EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
Lord Eassie Lord Wheatley Lord Marnoch	[2010] CSIH 42 XA108/08 OPINION OF THE COURT delivered by LORD EASSIE in Appeal by SHELTERED HOUSING MANAGEMENT LIMITED Appellants; against BON ACCORD BONDING COMPANY LIMITED Respondents: ____________

Act: A Clark, Q.C., McBrearty; Balfour + Manson LLP (for Drever & Heddle, Solicitors, Caithness)

Alt: J J Mitchell, Q.C., McKenzie; Paull & Williamsons

18 May 2010

Introductory

[1] This is an appeal under section 11(7)(b) of the Tribunals and Inquires Act 1992 against an order made on 9 June 2008 by the Lands Tribunal for Scotland under section 90(1)(c) of the Title Conditions (Scotland) Act 2003 (asp 9) - "the 2003 Act".

[2] The order relates to subjects known as Dunmail Manor in Cults, Aberdeen. Dunmail Manor was constructed in or around 1986 by the then owner of the land, Esson Properties Ltd - "Esson" - as a sheltered housing development. It comprised inter alia a number of flats or apartments - "the sheltered flats" - intended as sheltered housing for the elderly but also a flat or apartment for a warden, an office, guest rooms and a garage. In due course each of the sheltered flats was sold and feued to the purchaser in question by means of a feu disposition granted by Esson.

[3] Prior to feuing off the sheltered flats, Esson executed on 26 September 1986 a Deed of Conditions - "the 1986 Deed of Conditions" - which was recorded in the Sasine Register on 20 November 1986. The feu dispositions were subject to the 1986 Deed of Conditions. The recitals in the 1986 Deed of Conditions included the following:

"FURTHER CONSIDERING that we are about to feu off the individual sheltered flats into which the said development has been divided and that we are about the execute Feu Dispositions in favour of the Feuars (as hereunder defined); FURTHER CONSIDERING that it our intention when the Development is completed and all the sheltered flats are feued off to convey any remaining parts of the Development and the Superiority of the Development to Sheltered Housing Management Limited incorporated under the Companies Acts and having their Registered Office at Thirteen Ward Road, Dundee so that they shall administer and manage the Development (we and our said successors being hereinafter referred to as 'the Superiors'); AND CONSIDERING that we intend to enter into a contract with the said Sheltered Housing Management Limited to administer and manage the Development on our behalf until such time as the said Superiority and others are conveyed to the said Sheltered Housing Management Limited;"

The standard missive whereby Esson sold the sheltered flats contained, in condition 11(e), this provision:

"(e) It is understtod (sic) that on the sale of the last flat in the Development the Superiority together with the ownership of the warden's flat, offices and the guest room shall be transferred from our clients to Sheltered Housing Management Limited or such nominees. The Management of the Development will be under control of the said Sheltered Housing Management Limited or other Housing Association registered under the Industrial and Provident Societies Act enforced (sic) from time to time with which the said Sheltered Housing Management Limited may amalgamate or from time to time be associated."

[4] In accordance with the terms of those recitals in the 1986 Deed of Conditions, Esson, by a disposition dated 6 June 2003, conveyed to Sheltered Housing Management Limited, who are the appellants in this appeal, their interests as superiors of the sheltered flats which had been feued off, and also the dominium utile of those parts of the development which had not been feued off, including in particular the warden's flat and office, the guest rooms, the garage, a potting shed, and certain store rooms.

[5] On 28 November 2004 the Abolition of Feudal Tenure (Scotland) Act 2000 came fully into force with the consequence that the superiority or dominium directum held by the appellants in the sheltered flats ceased to exist and was extinguished. On the same date the 2003 Act came fully into force. Section 33 of the 2003 Act, put very shortly, provides for the variation or discharge of what are termed in that Act "community burdens". Availing herself of the procedures for achieving such variation or discharge by majority vote, a proprietor of one of the sheltered flats - a Miss Margaret Forbes Jack - served upon the other proprietors and the appellants on 9 September 2005 a "community consultation notice" in terms of section 55(2) of the 2003 Act intimating a proposal to vary all of the community burdens in the 1986 Deed of Conditions by replacing that Deed of Conditions with a new, proposed Deed of Conditions annexed to the notice - "the proposed Deed of Conditions". A majority, but not all, of the proprietors of the sheltered flats executed the proposed Deed of Conditions. Intimation was thereafter given by Miss Jack in terms of section 34(1) of the 2003 Act of her proposal to register the proposed Deed of Conditions in the Land Registry. Miss Jack has since died, and her place as respondent in these proceedings has been taken by another proprietor, the present respondents in consequence of procedural steps which it is unnecessary for us to describe.

