Heritable property — Standard security — Obligations of heritable creditor in possession — Whether heritable creditor liable for arrears of common charges in building — Appeal to House of Lords against Court of Session decision that the heritable creditors not liable for such charges in arrear — Appeal dismissed
The appellants carried on business as property managers and factors and were the factors of a tenement of dwelling-houses in Glasgow. In June 1986, the respondent building society granted a loan to enable the borrower to purchase one of the flats in the tenement. The loan was secured by means of a standard security under the Conveyancing and Feudal Reform (Scotland) Act 1970. The borrower’s title as proprietor of the flat was registered in the Land Register together with the standard security in favour of the respondents. By 1987 there were substantial arrears in the monthly instalments on the loan repayment, in default of the obligations imposed on the borrower by the standard conditions of the security. In October 1988 the respondents entered into possession of the flat when the borrower was in arrears of his share of the common charges payable to the appellants as factors of the tenement. Those charges were in respect of feuduty, common maintenance accounts, insurance premiums and the appellants’ management charges, all of which fell due for payment before the date when the respondents entered into possession. The respondents paid off the arrears of feuduty but there remained outstanding the balance of the sum, amounting to £179.07. The appellants called upon the respondents to make payment of that amount under section 20(5)(b) of the 1970 Act and when they refused to do so, raised an action in the Sheriff Court.
Although the sum was small, the question was of general importance, namely whether the sum due was an obligation of the proprietor relating to the management and maintenance of the subject, which in terms of section 20(5)(b) must be deemed to have been assigned to the respondents when they entered into possession. The appellants’ argument was successful before the Sheriff and the Sheriff Principal. On appeal to the Court of Session, the first Division reversed the judgment and held that the respondents were not liable for payment of the sum in question. The appellants then took the matter to the House of Lords.
Held The appeal was dismissed.
1. The question raised could be determined by considering whether the debt subsisted at the date on which the respondents came into lawful possession of the security subject as an obligation of the proprietor enforceable against the proprietor as such thereafter. The whole debt fell due for payment before the date when the respondents entered into possession. If that obligation incurred by the borrower was personal to him in the sense that if he sold the property he would be obliged to pay the debt and the purchaser from him would not have the obligation to do so, it was clear that that obligation could not be an obligation on the proprietor subsisting when the respondents took lawful possession of the subjects.
2. The principle established by the cases of, inter alia, Incorporation of Tailors of Aberdeen v Coutts (1840) 1 Rob 296 and Marshall v Callander & Trossachs Hydropathic Co Ltd (1895) 22 RT 954 was that an obligation, eg to maintain the subjects of the grant imposed as a condition of the title, would be enforceable against singular successors. The practical carrying out of the obligation might involve payment of sums which could be ascertained only by reference to the nature of the required work as and when it became necessary. The obligation to maintain would carry with it the obligation to pay for that work but when the obligation to pay a particular sum thus arose, that would be a debt due by the owner at the time the work was carried out. Therefore, when an obligation to repair had been carried out and a debt was due in consequence by the owner who had, by carrying out the work, performed the obligation to repair, the obligation to pay the unpaid debt of that owner would not be transmissible. To hold the contrary would be inconsistent with the doctrine that an obligation to pay an indefinite sum of money could not be constituted a real burden or condition of the title binding on the singular successors.
3. Accordingly, the obligation to pay the debt in question incurred by the borrower during his period as owner would not transmit to a successor in title to his flat. Thus there could be no ground for holding that that debt was an outstanding obligation of the proprietor as such of the flat at the time the respondents entered into possession.
4. The obligation of the respondents was incumbent upon them under a new form of heritable security created by the Act. They were not liable for the debt in question on the basis of a proper construction of the Act having regard to the relevant provisions of the title under which the borrower held his flat and which were therefore the relevant provisions of the title to the subject of which the respondents were heritable creditors in possession.
A C M Johnston QC and Alexander Philip QC (instructed by Sinclair Roche & Temperley) appeared for the appellants; and Nigel Emslie QC and Heriot Currie (instructed by Church Adams Tatham & Co) appeared for the respondents.
