Tenement law: compulsory owners’ associations

Commissioner

Professor Frankie McCarthy

Team Members

Stephen Crilly, Project Manager
Georgia McCuaig, Legal Assistant

This project will consider changes to the law in order to establish compulsory owners’ associations for tenement properties.  The legal term "tenement" covers all buildings containing flats, for example, a converted villa, "four-in-a-block" or a modern, high rise development.

The project follows from a reference under the Law Commissions Act 1965 received on 10 January 2022 from the Cabinet Secretary for Social Justice, Housing and Local Government (Shona Robison MSP).  The reference asks the Commission:

 “To review the law of the tenement in Scotland, including the Tenements (Scotland) Act 2004, and make recommendations for reform to implement recommendation 2 (establishing compulsory owners’ associations) of the Final Recommendations Report dated 4 June 2019 of the Working Group on Maintenance of Tenement Scheme Property.

Your recommendations should include proposals on the establishment, formation and operation of compulsory owners’ associations and the rights and responsibilities to be imposed on them, including, insofar as you consider appropriate and desirable, such rights and responsibilities in relation to recommendations 1 (building inspections) and 3 (establishment of building reserve funds) of the Report.”

As stated, the reference follows the Final Recommendations Report of the Working Group on Maintenance of Tenement Scheme Property.  A copy of the Report can also be downloaded here.

Background

In March 2018, the Scottish Parliament established a cross-party Working Group to consider difficulties with the state of repair of Scotland’s tenement properties.  The Working Group consisted of a number of MSPs and various individuals and organisations with expertise in property management and maintenance.  The Working Group set out three primary recommendations for reforming the law of the tenement in order to improve matters:

               1.     a requirement for buildings to be inspected every five years;

               2.     establishing compulsory owners’ associations; and

               3.     the establishment of building reserve funds. 

The essence of the second recommendation is that the owner of every tenement flat in Scotland should be required to enter into an association with the owners of the other flats in the same building.  The key purpose of the association would be to manage maintenance and repair of the building.  Our project aims to set out an appropriate legislative basis for implementing this recommendation.

The Working Group described some key features of the proposed owners’ associations as follows:

• the association would have legal personality which would allow it, among other things, to enter into contracts;
• the association would be required to hold an annual meeting, which would prevent absent or apathetic owners holding up repairs;
• the association would have the ability to control an annual repair plan and budget;
• the association would be empowered to delegate certain rights and responsibilities, including the right to pursue non-paying owners, to a manager.

The Working Group considered a body of this kind to be “an essential element of tenement maintenance by providing leadership, effective decision-making processes and the ability of groups to enter into contracts”.

Given the complex policy and legal issues connected to the introduction of owners’ associations (notably around the interaction of any proposed legislation with existing property titles and human rights concerns), the Working Group recommended that the matter be referred to the Scottish Law Commission for further consideration and development.

Scope

Our initial scoping work has identified a number of key issues which require to be addressed by the project.  A more detailed discussion of these can be found here.  In summary, the questions we will seek to answer in the course of the project are:

• What form of legal entity will compulsory owners’ associations take?
• How will compulsory owners’ associations be created – by operation of law or by other means?
• How will flat owners, who are to be automatic members of the compulsory owners’ association, be identified and contacted?
• What powers and duties should compulsory owners’ associations have? Should these be capable of variation by agreement?
• How will compulsory owners’ associations operate and make decisions at a practical level?  A number of different questions arise here including: how will the association operate in a mixed ownership building (for example, where properties are owned by both private owners and a local authority or registered social landlord)?  Should there be a mechanism to enforce participation (or penalise non-participation) in the association?  And, how can decisions of the association can be appealed or otherwise challenged?
• What steps will compulsory owners’ associations be able to take where a flat owner fails to comply with an obligation to contribute to a building reserve fund or otherwise to the cost of works?
• How would a particular compulsory owners’ association be brought to an end should that be necessary, for example, if the tenement is demolished?
• What should happen if a compulsory owners’ association becomes incapable of functioning because flat owners are unable or unwilling to participate in the operation of the association?
• Should any tenement buildings be exempt from the obligation to form a compulsory owners’ association?
• How will any new law on establishing and operating compulsory owners’ associations interact with pre-existing title conditions for any particular flat or building?
• How will any new law on establishing and operating compulsory owners’ associations affect the rights of flat owners and potentially others under the European Convention on Human Rights?
• What consequential amendments to other areas of the law might be triggered by the introduction of compulsory owners’ associations?

The list of key issues will be kept under review and updated as needs be.

As suggested in the reference letter, when considering the rights and responsibilities of compulsory owners’ associations we will bear in mind the feasibility and desirability of providing powers for associations to carry out energy efficiency and heating improvement work as well as taking on responsibilities in relation to fire safety matters.  

It is important to note that our role here is not to review the law of the tenement in general, and while we are keen to hear where the current law is thought to fall short in dealing with matters relating to tenement repairs and maintenance, we are not able to provide advice or assistance on specific cases or disputes.

Progress so far

We have carried out a preliminary scoping exercise to identify the key legal issues which arise from the Working Group Report.  These are noted above in the Scope section.  We have put in place an advisory group of legal experts to support our work on the project as it develops.

Throughout spring and summer 2022 we held a series of scoping meetings with (principally non-legal) stakeholders.

In September 2022 we ran two webinars as part of an international comparative law series.  In the first of those, Dr Lu Xu spoke about the lessons that can be learned from the introduction of commonhold tenure in England.  Dr Xu's slides are available here, and his presentation can be viewed here.

In the second webinar, Professor Cathy Sherry discussed the lessons to be learned from the Australian law of strata title and considered when the powers of owners' associations go too far.  Professor Sherry's talk is available to view on our YouTube channel at this link.

The third and final webinar in the series took place on 21 October 2022, and looked at how the law in a number of European countries deals with enforcing payments that are due for tenement maintenance and improvements.  Professors Sergio Nasarre Aznar, Magda Habdas, Sandra Passinhas and Vincent Sagaert tackled the law of Spain, Poland, Portugal and Belgium respectively.  The recording of the webinar can be found here.  Slides from three of the presenters can also be found here: Professor Passinhas' slides, Professor Habdas' slides, and Professor Sagaert's slides.

We have carried out a detailed data capture exercise in relation to property management burdens in approximately 350 title deeds.  This is with a view to giving us an indication of the types of clauses that govern the management of multi-owner properties across the country.  The anonymised deeds cover a wide range of building types, ages and geographic locations.

The results of our engagement with stakeholders, comparative law discussions, and our own detailed research will contribute to a Discussion Paper which we intend to issue in spring 2024.  The paper will seek views on any significant questions or preliminary proposals that we might have.  This public consultation will remain open for approximately three months.  

When we have analysed responses to that Discussion Paper, and carried out any further research required, we hope to be in a position to provide the Scottish Government with a report detailing our recommendations and providing a draft Bill for their consideration.  We currently estimate that this will be in spring 2026, as requested in the reference letter.

We are always keen to engage with stakeholders who may be affected by the subject matter of this project and would be happy to hear from anyone who wishes to input.

For further information, please contact Stephen Crilly at info@scotlawcom.gov.uk.