[6] The appellants did not execute the proposed Deed of Conditions. On receipt of the intimation under section 34(1) of the 2003 Act to which we have just referred they duly made application to the Lands Tribunal in terms of section 37(1) of the 2003 Act for an order, put shortly, for the preservation, unvaried, of the existing conditions contained in the 1986 Deed of Conditions. The appellants were unsuccessful before the Lands Tribunal in securing the preservation, unvaried, of the 1986 Deed of Conditions. On 9 June 2008 the Lands Tribunal made the order which is the subject of this appeal. In it the Lands Tribunal refused the appellants' application for preservation unvaried of the 1986 Deed of Conditions and proceeded
[1] to vary "the said community burdens in the [1986] Deed of Conditions ... by deleting them in their entirety and substituting in lieu thereof the provisions of clauses 1 to 11 of the proposed deed", which the Lands Tribunal then set forth ad longum in its order. So, put shortly, what the Lands Tribunal did was to replace the 1986 Deed of Conditions with the new proposed Deed of Conditions advanced by Miss Jack. We therefore turn to the terms of the respective deeds of conditions.

The Deeds of Conditions

[7] We shall summarise successively the principle features of the respective Deeds of Conditions so far as pertinent to the dispute between the parties.

[8] Taking first the 1986 Deed of Conditions, clauses (FIRST) and (SECOND) impose a number of user restrictions on all of the sheltered flats. It is not necessary to catalogue those restrictions, but, by way of example, the (former) feuars are prohibited from carrying on any trade or from keeping livestock other than one cat or one dog. There is also a condition that a sheltered flat be occupied only by a person or persons over the age of 55 years, unless otherwise allowed by the superiors in their sole discretion. Clause (THIRD) deals with the common parts of the development, in which each feuar holds a right of common property. Clause (FOURTH) is concerned with the use of the amenity ground, in which each feuar holds a right of common property. Clause (FIFTH) makes provision for the feuars' right of free ish and entry to the flats and to the common property. Clause (SIXTH) burdens each of the sheltered flats with liability for maintaining the main fabric of the development, including the common parts, and also the warden's flat and office, guest rooms and stores, all to the satisfaction of the superiors; and the clause allocates the costs of meeting that liability equally among the 43 sheltered flats. Clause (SIXTH) further provides that:

"The obligations of maintenance and repairs specified in this Clause shall be discharged by the feuars paying a monthly service charge referred to in Clause (NINTH) hereafter".

[9] Clause (NINTH) of the 1986 Deed of Conditions opens thus:

"Notwithstanding the provisions of Clause (SIXTH) above the Superiors shall be exclusively responsible for the management, maintenance and administration of the Development (other than the interiors of the sheltered flats which shall be the sole responsibility of the occupiers thereof) and this responsibility shall include, but shall not be limited to, the following:- ...".

There then follows a list of various matters which it is not necessary for us to catalogue or rehearse in detail. They include such matters as the maintenance and repair of the structure and external parts of the development, the maintenance of the amenity ground, insurance of the building and the appointment of a warden. The clause then goes on to provide for payment by each of the feuars of a monthly service charge to the superiors set in the Deed of Conditions at £48.92, but reviewable by the superiors at any time on giving one month's prior notice to the feuars.

[10] We turn now to the proposed Deed of Conditions. As the Land Tribunal notes, many of the provisions of the proposed Deed of Conditions repeat essentially the user and maintenance burdens of the 1986 Deed of Conditions. For present purposes, the significant departures or variations from the 1986 Deed of Conditions are those which relate to the dominium utile eventually conveyed to the appellants by Esson. That dominium (now allodial) is brought into the scope of the proposed Deed of Conditions by its definition of "Residual Property" and its other provisions relating to that property. "Residual Property" is defined in clause 1.1.10 of the proposed Deed of Conditions as meaning:

"... the Development under exception of the Flats and including, but without prejudice to the generality, the House Manager's Apartment and Office, the Guest Rooms and all stores rooms or storage areas including without prejudice to the generality garden equipment store, potting shed, utility rooms or cleaning cupboards on each floor and the store room on each floor (housing electricity boards) and being the subjects registered in the Land Register of Scotland under Title ABN7394."

