no uncertainty.”

The Lord President also commented: “If the de praesenti principle were to be applied in the manner sought by [BAM], it would operate as a substantial obstacle to developers of multi-occupation phased development sites for which they wish to set out ab ante the rights and obligations of potential purchasers in connection with what is intended to be used as common property… The use of the deed of conditions by [the original owner of the development site] was a common, sensible and appropriate use of a single document setting out the conditions to be incorporated by reference in subsequent split off dispositions. In practical terms, no doubt the nature of the structures to be built would already have been the subject of extensive planning and building warrant procedures. The nature and location of the structures was described in a manner which met the de praesenti principle.”

PMP Plus distinguished

It is clear that the specific circumstances in this case were quite different to the issues in PMP Plus. The deed of conditions provided for flexibility. However, as Lord Menzies put it (in agreeing with the Lord President on this issue): “The area occupied as, or allocated to, common parts is not affected by this element of flexibility. I consider that this is sufficiently clearly identified, and is not properly categorised as ‘an area of land ascertainable only under reference to an uncertain future event’. There were clearly uncertain future events anticipated, but unlike in [PMP Plus], the extent of the land was not ascertainable only by these.”

Developers and their solicitors can draw a great deal of comfort from the confirmation in this decision that so long as there is sufficient identification of what is to be common, it does not need to physically exist at the time of conveyance.