Defective and Dangerous Buildings (Recovery of Expenses) (Scotland) Bill: Stage 2
Amendment 1, in the name of the minister, is grouped with amendment 19.
Amendment 3, in the name of the minister, is grouped with amendments 4, 17, 18 and 21.
The amendments can be considered as minor drafting changes. If members thought that the previous amendments were technical, they should wait until they hear these ones.
The most significant amendment in the group is amendment 4. Once a building has been demolished, only the land or site remains. Amendment 4 will ensure that, where a charging order for expenses is made in respect of demolishing a building, references to the building in the new sections to be inserted in the 2003 act—section 46A and sections 46C to 46G—are to be read as references to the site of the demolished building.
Amendment 18 is consequential to amendment 9, which seeks to remove delegated powers for Scottish ministers to make further provisions on the repayment or early redemption of repayable amounts. Amendment 18 removes an amendment to section 54 of the 2003 act, as found in section 1(d) of the bill, which makes provision in respect of orders and regulations and is now no longer required.
Amendment 3 is a minor drafting amendment that seeks to change “subsection” to “section” in section 46B(1)(b) of the 2003 act. Amendment 17 is similarly a minor amendment that seeks to clarify the insertion point of subsection H in section 47. Amendment 21 is another minor drafting amendment and is consequential to amendments 8 and 9, which seek to remove the role of Scottish ministers in the repayment or early redemption of repayable amounts.
I move amendment 3.
Amendment 5, in the name of David Stewart, is grouped with amendments 6 to 9.
I am pleased that Mr Stewart lodged amendments 5, 6 and 7, which will provide flexibility on the term of a charging order, and I support the amendments. Key stakeholders such as the Convention of Scottish Local Authorities, local authorities and the Law Society of Scotland expressed concern that a 30-year standard term represents a long time before costs can be recovered and is inflexible.
The range of costs that local authorities incur can vary significantly, as is evident when we compare the cost of minor work on a defective building with the cost of demolishing a number of dangerous buildings. Amendments 5, 6 and 7 will allow local authorities, when determining the term of a charging order, to consider, depending on the cost of the works that they had undertaken, the appropriate level of annual instalments and the owner’s ability to pay.
Amendments 8 and 9, which are Government amendments, will remove an additional, unnecessary level of bureaucracy. When a local authority has done enforcement work, it will determine the amount that is repayable by the owner and instigate a cost-recovery mechanism. If the local authority decides to make a charging order, the owner has the right to appeal to the sheriff. Even when a charging order has been registered, the owner can settle their liability at any time and even agree a lower settlement amount with the local authority, if that is appropriate.
Amendments 8 and 9 will remove the power for ministers to determine cases when the owner and local authority cannot agree on the settlement amount, thereby removing the possibility that owners would use ministers to delay or frustrate the repayment of their debt. The repayable amount is a matter between the building owner and the local authority.
Mr Stewart, I assume that COSLA supports amendments 5, 6 and 7.
The amendments in this group cover various registration issues. Amendment 10 clarifies that a charge is created when a charging order is registered in respect of a building.
Amendment 14 covers the discharge of a charging order in a similar way: the charge is discharged when discharge of a charging order is registered—I hope that members followed that.
Amendment 11 clarifies who a registered charging order is enforceable against. It will amend proposed new section 46E(3) of the Building (Scotland) Act 2003 so that a registered charging order will be enforceable by the local authority against the owner of the charged building, rather than against
“any person deriving title to the charged building.”
“Owner” is the term used throughout the Building (Scotland) Act 2003 and is defined in section 56 of that act.
For similar reasons, amendments 12 and 13 amend paragraphs (a) and (b) of new section 46E(4) of the 2003 act. A charging order is not enforceable against a third party who acquires the right to the charged building in good faith and for value before the charging order is registered. Amendments 12 and 13 are intended to clarify that a charging order is not enforceable against “any person”, rather than “a third party”. The amendments also clarify that a charging order is not enforceable against any person who subsequently derives title from such a person. That avoids any doubt arising as to what is meant by “a third party”.