The proposed Deed of Conditions goes on to define "House Manager's Apartment and Office" and "the Guest Rooms" in clauses 1.1.11 and 1.1.12 respectively but we do not think it necessary to set out those definitions in detail since they are essentially what is otherwise referred to as the warden's flat and the guest rooms. [11] Importantly, for present purposes, the proposed Deed of Conditions goes on to provide in clauses 3.1 and 3.2 as follows:

"3.1 The House Manager's Apartment and Office shall not be used otherwise than for occupation and use by the House Manager.

3.2 The Guest Rooms shall not be used otherwise than for occasional occupation by guests or visitors to the Proprietors or occupiers of Flats. Such occupation of the Guest Rooms shall be on such financial terms and subject to such conditions as the Factor shall from time to time determine having regard to the good estate management of the Development as a sheltered housing development."

[12] The term "Factor" is defined in clause 1.1.19 thus:

"'Factor' means Peverel Scotland Limited, ... or, in substitution therefor, such other person, firm or company as is from time to time appointed in accordance with the provisions of clause 8."

Clause 8.3 of the proposed Deed of Conditions provides for the Factors being replaced by a simple majority of the proprietors taking a decision to that effect. The proposed Deed of Conditions was executed by Peverel Scotland Limited, who took de facto occupation of the appellant's property in November 2005. We understand that, pending the determination of these proceedings, the appellants agreed informally to refrain from taking steps to recover possession of their property.

[13] Clause 9 makes provision for the appointment and employment by the factor of the "House Manager".

[14] Clause 1.1.13 contains a definition of the term "House Manager's Apartment Charge, as meaning ..." an annual sum payable to the proprietor thereof in respect of the use of the Residual Property including, without prejudice to the generality, the House Manager's Apartment and Office and the Guest Rooms. The clause goes on to fix the annual sum at £6,000, subject to annual review and variation by increase or decrease in line with the retail price index. (Although the House Manager's Apartment Charge is included in the list of "Common Charges", there does not appear to be any substantive provision stipulating for payment to the proprietor of the Residual Property).

Community Burdens - pertinent legislative provisions

[15] Community burdens are treated principally in Part 2 of the 2003 Act. The expression "community burdens" is defined in section 25:

"25(1) Subject to subsection (2) below, where -

(a) real burdens are imposed under a common scheme on two or more units; and

(b) each of those units is, in relation to some or all of those burdens, both a benefited property and a burdened property,

the burdens shall, in relation to the units, be known as 'community burdens'.

(2) Any real burdens such as are mentioned in section 54(1) of this Act are community burdens."

Section 54(1) of the 2003 Act provides as follows:

"54(1) Where by a deed (or deeds) registered before the appointed day real burdens are imposed under a common scheme on all the units in a sheltered or retirement housing development or on all such units except a unit which is used in some special way, each unit shall be a benefited property in relation to the real burdens."

Supplementary provision is contained in section 26, which states:

"26(1) Without prejudice to section 2 of this Act, community burdens may make provision as respects any of the following -

(a) the appointment by the owners of a manager;

(b) the dismissal by the owners of a manager;

(c) the powers and duties of a manager;

(d) the nomination of a person to be the first manager;

(e) the procedures to be followed by the owners in making decisions about matters affecting the community;

(f) the matters on which such decisions may be made; and

(g) the resolution of disputes relating to community burdens.

(2) In this Act 'community' means -

(a) the units subject to community burdens; and

(b) any unit in a sheltered or retirement housing development which is used in some special way as mentioned in section 54(1) of this Act."

[16] Variation of a community burden is dealt with principally in section 32 and following sections. Under the heading "The expressions 'affected unit' and 'adjacent unit', section 32 states:

"In this Part of this Act a unit in respect of which a community burden is to be varied ('varied' including imposed), or discharged, is referred to as an 'affected unit'; and 'adjacent unit' means, in relation to an affected unit, any unit which is at some point within four metres of the unit."

