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PSG update

15 February 10

The Property Standardisation Group reports on recent revisions to some of its documents, and on current projects

by Ann Stewart and others

Regular visitors to the Property Standardisation Group website www.psglegal.co.uk will know that our documents and materials are subject to ongoing review, and are revised and updated whenever necessary. Some changes may be minor – rephrasing to improve clarity, or adding further options when new alternatives present themselves. Others are more radical, when changes in the law or practice alter the nature of a document or the way in which it is used. Two sets of PSG documents have recently been subjected to a significant overhaul.

DMS in deed of conditions

The Development Management Scheme (DMS), introduced by Part 6 of the Title Conditions (Scotland) Act 2003, was brought into force on 1 June 2009, through the Title Conditions (Scotland) Act 2003 (Development Management Scheme) Order 2009.

The DMS consists of a set of rules to manage the shared facilities in a new development, such as any common ground, playparks, shared car parking etc. The rules regulate a number of administrative matters such as appointment and duties of the manager, convening meetings, instructing emergency work, and financial matters such as fixing a budget and applying a service charge.

The rules are similar to real burdens and can be applied to land which is going to be developed with a number of units that will be subject to the same provisions, in the same way as conditions in a deed of conditions. The DMS provides for an owners’ association to be formed to manage the shared facilities on behalf of the owners of units in the development. Each owner will automatically become a member of the owners’ association, a body corporate which will be able to enter into contracts for the benefit of its members and own property in its own name – a useful attribute which may help when deciding how to deal with ownership of the common areas in a development. The DMS provides that a manager will be appointed by the owners’ association to deal with the day-to-day management of the shared facilities.

The DMS does not automatically apply to developments: it has to be specifically applied to them. There is no particular form of wording required, and there appears to be no reason why words of application cannot be incorporated within the deed of conditions for the development. The latest version of the PSG deed of conditions accordingly incorporates an optional clause which, when used, will apply the DMS to the development, at the same time as other community burdens dealing with matters of amenity, and servitudes, are also applied to it, in the traditional way.

In addition, the full text of the rules of the DMS has been added to the deed of conditions as a schedule, as, given that the majority of individual unit owners are unlikely to be familiar with the details of the actual rules as they appear in the 2009 Order, the Group felt that it would be helpful to those who will actually be subject to these rules, to set them out at length in the deed for ease of reference.

The guidance notes that accompany the PSG deed of conditions have also been updated to explain the purpose of the DMS and how best to refer to its terms, and where necessary vary them, within the structure of the deed of conditions, to suit the particular circumstances of the development.

SDLT guidance and undertakings

Within a few weeks of the introduction, in December 2003, of stamp duty land tax, the PSG produced standard form wording for incorporation into offers, and styles of undertakings suitable for use in lending transactions. Originally returns were all submitted in hard copy, but with the introduction of online submission direct to HMRC, after its initial teething difficulties were ironed out, it is now the predominant means of SDLT submission, with the advantage of same-day submission receipt minimising, if not eliminating, the requirement for undertakings to deliver. Recognising this shift in practice, the Group has overhauled the SDLT guidance note and the undertakings, to reflect the current approach.

Current projects

Not all commercial property documents lend themselves to the PSG approach, which aims to produce a balanced document that reflects the interests of both parties to the deed. A PSG commercial lease continues to be as elusive as Nessie, but the Group has decided to work on a PSG licence to occupy, recognising that by their nature, such licences tend to operate for shorter periods of time, and many of the issues that protract negotiations on the terms of leases are less problematic where a licence to occupy is being deployed.

The use of overseas companies in property transactions is prevalent, and practitioners find the requirement for a foreign opinion on the powers and capacity of such entities, and the enforceability of the documents they enter into, occurs regularly. The City of London Law Society (CLLS), who produced the industry standard style of certificate of title that the PSG adapted for Scotland, has also produced a style of foreign opinion letter, and the Group is taking the opportunity to adapt this document for use for property transactions that take place in Scotland. It should be noted that this style opinion is the form to be requested of the solicitors in the jurisdiction of the overseas company, rather than being suitable for a Scottish solicitor to give.

Commercial property lawyers in Scotland cannot fail to be aware of the impending introduction of the Carbon Reduction Commitment Energy Efficiency Scheme in April this year. How the obligations on participants under the scheme, mostly large organisations, will be dealt with where the buildings, the emissions from which are to be taken into account when calculating the liabilities of participants under the CRC, are occupied by tenants, is already proving problematic to practitioners. An industry working party, set up by interested organisations, including the BPF, has just consulted on whether a cross-industry consensus can be reached on how CRC costs should be apportioned between landlords and tenants in new leases. If some consensus is possible, the working party plans to produce standard form wording for incorporation into leases, that it is hoped would thereafter become an industry model. The PSG supports this initiative, and is in contact with the working party with a view to any necessary “kilting” of agreed wording.

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