Tenancy Deposit Schemes

Recently the private rental sector in Scotland has undergone a significant change in the way tenants deposits are handled, as the Tenancy Deposits Scheme (Scotland) Regulations 2011 have come into force.  Landlords and agents are now obliged to transfer the deposit to a licensed operator, who is to hold the deposit securely and assist in resolving any disputes between landlord and tenant regarding the deposit.  All deposits taken from 2 October 2012 must be placed with a licensed operator within 30 days of the tenancy starting. For any deposits taken before 2 October 2012 landlords and agents have until 13 November 2012 to transfer the funds to a licensed operator. For those found to not comply on application to the Court by a tenant the landlord will be ordered to pay the tenant an amount to three times the value of the deposit monies. For more information contact our Rural and Commercial Land Team.

Kyle Moir
Senior Solicitor
Business – Rural & Commercial Land

Property Factors Registration Open From 30 July 2012

Property factors across Scotland can sign up to a compulsory registration scheme from Monday 30 July 2012.

Registration is a central element of the Property Factors (Scotland) Act 2011, new legislation passed by the Scottish Parliament last year. Factors will also have to comply with a statutory code of conduct. They have until October 1 to register but could start doing so from yesterday.

About 225,000 homeowners across Scotland use property managers to carry out repair and maintenance responsibilities of communal areas of buildings and housing estates.

Infrastructure Secretary Alex Neil said: “The majority of property factors provide a good, effective service. This new law means that for the first time consumers will have access to information to judge good service and for property factors, an opportunity to demonstrate the quality of their services.

“Compulsory registration is good news for consumers and will help enhance the reputation and integrity of the property managing industry.”

Iain Friel, vice-president of the Property Managers Association Scotland, welcomes the new code of conduct.

“Our members believe that the new legislation will benefit the property management industry, not only providing consumers with a recognised system of redress, it will also provide property factors an opportunity to demonstrate the necessary dedication, skill and experience required in the professional management of common property throughout Scotland.”

Nicola McCafferty 
Senior Solicitor – Commercial Property

First Tenancy Deposit Scheme Approved

Further to my previous articles regarding the introduction of the Property Factors (Scotland) Bill and the Tenancy Deposit Schemes (Scotland) Regulations 2011, I can now report that the first tenancy deposit scheme has been approved by Housing Minister, Keith Brown.

The first tenancy deposit scheme to be approved is the Letting Protection Service Scotland. Two further schemes are also being considered with the intention of starting all three schemes, which will operate across Scotland, from 2 July 2012.  In order to provide landlords with time to prepare, the legal requirements to submit deposits into a scheme will come in to effect from November 2012.

Once in place, landlords or their agents must pay deposits to an approved scheme and provide their tenants with key information about the tenancy, the deposit and the scheme which is protecting it. The schemes will be free to participate in and will provide access to a free and independent dispute resolution service.

Please refer to my previous articles for a more in-depth discussion of what this all means for landlords and tenants.

http://blackaddersbusinesslegalnews.com/2011/05/04/the-tenancy-deposit-schemes-scotland-regulations-2011/

Nicola McCafferty
Senior Solicitor
Business – Commercial Property

Property Factors (Scotland) Bill passed by MSPs

New legislation which will introduce statutory regulation of property factors to protect consumers in Scotland has been approved by MSPs. The Property Factors (Scotland) Bill was passed in the Scottish Parliament on Friday 3 March 2011 after attracting cross-party support.

The Bill introduces a registration scheme and a statutory code of conduct for property factors. It will be an offence for a property factor to operate in Scotland without being registered, and will introduce an accessible form of alternative dispute resolution. This will be reinforced by a code of conduct setting out minimum standards of practice for registered property factors.

Please see my blog entry from 29 September 2010 for a more in-depth discussion on the content of the Bill. The Bill now goes forward for Royal Assent and will come into force on a day or days to be set by Order.