Subsections (1) and (2) of section 33 provide:

"33(1) A community burden may be varied ('varied' including imposed), or discharged, by registering against each affected unit a deed of variation, or discharge, granted -

(a) where provision is made in the constitutive deed for it to be granted by the owners of such units in the community as may be specified, by or on behalf of the owners of those units; or

(b) in accordance with subsection (2) below.

(2) A deed is granted in accordance with this subsection if it is granted -

(a) where no such provision as is mentioned in subsection (1)(a) above is made, by or on behalf of the owners of a majority of the units in the community (except that, where one person owns a majority of those units, the deed must also be granted by at least one other owner); or

(b) where the manager of the community is authorised to do so (whether in the constitutive deed or otherwise), by that manager.

...

(5) This section is subject to section 54(5)(b) and (c) of this Act."

Section 34 includes:

"34(1) Where a deed of variation or discharge is granted under section 33(2) of this Act, a proposal to register that deed shall be intimated to such other owners of the units in the community as have not granted the deed.

(2) Such intimation shall be given by sending a copy of the deed, together with-

(a) a notice in, or as near as may be in, the form set out in schedule 4 to this Act; and

(b) the explanatory note which immediately follows that form in that schedule.

(3) Where a deed has been granted as mentioned in subsection (1) above, any person to whom intimation is given under subsection (2) above may, during the period of eight weeks beginning with the latest date on which intimation of the proposal to register the deed is so given, apply to the Lands Tribunal for preservation, unvaried, of the community burden in so far as constituted in favour of, or against, any unit not all of whose owners have granted the deed.

...".

[17] Where an application is made to the Lands Tribunal for Scotland, among others, sections 98 and 100 of the 2003 Act apply:

"98 An application for the variation, discharge, renewal or preservation, of a title condition shall, unless it falls to be granted as of right under section 97(1) of this Act, be granted by the Lands Tribunal only if they are satisfied, having regard to the factors set out in section 100 of this Act, that -

(a) except in the case of an application under subsection (3) of section 34 or, in respect of a deed of variation or discharge granted by the owner of an adjacent unit, subsection (1) of section 37 of this Act, it is reasonable to grant the application; or

(b) in such a case, the variation or discharge in question-

(i) is not in the best interests of (all the owners (taken as a group) of) the units in the community; or

(ii) is unfairly prejudicial to one or more of those owners.

100 The factors mentioned in section 98 of this Act are -

(a) any change in circumstances since the title condition was created (including, without prejudice to that generality, any change in the character of the benefited property, of the burdened property or of the neighbourhood of the properties);

(b) the extent to which the condition -

(i) confers benefit on the benefited property; or

(ii) where there is no benefited property, confers benefit on the public;

(c) the extent to which the condition impedes enjoyment of the burdened property;

(d) if the condition is an obligation to do something, how -

(i) practicable; or

(ii) costly,

it is to comply with the condition;

(e) the length of time which has elapsed since the condition was created;

(f) the purpose of the title condition;

(g) whether in relation to the burdened property there is the consent, or deemed consent, of a planning authority, or the consent of some other regulatory authority, for a use which the condition prevents;

(h) whether the owner of the burdened property is willing to pay compensation;

(i) if the application is under section 90(1)(b)(ii) of this Act, the purpose for which the land is being acquired by the person proposing to register the conveyance; and

(j) any other factor which the Lands Tribunal consider to be material."

Competency of the variation
Submissions for the appellants

[18] Before the Lands Tribunal and before us, counsel for the appellants submitted that, in so far as it sought to burden the appellants' property, the variation purportedly effected by the proposed Deed of Conditions was incompetent. There were two discrete bases upon which the submission of incompetency proceeded. Put briefly, the first was to the effect that the burdens which the proposed Deed of Conditions purported to place on the appellants' property were repugnant with ownership. The second was that those burdens were not "community burdens" and hence could not be imposed on the appellants against their will in terms of the 2003 Act.

