Property Law Based on Scottish law
Problem A (i)In order to sell the property
Formasi Bank is only permitted to enforce their standard security, when Lucy defaults in accordance with the conditions of the standard security.
Condition 8 of Schedule 3 of the Conveyancing, Feudal Reform (Scotland) Act 1970, allows the creditor to call up the standard security in accordance with s19 but this is subject to provisions in the security.
Here there is an acceleration clause after two months of default payment, which means that action may begin once this has occurred. Condition 9 states the scenarios where the debtor defaults on the loan. No calling up notice has yet been served but, so long as Lucy has missed two payments, she is in default by virtue of Condition 9(b).
The creditor has remedies in accordance with Condition 10 of the standard form. These must be exercised in accordance with Part II of the 1970 Act. As the creditors seek advice on distribution of the proceeds after sale, they are seeking the remedy under Condition 10(a).
The creditor must first serve a notice of default in accordance with the statutory form of the 1970 Act. This may be served on the debtor (Lucy) whereby one month’s notice is given to remedy the default of two or more loan repayments. If this notice is not complied with, the creditor may then exercise the sought remedy of sale. However, the creditor must be aware that the debtor continues to have a right to remedy the default up to the conclusion of a subsequent and enforceable contract of sale.
(ii)The ranking of securities
Normally ranking will be prioritised in order of registration but as the Bank of Balhoon notified of their security over the property, there may be a ranking agreement that places the £25,000 in pari pasu with the Bank of Balhoon.
If there is no ranking agreement and, assuming that £128,000 is the best possible price, Formasi will receive £75,000 for the first security and the Bank of Balhoon, £47,000 for their security, with £6000 left over to cover the remainder.
If it is pari pasu, Formasi will receive £75,000 and a dividend of the percentage that £25,000 represents from the remaining debt, which is 34.72% of the remaining balance.
Problem B
(i)Are the options permissible?
The passing of the Feudal Tenure etc (Scotland) Act 2000 states that all prior existing real burdens were to be extinguished unless the superior actively preserved the real burden by registering it prior to the passing of the Act.
In the present case the superior, Georgina Throatwarbler, registered the third real burden dated 12 February 1983. This is therefore the only burden that can still possibly exist and all others are now extinguished as of 28th November 2004, which means that, subject to the conditions of her standard security, Lucy may let the property for residential purposes but no commercial activity of any kind may be carried on by either Petronella or Gabrielle.
Conditions of the burden are that Georgina must own land that contains a building that is used for the purpose of dwelling human habitation or human resort, and is situated within 100 metres of the burdened property. She does have a one eighth proviso in the gardens but the land on which the building is situated is the solum of the ground floor proprietors. This renders the burden dubious.
There is also no mention of the flat numbers that are affected by the burden. There may be some information missing from the burden, which if found must then specify number 66 Zoo Lane for Lucy’s business plans to be prohibited. If this cannot be done, the burden was not enforceable prior to the passing of the 2000 Act, which means that it could not have been preserved under the 2000 Act..
(ii)Who should Lucy approach if her plans are not permissible?
Lucy may apply to discharge the burden in accordance with the Title Conditions (Scotland) Act 2003. This is done by way of a minute of waiver granted by those who benefit from the burden and are entitled to enforce the burden. Lucy will have to register this minute of waiver so that it is enforceable against successors to the benefited land.
There can also be acquiescence that is a personal bar. This has to be express and the breach involves substantial financial outlay by the person in breach and benefit of the expenditure is lost by enforcement. Additionally, in implied breach the benefited person knew or ought to have known of the breach and failed to act within a reasonable time or twelve weeks but this is a rebuttable expiration.
Failing the above, Lucy can apply to the Lands Tribunal in accordance with the conditions under the 2003 Act to have the real burden discharged or varied. Lucy must however check the feu disposition containing the burden to see if there is a time bar of five years which would prohibit variation or discharge after that time. If no such restriction exists, she may apply to the Lands Tribunal.
Problem C
(i)Internal alterations for height
Georgina lives upstairs in the top floor. She therefore has sole ownership of the roof and roof space immediately above her flat. She is therefore allowed to extend the flat up into the space immediately under the roof itself.
(ii)The Mural and Replacement of the Stair Railings
These are part of the common ownership property of the tenement flat owners. The Tenements (Scotland) Act 2004 imposes a positive duty of maintenance but this maintenance must not be unreasonable. The question of reasonableness is measured on the age of the property and the cost of maintenance. This therefore means that it is unlikely that the mural is suitable in a Victorian tenement and prohibitive costs will also not be part of the obligation of maintenance.
Section 4 and Schedule 1 of the 2004 Act imposes a tenement management scheme, which will apply here are there is no property factor. In accordance with this scheme there is a structure for decisions on repairs and replacement. Decisions are taken on the basis of one vote per tenement flat and costs are payable in accordance with the proportion of ownership in the common area.
Bibliography
Legislation
Conveyancing and Feudal Reform (Scotland) Act 1970
Abolition of Feudal Tenure (Scotland) Act 2000
Land Registration (Scotland) Act
Title Conditions (Scotland) Act
Tenements (Scotland) Act 2004
Case Law
Taylor v Dunlop (1872) 11 M 25
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