Reforming tenement law

Reforming tenement law: compulsory owners’ associations 

The Scottish Law Commission has published its Discussion Paper on Tenement Law: Compulsory Owners’ Associations. The paper sets out our provisional proposals for the introduction of owners’ associations for tenements in Scotland. It seeks views on these proposals and asks a number of related questions. 

Project background

Scotland’s housing stock is in a declining state. In December 2017, the Scottish House Condition Survey found that 48% of dwellings in Scotland had elements in critical disrepair, with the figure rising to 67% in the pre-1919 housing stock. Poor maintenance of existing housing is an obvious problem for a country currently dealing with housing shortages. Heating poorly maintained houses also generates significant climate emissions, which will need to be reduced if the Scottish Government’s target date of 2045 for net-zero emissions is to be met.

Against this background, the Scottish Government is undertaking a range of initiatives intended to rehabilitate the existing housing stock. Tenements, which include any building made up of at least two flats divided from each other horizontally and intended to be in separate ownership, make up around 37% of all housing in Scotland. Addressing disrepair in these properties has proved particularly challenging due to legal, technical and cultural obstacles that are not present in the case of single dwellings. The large-scale retrofit works that may be required to bring some tenement buildings into line with revised energy efficiency standards will prove more challenging still.    

In recognition of these difficulties, a Scottish Parliamentary Working Group was convened in 2018 “with the purpose of establishing solutions to aid, assist and compel owners of tenement properties to maintain their buildings”. The Working Group published a report in 2019 that set out three principal recommendations for reform in tenement law and management:

• The introduction of a requirement for tenements to be subject to a whole-building condition inspection every five years.
• The establishment of compulsory owners’ associations.
• The establishment of building reserve funds.

The Scottish Government has committed to taking forward these recommendations. However, it recognised that the legislation required for the introduction of owners’ associations would be complex. The Working Group intended every tenement in Scotland to have an owners’ association with legal personality, with owners of flats in the tenement automatically becoming members of that association. It was thought that the existence of a central organising body for each tenement would make coordination among owners in relation to building works more effective, and facilitate a proactive culture of repair. The power of the association to enter contracts in its own name would also make the process of arranging – and paying for – such work simpler and fairer for owners and contractors alike. But legislating for this initiative raises difficult questions around the interaction of new law with existing tenement title conditions, and concerns about compliance with the property rights of flat owners under Article 1 of the First Protocol to the European Convention on Human Rights.

Accordingly, the Scottish Law Commission was asked to review the matter and make proposals for appropriate legislation. The Discussion Paper seeks views on the Commission’s provisional proposals.  

The provisional proposals

The paper suggests the insertion of new provisions into the Tenements (Scotland) Act 2004 to create owners’ associations (OAs), together with repeal of the Tenement Management Scheme and replacement with a new Owners’ Association Scheme (OAS). 

Mandatory aspects

The paper suggests that OAs be subject to four mandatory duties to ensure their operation at a basic level, namely to:

• appoint an OA manager
• hold an annual meeting of members
• approve an annual budget
• comply with any requirement to register the OA

These duties could not be varied in the tenement titles. Compliance with the duties would be enforced through a remedial management scheme, in which the court would appoint a manager to an OA which was in default, with owners liable for the costs of remedial management until the OA becomes operational again.

Default aspects

Beyond the mandatory duties, the operation of the OA will be regulated by the tenement title conditions, as supplemented by the new default rules in the OAS where the titles are silent or incomplete. The paper suggests the OA should have a general function of managing the tenement for the benefit of its members, with its powers exercised on a day-to-day basis by a manager, as directed by the members. Provisions on meeting, voting and sharing costs will generally follow the same model as the Tenement Management Scheme, though the paper consults on certain tweaks, including the introduction of special majority voting (rather than unanimity) for improvement works and an expansion of the duty on owners to maintain the building to cover any works required in the interests of health and safety.

The paper also considers whether tenement title conditions (including those currently in place) should have to be rewritten in a new, standardised format to make clear to owners where the OAS applies and where it does not. In addition, it asks for views on the introduction of new mechanisms by which owners can enforce maintenance obligations against one another, including a potential reallocation of tenement disputes from the sheriff court to the First-tier Tribunal, and the introduction of tenement-specific land attachment.   

Next steps

Consultation on the Discussion Paper runs until 1st August 2024. The results of consultation will be drawn together in a final report and draft Bill, anticipated in 2026. The Commission would be grateful to hear your views on any or all of the questions asked. Please find the Discussion Paper and consultation response form here. The Commission will also be hosting two free webinars in May to provide an overview of the contents of the paper. Registration details for the webinars can be found on the project webpage.

Written by Georgia McCuaig and Professor Frankie McCarthy at The Law Commission