Patricia Ferguson, MSP for Glasgow Labour, who promoted the Bill has said “The Bill recognises the plight of people who have suffered at the hands of unscrupulous factors – people identified during the consultation on the Bill, people recognised by the Office of Fair Trading in their report into property management across Scotland and the people who have come to our surgeries. In short, people have come to this Parliament for help because it can be found nowhere else…This legislation will help to root out the rascals in the industry and give it the opportunity to show that most factors do work to high standards.”

Nicola McCafferty
Solicitor
Commercial Property

Protected by a Collateral Warranty?

The outcomes in the cases of Scottish Widows Services v Harmon/CRM Facades and Scottish Widows Services v Kershaw Mechanical Services are a wake up call that liability can be incurred in providing collateral warranties.

Scottish Widows Services were assigned the lease to Port of Hamilton, as well as the collateral warranties provided to the original Tenant by the contractor and architect for the development. The roof of the building was leaking so Scottish Widows Services sought damages from the contractor and architect, for issues/defects in a development they had leased.

Scottish Widows Services knew of the defects before they acquired its interest and as such were in a position where they didn’t have any obligation under the lease to repair these defects. They did however chose to carry out the repairs of the own volition. They then sought to recover, but where they entitled to?

The contractor and architect argued that the losses where self-inflicted as Scottish Widows Services knew the position when they were entering into the lease. Scottish Widows Services then accepted the premises in the condition it was in at the start of the lease (including the defects). It was also argued that the repairs were done for Scottish Widows Services’ convenience and not as a legal obligation. These arguments did not carry any weight with the court as the breach of collateral warranty remained the dominant cause of loss.

Scottish Widows Services only had to prove that they incurred reasonable costs in fixing the defects, which were a result of the breach of the collateral warranty. A beneficiary of a collateral warranty is not normally party to the terms of the original contract or appointment, they are unlikely to have an existing or future relationship with the granters of the warranty, so they are likely to pursue any legal remedy robustly.

Kyle Moir
Solicitor

Planning for new property solutions?

I read a very interesting report about research by the Royal Institution of Chartered Surveyors (RICS) which has suggested one solution to easing the current housing crisis could lie in low-cost housing solutions.

In the New Law Journal, potential solutions include modular homes – self-contained houses with a bathroom and kitchen, constructed off-site and then transported to a given location. Such homes can be priced from around £20,000. In addition, RICS suggests that homes made from recycled plastic are also available. This accommodation is made from “thermo poly rock” which uses 18 tonnes of recycled plastic and minerals which would otherwise be consigned to landfill sites. the report author Dr Chris Goodier from Loughborough University, said “UK house-building has long been associated with expensive, time-consuming methods and can mean that environmental standards are difficult to maintain. [These] designs are not only cost-effective but can be constructed in a very short period of time. Furthermore, many major mortgage providers are already willing to lend against these structures, which has been a problem in the past, meaning that first-time buyers could find them a way of getting onto the property ladder.”

For the Tayside and Scottish market, it will be very interesting to see just what the reaction of planning officials will be to a planning application for these properties, what developers will make of them, if lenders are prepared to finance them, and what local surveyors will make of them in valuation reports!

Shaun Mackintosh
Associate

Tenants’ Break Options

In the present economic climate it is not uncommon to find that tenants enter into lease transactions in circumstances where they are given the right to terminate the lease before the end of its contracted duration or indeed to extend the duration of the lease beyond the period of occupation originally contemplated in the lease. Normally the lease will provide that options such as these are to be exercised by the tenant serving notice upon the landlord of the tenant’s intention to exercise such option.

In situations such as this it is essential that care is taken when serving such a notice to ensure that the notice is fully compliant with the terms of the lease. Quite frequently a lease will specify a strict time limit for service of the option notice which must be met if the option is to be successfully exercised. The tenant would be well advised to diarise in advance the date upon which service of the notice is to be made to ensure that it is not overlooked.

When serving the notice the tenant needs to consider carefully the terms of the lease before issuing the notice. The lease should specify the period of notice required,  the address to which the notice is to be served and the method by which the notice is to be served. In particular it is essential that the party serving the notice ensures that service is effected upon the correct recipient and this is frequently an issue where the landlord has disposed of the leased property to a third party since granting the lease.

