When a developer is considering how to set out the management structure for the future maintenance of the common infrastructure and those areas of common interest within the development, the key considerations are:

  • the developer's ability to make their own decisions with regard to how the development proceeds;
  • retaining flexibility to address any potential unforeseen issues that may arise whilst the development is being built out, for example, requiring to re-route utilities in order to accommodate the sale of a plot or the requirements of the utility provider; and
  • can the developer change the development layout so as to ensure they are maximising the site's potential for development or addressing a change in the market conditions?

A Development Management Scheme in terms of The Title Conditions (Scotland) Act 2003 (Development Management Scheme) Order 2009 is the preferred arrangement to deal with the management of the common amenity ground and common infrastructure. With a Development Management Scheme ("DMS"), when the first plot is sold a residents' association is created as a formal legal entity to which each plot purchaser immediately becomes a member upon completion of their purchase. This residents' association has the responsibility with regard to the management and maintenance of the common infrastructure and amenity land. If the DMS contains regulations as to the use of that common amenity land or common infrastructure, the residents' association can make decisions with regard to the enforcement of those regulations. If the developer is seeking to make changes to the layout or extending the development those proposals could be obstructed by the residents' association.

This was the situation which occurred in the 2023 Lands Tribunal case of Michael Marshall and Others v Granton Homes Limited.  In this case Granton Homes Limited had a development in Peebles which initially was the conversion of a former block of holiday apartments into 12 residential flats. The deed of conditions set up a DMS which came into being upon the disposal of the first sale and within that DMS, there was a provision whereby no trees or shrubs situated on the scheme property could be cut down unless with the authority and under instruction of the manager appointed by and instructed by the residents' association. Granton Homes sought planning consent to build another ten units within the development. In order to carry out this work they would require to remove some trees. The DMS also contained a prohibition against any building being erected on the common garden ground. For the additional ten flats, the developers would need to install a foul waste treatment plant and soakaway in the common garden ground.

Some of the residents of the initial development of 12 flats sought to obstruct this additional development of ten units by having the residents' association vote against the removal of the trees and the siting of the sewage treatment facility under the garden ground. The DMS had however been drafted on the basis that whilst the development was ongoing and the developer retained property at the development, they retained a right to veto any decision of the residents' association. Accordingly, the developer vetoed the decision of the residents' association that prevented the developer from removing tree and installing the sewage treatment facility under the garden ground. Some of the members of the residents' association submitted an application to the Lands Tribunal to vary the rules within the DMS which provided the developer with the "golden vote".

The Lands Tribunal did not agree with the applicants. Whilst they recognised that a DMS is more commonly set up to deal with the management of the common amenity ground and infrastructure once the development is complete, it is valid for the DMS to be in place and to be in operation whilst the development is ongoing. In that respect it would be expected that the developer would seek to retain the ability to make decisions that would benefit the proposed development. There was nothing wrong with the developer retaining a golden vote whilst they retained any part of the development and this golden vote would be apparent to any purchaser purchasing a plot and reviewing the terms of DMS which they were buying into. The tribunal did indicate they would expect the developer's golden vote to remain only whilst the development was ongoing and once completed the developer would divest itself of its interest in the development and thereby exit the residents' association taking their golden vote with them.

Drafting for a golden vote in a DMS is therefore be a valuable asset in the developer's toolbox.

Contributor

Charles Hay

Managing Associate