[19] In relation to the first branch of this submission, counsel submitted in summary that the requirement that a real burden be not repugnant with ownership was set out in section 3(6) of the 2003 Act. The right to use and enjoy the property was fundamental to the notion of ownership. In that respect reference was made to the essay by Honoré published in Oxford Essays in Jurisprudence (1961) p 370ff. Reference was further made to the Report of the Scottish Law Commission on The Abolition of Feudal Tenure (Scot Law Com 168) and to the Commission's Report on Real Burdens (Scot Law Com No.181) paras 7.57, 11.66; Reid on Property para 391; and to Earl of Zetland v Hyslop (1881) 8R 675; (1882) 9 R (HL) 40; Moir's Trustees v McEwan (1880) 7R 1141; Moncrieff v Jamieson 2008 SC (HL) 1 and Beckett v Bisset 1921 2 SLT 33. The provisions of the proposed Deed of Conditions, particularly clauses 3.1, 3.2 and 3.3, had the effect of perpetually depriving the appellants of any ability to use, occupy, manage or control, or even enter, their property. Contrary to what the Lands Tribunal had said in its Opinion, the appellants could not let the property because they could never be in a position to give possession to any occupier.

[20] In respect of the second ground of challenge to the competency of what was proposed in the proposed Deed of Conditions counsel submitted, in summary, that while the former feuars, the now allodial owners of the sheltered flats, were subject to certain mutually enforceable burdens, and hence subject to "community burdens" in terms of a common scheme, the appellant's property was not so burdened. What the proposed Deed of Conditions sought to do was not only to vary the existing community burdens enjoyed by the sheltered flats but also, to impose new real burdens on the appellants' currently unburdened property. Section 33(1) of the 2003 Act enabled a majority to vary community burdens. While variation was defined as including the imposition of a new burden (cf. section 33(1) and section 122(1) of the 2003 Act), properly construed the statutory provisions meant only that in varying existing community burdens the majority might impose a new burden on each other, that is to say on those subject to the community burdens; not that a new burden might be imposed on a proprietor not subject to the community burdens in the first place.

[21] Counsel for the appellants went on to advance, as a further proposition, that what section 33(1) permitted was the variation (including imposition) of a "community burden". It was clear from section 25(1)(a) of the 2003 Act that an essential feature of community burdens was that they were imposed under a common scheme on a plurality of properties. A common scheme referred to the imposition of a burden or burdens which would normally, but not necessarily, be the same for each of the burden properties and mutually enforceable. The notion of common scheme was explained in Hislop v MacRitchie's Trustees (1881) 8R (HL) 95. The burdens which the proposed Deed of Conditions purported to impose (particularly in clause 3) on the appellants' property deprived the appellants of the ability to occupy, use, possess, control or manage, or let their property. No other unit of ownership in Dunmail Manor was subject to that or any similar burden. Accordingly the restrictions purportedly imposed by clause 3 of the proposed Deed of Conditions did not form part of any common scheme since there was no plurality of properties upon which such a burden was imposed.

[22] Further, the statement in subsection (2) of section 25 that "any real burdens such as are mentioned in section 54(1) of this Act are community burdens" did not assist the respondents. Section 54(1) was confined to burdens imposed under a common scheme and it simply provided that all of the properties within a sheltered housing development should be benefited properties in respect of those common scheme burdens. The combined reading of section 25(2), section 54(1) and section 26(2) was to make clear that in a sheltered housing development the fact that a retained unit such as a warden's flat was not subject to the common burdens imposed on the sheltered flats did not prevent those common burdens from being community burdens. It further made the retained unit of property a "benefited" property in respect of the community burdens and thus a member of the "community" (cf. section 26(2)(b)). Consequently when it came to making community decisions (for example on maintenance of the common parts) the owner of the retained or residual unit was deprived of the veto which that owner would otherwise have had. But the provisions did not mean that the retained property was subject to the community burdens to which the other proprietors of the sheltered flats were subject. Reference was made to the Scottish Law Commission Report on Real Burdens, paras 7.12 to 7.14, para 11.65, and para 129 of the Explanatory Notes to the statute.

