Andrew Leslie, associate – housebuilder, Gillespie Macandrew, discusses the importance of a well drafted Deed of Conditions for residential developments
THOSE involved in the development of land will appreciate the usefulness of Deeds of Conditions. This set of rules drawn up by the developer regulates the rights and obligations of the homeowners on a development, and – if written well – provide the owner of each property with rights of access, rights for services and utilities and rights to enjoy the open spaces, parks, play areas and car parks.
Crucially, it also covers how maintenance costs should be divided between the homeowners on the development.
While this all sounds straightforward, developers must not see this simply as a box-ticking exercise. The Deed of Conditions is an important legal document, which can have a big effect on the satisfaction of the eventual residents on the development.
At best, a poorly drafted Deed of Conditions can cause frustration for the homeowner; but at worst, it can have serious repercussions for the developer’s reputation.
A recent example in the news highlighted the problems that can arise when a Deed of Conditions is drafted without considering the practicalities of looking after the development. Residents of a large development were unhappy with the service they had received from a land management company and were threatened with court action after refusing to pay their bills. Regardless of whether the land management company was doing its job or not, the issue could have potentially been avoided if the residents had more power.
This example was a complicated one because multiple factors had been appointed on the site, along with the land management company, which was responsible for the maintenance of the major open space areas. When it came to the point of taking action against the land management firm, the residents discovered that because of the way the Deed of Conditions had been drafted, they had very little control over their shared space.
It is important that any Deeds of Conditions takes into account the practical operations of maintaining the development and the appointment of factors. In this case there could have been a single contract for all of the maintenance work, with a single point to report to – namely, a residents’ association. However, the manner in which the Deed of Conditions had been written didn’t allow for a residents’ association to formally represent residents on the site.
Since 2009, it’s been possible to incorporate a Development Management Scheme (DMS) into a Deed of Conditions, allowing ownership of the common parts of a development to be transferred to a residents’ association. This can be a game-changer for developers, because they can also retain some flexibility to make changes as work progresses.
As the traditional style Deed of Conditions needs to be registered against the title before the first unit is sold – and because it requires that everything in the development needs to be shown on a plan – it is often too rigid in specifying the layout of the development, so it can be difficult or impossible to deviate at a later stage.
By including a DMS, the residents’ association is a separate entity and is capable of owning land. With this in place, the transfer of land from developer to residents’ association can take place when the development is complete (or in phases as it is ready to be transferred). So the developer has more flexibility, while leaving control of the shared parts of the development to the proprietors.
This has been around for ten years, but is still underused. When combined with more collaboration with the factors from the start, it means there is one point of contact throughout the project, which is then handed over to the residents’ association when the final plot is sold. This results in more control for the homeowners, while ensuring the reputation of the housebuilder.
It may seem like a simple exercise, but getting it right can make all the difference.