A developer’s goals in managing the common components of a development include:
- Maintaining the amenities and services within a development to make sure it provides a high-quality living environment.
- Make sure the management structure gives the developer a way out so they can transfer management to a trustworthy successor and transfer all liability for common elements once the development is finished.
- A transparent, fair, and equitable management system that minimises disagreements regarding the fees assessed to plot owners for the upkeep of the common areas It is common for residents to dispute their bills and try to get out of paying for amenities they may feel they don’t use.
The management of the common elements may be covered in the title deeds in a number of ways. Depending on the specifics of the development, such as its size, location, and nature, it is important to determine which method is the best course of action.
What are considered to be common parts?
Common parts are those areas and pieces of infrastructure that the developer has determined are for the benefit of more than one unit within the development. Some common parts will benefit all of the estate’s proprietors, while others might only be advantageous to a select few. For example, a small portion of the development might only permit access to a select few plots, and those select few plots would be in charge of the upkeep of the shared access. There’s a chance that some of the growth has been stopped. As a result, the tenement blocks will share features specific to those flat properties. Even though there was no obvious benefit to them, owners have recently contested their obligation to pay for the maintenance of common elements.
In a recent Land Tribunal case, a party was successful in avoiding liability for the maintenance of a portion of amenity ground on the grounds that the title condition had not been expressly stated and the relevant portion of the amenity ground was located in a section of the development some distance from their property. Depending on how the management structure is set up, successful applications like those might result in a residual liability for the developer in terms of common charges.
The Ownership Model
When deciding how to best set up the management of the common charges, there are three ownership models to consider:-
- The common ownership model
- The land-owning maintenance model
- The development management scheme.
Each of these models has a unique way of holding the common parts and, consequently, a distinctive way of handling the management of the common parts.
The Common Ownership Model
Developers considered this to be the most flexible ownership model because it was the most popular. In this model, the deed of conditions designates the common parts as common property, and a share of the common parts is included with each conveyance to a purchaser of a plot of land. Such a Deed of Conditions used typically contains a clause indicating that the developer retained the right to choose the size of the common areas up until the development was finished. As a result, the developer had some discretion over what would be included in the common parts.
The developer may still give away a portion of the land to a third party as their exclusive property if the conveyance is made before the development is deemed to be completed in the case of a portion of the ground that was initially designated as amenity ground and part of the common parts but for which the developer was later able to obtain a return. The full extent of the common parts and, consequently, the extent of the common parts under the ownership of the co-proprietors, were only determined after the development was complete. However, this model was contested after the 2008 ruling in the case of PMP v. Registers of Scotland. In that instance, the Lands Tribunal stated that a conveyance of a parcel of land that could not have been validly ascertained at the time of the conveyance was invalid. As a result, the developer must be very clear about the areas designated as the common parts for which a share of common property is being conveyed to the first plot owner at the point of sale in order for this model to continue to work. A plan that is attached to the deed of conditions should ideally show the extent of the common property and convey a specific percentage share to each co-owner.
The disadvantage so far as this model is concerned is that it does take away the flexibility in that from the first conveyance in favour of a plot proprietor containing a pro indiviso share in the common parts, the common parts cannot be used for any other purpose without the consent of each proprietor owning a pro indiviso share.
The Land-owning Maintenance Model
The land-owning maintenance model is the second model. According to this model, the developer will keep ownership of the common areas while construction is taking place, and when a maintenance schedule for the areas is necessary, the developer will transfer ownership of the area to a land management firm like the Green Belt Company.
There will be a number of title conditions attached to the transfer of title to the land management company that require it to maintain the common areas while also having the right to charge the proprietors for those expenses. The owners would be required by the conditions of the deed to contribute to the upkeep of this area. The advantage of this model for the developer is that they are handing off responsibility to the property management company, who will deal with the residents, along with the property.
Development Management Scheme
The development management scheme is the third ownership model. From the date of the first sale, this concept provides for the formation of a residents association as a corporate body with its own identity apart from the plot purchasers. Each new purchaser automatically becomes a member of this corporate entity as the sale progresses. This entity is responsible for the upkeep and management of the common areas in accordance with the development management scheme guidelines, and the residents association might choose a property manager to act on their behalf in this regard. At the completion of the development, the developer has the ability to transfer the common components in whole or in part to this corporate entity.
This model gives the developer with an exit option similar to the land management ownership vehicle, but the inhabitants retain an element of stake in terms of how the common parts are administered. Each of these three models has advantages and downsides. For example, the common ownership model eliminates an element of flexibility that the land-owning maintenance model and the development management plan model preserve. However, unlike the common ownership or development management schemes, the land-owning maintenance model does not allow proprietors to participate in the management of the common parts. The ideal strategy for your clients or development will be determined in part by the size of the development. If it is a small development, the common ownership model is probably the best option, although it does necessitate determining the layout and location of the shared elements at an early stage.
The development management plan would benefit larger developments with the possibility for further stages the most because it provides the most flexibility. If any of the common parts require expert work, the land-owning maintenance model is probably ideal since it permits people who conduct common parts maintenance as a business to ensure that the required methods for management of these parts are in place.
Complete Clarity has expertise in drafting for all three types of models and can advise you on which model would be ideal for your development.