Submissions for the respondents

[23] In his response to the first limb of the competency argument, counsel for the respondents observed that the term "repugnant with ownership" was not one which he had come across in any other statute. In the Scottish authorities pre-dating the Act, one had the views expressed by Lord Young in the two nineteenth century cases to which counsel for the appellants had referred. But there was little else. A bar on performing any juristic act in respect of the property might be incompatible with ownership. But, it was submitted, restrictions on the use of the property were clearly not repugnant with ownership; nor was an obligation to provide services. Reference was made to Grant v Heriot's Trust (1906) 8F 647. The terms of clause 3 of the proposed Deed of Conditions entailed simply a restriction on user. Such restrictions were long recognised as competent real burdens or restrictions. The first ground of challenge to the competency of the variation was thus unsound. The repugnancy argument as advanced by the appellants would prevent the creation even by agreement of an arrangement where the retained property would be held for the use of a warden appointed by a factor or manager selected by the proprietors of the sheltered flats.

[24] As respects the second branch of the appellants' argument on competency, counsel for the respondents submitted first that it was incorrect to describe the appellants' property as being unburdened. The disposition to the appellants was subject to inter alia the 1986 Deed of Conditions. That included the provisions of clause (NINTH) of the 1986 Deed of Conditions. The problem was that the drafter of the 1986 Deed of Conditions was understandably unaware of the future abolition of the feudal system. So while the obligations in clause (NINTH) were on the superior, there was nonetheless, it was submitted, a general scheme for Dunmail Manor and the obligation of the superior under clause (NINTH) should be treated as having passed to the appellants.

[25] Counsel for the respondents further submitted that the appellants' contentions respecting the need for the warden's flat and office to be subject to existing community burdens before any varied or new burden could be imposed would render the Act useless and seriously defective. The policy underlying the Act was that set out by the Scottish Law Commission in its Report on Real Burdens, particularly in para 7.18. If the majority of the proprietors of a shared garden could increase the annual dues payable by the proprietors in respect of the garden without the consent of all (cf. Young & Others 1978 SLT (LT) 28 and paras 6.95 and 6.96 of the SLC report) there was no reason in principle why consent should be necessary to extend the obligation to pay for the garden to adjacent houses not subject to that existing liability. Compensation would be available under the provisions of the Act.

[26] Counsel for the respondents went on to submit that the core provision for community burdens was section 33 of the Act and it should be seen as the key to breaking what counsel termed might otherwise be a circularity in the statute. Two phrases required to be "broken out". The first phrase was "affected unit"; this was defined in section 32 as "a unit in respect of which a community burden is to be varied ('varied' including imposed), or discharged is referred to as an 'affected unit'." Counsel placed emphasis on the words "is to be" which it was submitted encapsulated a need to look to the future, that is to say, to what the proposed deed would do. The second phase was "community burden" and its link to a "common scheme". The term "common scheme" was descriptive, not prescriptive. The common scheme was to be found in the proposed deed. Accordingly, it was submitted, a community burden could be imposed even if there were no prior or existing constitutive deed and the property concerned were not subject to any existing or prior community burden.

Discussion
[27] In addressing the arguments advanced to us respecting the competency of what was contained in the proposed Deed of Conditions we find it convenient to begin with the consideration of the second ground of challenge advanced by the appellants, namely the community burdens issue.

[26] As we understood the argument advanced for the respondents in answer to that challenge, the central contention was that it was not necessary that a party upon whom a new burden was sought to be imposed be already subject to any community burden. One looked to the proposed deed for the common scheme whereby mutually enforceable burdens were placed upon a plurality of units; and accordingly if there were some loosely defined community or group of proprietors they could, by a majority decision, impose a community burden on another proprietor or proprietors, notwithstanding the absence of any existing deed imposing a community burden on all of the proprietors to be affected by the proposed deed. We refer to the example given by counsel for the respondents mentioned in para [25] above, in fine.

[29] For a number of reasons we are unable to accept this construction or interpretation of the statutory provision. First, as an important component of the argument for the respondents emphasis was placed on the phrase "is to be" in the definition of affected unit in section 32. It appears to us that the argument draws a central inference from that phrase. In our view that is not justified and moreover does not fit with the structure of the Act. Thus, section 33(2)(a), which immediately follows section 32, in making provision for majority decision necessarily postulates or requires the existence of a defined community subject to community burdens. But, as counsel for the appellants pointed out in his reply to the argument for the respondents, if, as the respondents submitted, the constitutive deed were the proposed deed, and the proposed deed contained the common scheme, it would follow that the "community" whose majority is empowered to vary the community burdens did not then exist. Moreover, the terms of section 34(3), and also section 90(1)(c), providing for application to the Lands Tribunal for preservation of the community burdens unvaried, plainly postulate the presence of an existing community burden to be preserved. Similarly, the terms of section 100 are consistent with there being an existing community burden.