The consequences of failing to validly serve a notice exercising a break option can be catastrophic to a tenant and may well result in the tenant losing the right to exercise the option and being contractually committed to continuing to occupy the leased property and meet the costs of the rent and other outgoings until the expiry date of the lease. It is therefore in the tenant’s best interest to ensure that they are correctly advised on the matter and that the notice is served appropriately.

If you require any further information in connection with the above, please contact Ken Scott whose e mail address is ken.scott@blackadders.co.uk

Renewable Energy Continues to Grow

Several newspapers reported this week that Mitsubishi has taken over the Scottish renewable energy technology company Artemis Intelligent Power. The Japanese company has said that the move will lead to an investment of £100m over 5 years and an additional 200 green jobs.

Artemis, described by the Carbon Trust as “the leading light in the UK’s clean tech revolution” has developed new controllable hydraulic pumps and motors. Artemis Wind is developing the technology to be used in wind turbine transmissions.

Managing Director of Artemis Win Rampen said: “This marks a huge step forward for the development of our game-changing technology. Drawing on the breadth and depth of Mitsubishi’s expertise and skills, AIP look forward to accelerating our research and development work with a view to our technology being used in turbines in UK and European waters by 2015.

A new ‘Centre for Alternative Technology’ is also planned by Mitsubishi and has been welcomed by the Scottish government. First Minister Alex Salmond said: “As well as delivering new jobs and investment, over the long-term this announcement could result of the creation of a major offshore wind turbine manufacturing site in Scotland.

The good news is that renewable energy continues its rapid growth in Scotland, which is an area of activity where Blackadders are increasingly being instructed. Please contact me at shaun.mackintosh@blackadders.co.uk or call me on 01382 342110 for any advice or information on renewable energy and find out how we can help you.

Protection for borrowers, hoops for lenders

New restrictions for repossession applications

The Home Owner and Debtor Protection (Scotland) Act 2010 came into effect on 30 September, introducing extra restrictions on lenders making repossession applications for residential properties in Scotland.

The Act requires lenders to try and reach agreement with borrowers who are struggling make debt repayments. Anyone advising either party to a mortgage should be aware of these new provisions.

The new law provides that lenders cannot be granted an eviction order unless they have complied with “pre-action requirements” specified in the Act, requiring the lender to:

  • give borrowers information about advice on debt management
  • take all reasonable steps to avoid repossession
  • use reasonable endeavours to reach agreement with a borrower for clearing arrears
  • not make a repossession application if a borrower is taking steps likely to result in arrears being cleared in a reasonable time

While those words likely and reasonable are going to be the cause of some debate and interpretation, even where property is empty, a lender cannot sell under its statutory powers unless either the borrower (and spouse / civil partner) formally gives up their occupancy rights, or the lender gets an eviction order from the court.

Court applications must also be sent to ‘entitled persons’, including a spouse, civil partner, even someone living with the borrower, who also have a right to make representations to the court.

Institutional and private lenders must apply these changes, especially pre-action requirements, to ensure any enforcement action is valid.

Shaun Mackintosh
Associate

Property development sites: current opportunities?

At Blackadders, we are always in touch with other property professionals to get the most up to date and useful market information available.  While the overall market for landowners and residential property developers is undoubtedly flat, there are always trends and new research becoming available to help make the most of current circumstances.

One of our nationwide land agent contacts has provided a regular update. From this, we can see that while some sites perform strongly, others see little or no recovery. The main points are:

  1. In general, land values continue to increase, but at a slower rate than previously. Nationally, while greenfield land values increased 2.4% in the 3rd quarter of this year, urban values were up only 0.2%.
  2. Fully serviced sites are where the real growth is, particularly in areas of strong demand and limited supply, for example in Broughty/West Ferry areas of Dundee.
  3. Although the market for bulk and strategic brownfield sites is limited, some real opportunities lie in converting these into serviced products.

We are also seeing that joint ventures are becoming more common, with involvement ourselves in structuring these novel types of deal. More detail to follow shortly.

Please contact me for more details or to discuss any development matters in confidence. Direct Dial 01382 342220 or email shaun.mackintosh@blackadders.co.uk.

Shaun Mackintosh
Associate