In March 2018, the Scottish Parliament created a cross-party Working Group to consider the state of repair of Scotland’s tenemental property and the difficulties that homeowners sometimes encounter with their ongoing communal maintenance requirements. The Working Group consisted of MSP’s along with individuals with experience in the property factoring industry. The Working Group set three recommendations for reforming the law in order to improve the current position:
- A requirement for tenement buildings to be inspected every five years
- Compulsory Homeowners’ Associations
- The creation of building reserve funds
The second recommendation is that every homeowner of every tenement flat in Scotland should be required to enter into an association with their fellow homeowners of the property, the purpose of which would be to address necessary maintenance and repair of the property on an ongoing basis.
The Working Group identified the benefits of creation of a compulsory homeowner’s association:
- Legal responsibility to enter into contracts
- A requirement to hold an annual general meeting, avoiding unnecessary delays when instructing essential repairs
- The ability to control annual repair plans and associated budgets
- Empowered to delegate certain rights and responsibilities to a manager, including recovery of costs from non-paying homeowners
A copy of the Final Recommendations Report of the Working Group on Maintenance of Tenement Scheme Property can be downloaded here
As this recommendation may have policy and legal implications, the Working Group recommended that it should be referred to the Scottish Law Commission for further development.
The Scottish Law Commission has recently reported that they have completed a preliminary scoping exercise to identify the key legal issues which arise from the Working Group’s recommendation on compulsory homeowners’ associations. The key issues that have been identified and kept under review are:
- What form of legal entity will a compulsory homeowners’ association take?
- How will compulsory homeowners’ associations be created – by operation of law or by other means?
- How will flat homeowners, who are to be automatic members of the compulsory homeowners’ association, be identified and contacted?
- What powers and duties should compulsory homeowners’ associations have? Should these be capable of variation by agreement?
- How will compulsory homeowners’ associations operate and make decisions at a practical level? A number of different questions arise here including:
- How will the association operate in a mixed ownership building (for example, where properties are owned by both private homeowners and a local authority or registered social landlord)?
- Should there be a mechanism to enforce participation (or penalise non-participation) in the association?
- And how can decisions of the association be appealed or otherwise challenged?
- What steps will compulsory homeowners’ associations be able to take where a flat homeowner fails to comply with an obligation to contribute to a building reserve fund or otherwise to the cost of works?
- How would a particular compulsory homeowners’ association be brought to an end should that be necessary, for example if the tenement is demolished?
- What should happen if a compulsory homeowners’ association becomes incapable of functioning because flat homeowners are unable or unwilling to participate in the operation of the association?
- Should any tenement buildings be exempt from the obligation to form a compulsory homeowners’ association?
- How will any new law on establishing and operating compulsory homeowners’ associations interact with pre-existing title conditions for any particular flat or building?
- How will any new law on establishing and operating compulsory homeowners’ associations affect the rights of flat homeowners and potentially others under the European Convention on Human Rights?
- What consequential amendments to other areas of the law might be triggered by the introduction of compulsory homeowners’ associations?
The Scottish Law Commission has also formed an expert advisory group to further support the development of this project. They now plan to engage with stakeholders who may benefit from the Working Group’s recommendations. The result of this research, coupled with their own detailed research, will form a Discussion Paper which is due for release in the Autumn of 2023. The paper will seek views on any significant questions or preliminary proposals that the Scottish Law Commission may have. The consultation will run for a period of three months.
The Scottish Law Commission’s aim is to provide the Scottish Government with their final recommendations and a draft Bill by Spring 2026.
At HPMS we continue to watch this important development with interest, carefully considering the positive effects this key proposed legislation is likely to have on our homeowner customers and what support we are able to offer as matters progress. We intend to keep our customers updated on the subject through a series of regular news stories.
We work with numerous Homeowner Associations, despite not having compulsory backing. These homeowner groups are hugely beneficial to the smooth running, ongoing factoring and maintenance of their property. We would recommend their existence for all blocks of flats and residential developments.
If, in the meantime, you require further advice or guidance concerning the formation of a Homeowners’ Association, then please do not hesitate to contact your factoring team directly.