[30] Leaving aside any specialty which may apply in the case of sheltered housing, we consider it clear that section 33 of the 2003 Act may only be invoked to vary or discharge an existing community burden. The definition in section 25 of a community burden requires that the burden in question be imposed on a plurality of properties under a common scheme and that the burden be mutually enforceable. In that connexion we note the definition given by the Scottish Law Commission in para 7.12 on its Report on Real Burdens: "Community burdens in the sense used in this report are burdens imposed upon (i) on a number of units of property (ii) under a common scheme and (iii) which are mutually enforceable in respect of each of the units. The totality of the units comprises the 'community' which is regulated by the burdens. All three criteria must be met." The three criteria are thereafter discussed in some further detail.

[31] We would also observe at this point that in our view the scope of the exercise allowed by section 33 is that of varying or discharging existing burdens rather than innovation by the creation of distinct new burdens, including, more particularly, the imposition of a new burden on an additional or substitute proprietor. In so observing, we recognise of course that the statute defines variation as including the imposition of a new burden, but it appears to us that what is in contemplation is the imposition of a new community burden in substitution or replacement of the existing community burden, or some closely related supplement to the existing community burdens. As is put by the Scottish Law Commission at para 7.66 of its Report on Real Burdens: "While discharge implies the extinction of a burden, in whole or in part, in variation a burden is supplemented or replaced. Variation thus involves the imposition of new obligations." Further, the terms of section 100 of the 2003 Act, listing factors to which the Lands Tribunal should have regard are, we think, more consistent with replacing or supplementing the existing burdens rather than with innovation by the imposition of a discrete new burden on previously unaffected proprietors. As a matter of principle this seems to us to be a more acceptable construction.

[32] As we understood his argument counsel for the respondents at one point sought to overcome that difficulty by questioning the Lands Tribunal's acceptance of the submission for the appellants that the appellants' property had not been subject to any community burden under the 1986 Deed of Conditions. It was submitted that the appellants' property was burdened by the terms of clause (NINTH) of the 1986 Deed of Conditions. We have come to the view that this aspect of the contention for the respondents is unsound. In our opinion, in so far as clause (NINTH) may be construed as imposing obligations, rather than giving management powers, those obligations were imposed on the superiors as such; they are not created as a real burden on the dominium utile held by the appellants. Moreover, as counsel for the appellants pointed out, even if it were a real burden on the appellants' property, it would not be a community burden since that burden is not imposed on a plurality of the properties (nor is there any equivalent burden on any other unit).

[33] Next, on this branch of the case, consideration has to be given to whether the foregoing is subject to any particular speciality arising from the fact that the development is a sheltered housing development. That involves consideration of the effect of section 25(2) and section 54(1) of the Act. For convenience we repeat the terms of section 54(1):

"54(1) Where by a deed (or deeds) registered before the appointed day real burdens are imposed under a common scheme on all the units in a sheltered or retirement housing development or on all such units except a unit which is used in some special way, each unit shall be a benefited property in relation to the real burdens."

As is explained at various points in the Scottish Law Commission Report on Real Burdens, this provision has in contemplation the situation sometimes encountered - as here - in sheltered housing developments where the developer has retained in his ownership a part of the building as a warden's flat or the like, which is thus not subject to the burdens imposed under the common scheme. The purpose and effect of the provision is, we think, twofold. First, by making each unit in the sheltered housing development a benefited unit, the provision ensures that mutual enforceability of the common scheme burdens on the sheltered flats is not defeated by the existence of the unburdened retained property, or by a provision in the common scheme confining enforcement powers to the superior by excluding any jus quaesitum tertio (as does the 1986 Deed of Conditions). Secondly, as counsel for the appellants submitted, taken along with section 26(2)(a) it brings the retained property into the "community" and thus removes any power of veto which the retained property might have had in respect of changes to the common scheme burdens imposed on the sheltered flats. But, in our view, these statutory provisions do not deem any obligation to which the retained property is subject to be a community burden for the purposes of section 25(2) or otherwise. In this connexion counsel for the respondents placed reliance upon the terms of para 7.18 of the Scottish Law Commission report, in which, having referred to the common practice for the developer to reserve ownership of one of the units to provide accommodation for a warden, the report continues thus:

