Notices of Potential Liability for Costs: Changes in Discharge Procedures

Since 2004, Notices of Potential Liability for Costs (NPLCs) have been a useful tool in the armoury of property factors and housing associations in recovering common maintenance costs and debts due by owner-occupiers for factoring costs.

Although they don’t prevent an owner from selling a property, purchasers are unlikely to buy the property with the notice in place and become liable for the debt. This has the practical effect of forcing the seller to pay the debt due before the sale is completed.

Until recently, it was not clear how such NPLCs could be discharged and removed from the relevant title if the liabilities to which they related had been discharged.

This has now been clarified by the Notice of Potential Liability for Costs (Discharge Notice) (Scotland) Order 2014.

Prior to 16 December 2014 and the introduction of such Discharge Notices, there was no statutory authority to discharge an NPLC, and so as a practical, non-statutory solution the Keeper accepted a Letter of Satisfaction (confirming the debt had been paid) or a Letter of Consent from the party who registered the original NPLC as sufficient evidence to remove the NPLC entry from a title sheet.

Such letters will now no longer be accepted as there are now statutory provisions to discharge such NPLCs.

The new procedure, along with a reminder on the form and purpose of NPLCs and the procedure for serving such notices, is set out below.

Everything you need to know about NPLCs

Types of NPLC

There are currently two types of NPLCs, one is registrable in terms of Section 13 of the Tenements (Scotland) Act 2004 and may be used in the case of a flat in a tenement. The other type is registrable under Section 10A of the Title Conditions (Scotland) Act 2003 and relates not only to tenement flats but also other types of property known as the burdened property.

What do they do?

NPLCs make the incoming owner of the flat or burdened property liable for the unpaid costs of work or maintenance provided that the NPLC was registered at least 14 days prior to the acquisition date by the incoming owner.

Form of NPLCs

The form of the NPLC must follow one of the statutory forms. The form of the tenement flat notice is given in Schedule 2 to the Tenements (Scotland) Act 2004 as amended by the Tenements (Scotland) Act 2004 (Notice of Potential Liability for Costs) Amendment Order 2004. The form of the burdened property Notice is given in Schedule 1A to the Title Conditions (Scotland) Act 2003, which was inserted by the Tenements (Scotland) Act 2004.

Title

An entry for an NPLC is made in the burdens section of the title sheet, and thus such notices are registered over a property. Although this will not prevent an owner from selling his property, it means that a purchaser will be unlikely to buy the property with the notice in place and become liable for the debt, and therefore this has the practical effect of forcing the seller to pay the debt due before the sale is completed.

Who can register such NPLCs?

Only a limited group of people can register such notice. A tenement flat notice may only be registered by (i) the owner of the particular flat, (ii) the owner of another flat in that tenement or (iii) any manager of the tenement (i.e the registered property factor). The burdened property notice may only be registered by or on behalf of (i) the burdened proprietor, (ii) a benefited proprietor or (iii) a manager (again, the registered property factor who manages the relevant property). Confirmation of eligibility should be given within the notice itself.

No specific figures are required in the notices to confirm the amount owed by the owner, but a list of the elements of the debt must be given and the works can be categorised under various headings.

Single notice or separate notices?

It is possible to register a single notice against several flats within the one tenement or against several burdened properties, so long as the notice is in respect of the same work or maintenance for each property but if there are any differences in the actual work or maintenance from one property to another, then separate notices would be needed.

When do such notices expire?

Such notices expire three years after registration but can be renewed by registering again before the end of that period.

Discharges of NPLCs – new procedures

If the debt to which the NPLC relates has been met, how can such notices be discharged during the unexpired period of the notice?

Before the expiry of the three-year period of the notice, it is possible that the debt may have been repaid and therefore the property owner is likely to wish the notice to be discharged and removed from his title in order to remove this blight against the title.

The Notice of Potential Liability for Costs (Discharge Notice) (Scotland) Order 2014 prescribes the form of two new discharge notices, which, from 16 December 2014, may be registered against a property which previously had an NPLC registered against it.

Such discharge notices can be used where the liability to which the NPLC has been met and the person who registered the original notice consents. The two forms of Notice of Discharge are as follows:

1. Notice of Discharge under Section 10A (3A) of the Title Conditions (Scotland) Act 2003, which takes the form set out in Schedule 1 or;
2. Notice of Discharge under Section 13 (3A) of the Tenements (Scotland) Act 2004 taking the form set out in Schedule 2.

The person who registered the original notice must consent to and sign the Notice of Discharge. Following submission of the Notice of Discharge, the entry for the NPLC will be removed from the title sheet by the Keeper.

The requirements for completion of such discharge notices are:

1. the property must be described in a way that is sufficient to identify it (but cross-reference can just be made to the description in the original NPLC);
2. where the property has a postal address, the description should include that address;
3. where title to the property has been registered in the Land Register, the description must refer to the Title Number of the property or of the larger property of which it forms part. Where the title to the property is still recorded in the Register of Sasines, the description should refer to the relevant Sasine deeds;
4. the discharge notice should include the date on which the original NPLC was registered in the Land Register or recorded in the Sasine Register.