"Under our proposals such a unit would be a benefited property but not a burdened property, leaving the burdens insofar as they apply to that unit outside the general definition of community burdens. The result would be awkward. The community would consist of all of the units bar one (the warden's unit); and while that community could make decisions by majority, the decisions would not bind the single unit lying outside the community, giving the unit a veto on change. This result is avoided by a rule that all common burdens which fall within the recommendation for sheltered housing should be treated as community burdens."

It is however not clear what is intended by the final sentence of the paragraph and it appeared to us that counsel for the respondents was unable to point to any other paragraph in the report resolving that absence of clarity in his favour. Accordingly, in the event, on this aspect also we consider that the argument for the appellants respecting the construction of the statute is to be preferred.

[34] For all these reasons we have come to the conclusion that the submissions for the appellants on this branch of the case are to be preferred. We do not consider that the provisions of the 2003 Act, particularly section 33, made competent the imposition of the burdens contained in clause 3 of the proposed Deed of Conditions on the appellants' property. We consider accordingly that the appeal must be allowed.

[35] Given that conclusion, it is unnecessary for us to express a concluded view on the first ground of challenge, namely repugnancy with ownership. As already noted, counsel advised that they had been unable to find any other enactment in which the term or notion had previously been deployed. In terms of the earlier Scots decisions counsel's researches were able only to locate the remarks of Lord Young in Moir's Trustees v McEwan and Earl of Zetland v Hyslop, none of which remarks were material to the decisions in those cases or endorsed by the other members of the Bench. So far as we can tell the notion of repugnancy with ownership appears to have evolved in the English law of easements. It presents difficulties, as is illustrated in the review of English authority conducted by Lord Scott and Lord Neuburger in Moncrieff v Jamieson. The concept may be reflective of the particular features of the English law of easements. But, be that as it may, the legislature has chosen to deploy the phrase in section 3(6) and section 76(2) of the 2003 Act. Counsel on both sides appeared, in our view understandably, to struggle somewhat with the concept. In view of our conclusion on the second ground of challenge, we do not think it would be useful to embark on a fuller obiter discussion of what is a difficult matter.

Valuation issues

[36] In the event that the imposition on the appellants' property of the burdens in the proposed Deed of Conditions was competent, certain valuation issues arose respecting both the "House Manager's Apartment Charge" and the payment of compensation to the appellants. Both parties led expert evidence on those issues.

[37] As we ultimately understood the criticisms advanced by counsel for the appellants of the Lands Tribunal's approach to that evidence, it essentially came to be whether the Lands Tribunal was correct in proceeding upon the basis that there was no market for the warden's flat and office other than a possible purchase by the residents of the sheltered flats (cf. para 27 of the Lands Tribunal's Opinion of 11 October 2007 - p 67 of the Appeal Print). There was, no doubt, an ambiguity in the terms of the planning consent whether the warden's flat and office were restricted to occupation by a warden, as opposed to another occupier meeting the personal - essentially age related - requirements for sheltered housing. The Lands Tribunal regarded the issue as arguable; they also appreciated the valuers' view that "whatever the correct construction [of the planning consent] the planners would be unlikely to consider enforcement in the case of the use of this [the warden's] flat as another sheltered flat". Having reached that view, namely that the market would regard sale of the warden's flat as a sheltered flat as unlikely to be the subject of contrary enforcement on the basis of a dubious interpretation of the terms of the planning consent (there was no express condition respecting the warden's flat), the reasoning whereby the Lands Tribunal, in the later parts of para 27, sought to reach the conclusion that the only market would be from the existing proprietors of the sheltered flats wishing to purchase it as a warden's flat is, to say the least, a little hard to follow. We therefore think that there is force in this aspect of the appellants' criticism of the Lands Tribunal's reasoning. But in the event, given our view on the competency issue making this matter obiter, it is not necessary for us to express any concluded view.

Result

[38] For the foregoing reasons we shall allow the appeal, but we would find it helpful to be addressed by parties on the terms of the interlocutor to be pronounced. To that end we shall put the case out "By Order".