Amendment 16, by inserting new section 46H into the 2003 act, will provide definitions for “register” and “appropriate land register”, which are terms used in the new sections.
I move amendment 10.
The amendments in this group deal with consistency of terminology. They provide further clarification in the bill in relation to the process of registering a charging order. As such, I welcome the amendments.
Amendment 10 agreed to.
Amendments 11 to 14 moved—[Derek Mackay]—and agreed to.
Has any work been undertaken on the number of instances in which the provision would have been used over, say, the past couple of years had it already been implemented?
That is a difficult question for Mr Stewart to answer.
10:30
This last group features only one amendment. Amendment 20 introduces standard ancillary provisions to enable ministers to give effect to the bill’s provisions and, in particular, to enable ministers to make any consequential amendments that may not yet have been identified.
The ancillary provisions follow the approach taken in, for example, the High Hedges (Scotland) Act 2013 and the Historic Environment (Amendment) (Scotland) Act 2011. Without such a power, it could be necessary to turn to Parliament to deal through subsequent primary legislation with a matter that is clearly within the original bill’s scope and policy intentions. That would not be an effective use of the resources of Parliament, the committee or Government.
The power is limited: it can be used only in relation to the bill. Importantly, it is also limited by providing the appropriate level of parliamentary scrutiny. Any order made under this section that contains a provision that adds to, replaces or omits any part of the text of an act will be subject to the affirmative procedure. Any other order made under the section will be subject to the negative procedure. I hope that that explains the rationale behind the amendment.
I move amendment 20.
Agenda item 2 is consideration of the Defective and Dangerous Buildings (Recovery of Expenses) (Scotland) Bill. I welcome David Stewart, the member in charge of the bill, and Derek Mackay, the Minister for Local Government and Planning, who has portfolio responsibility for the subject matter of the bill.
Before we consider the amendments, it might be helpful if I set out the procedure for stage 2 consideration. Everyone should have with them a copy of the bill as introduced, the marshalled list of amendments, which was published on Monday, and the groupings document, which sets out the amendments in the order in which they will be debated.
There will be one debate on each group of amendments. I will call the member who lodged the first amendment in each group to speak to and move their amendment, and to speak to all the other amendments in the group. Members who have not lodged amendments in the group but who wish to speak should indicate that by catching my attention in the usual way. If the minister and the member in charge have not already spoken on the group, I will invite them to contribute to the debate in that order just before I move to the winding-up speech. The debate on each group will be concluded with the member who moved the first amendment in the group winding up.
Following the debate on each group, I will check whether the member who moved the first amendment in the group wishes to press their amendment to a vote or to withdraw it. If they wish to press ahead, I will put the question on the amendment. If a member wishes to withdraw their amendment after it has been moved, they must seek the committee’s agreement to do so. If any committee member objects, the committee must immediately move to the vote on the amendment. If any member does not want to move their amendment when I call it, they should say, “Not moved.” Please remember that any other MSP may move such an amendment. If no one moves the amendment, I will immediately call the next amendment on the marshalled list.
Only MSPs are allowed to participate in debates on amendments, and only committee members may vote at stage 2. Voting is by show of hands. It is important that members keep their hands clearly raised until the clerk has recorded the vote. The committee is required to indicate formally that it has considered and agreed each section of the bill, so I will put a question on each section at the appropriate point.
Section 1—Expenses recoverable using charging orders
The first group is on the extension of charging orders to include expenses under sections 25 to 27 of the Building (Scotland) Act 2003. Amendment 22, in the name of the minister, is grouped with amendments 23, 24, 2 and 25 to 28.
Let me outline the rationale for the amendments. Currently, the bill will allow charging orders to be made only for work on defective and dangerous buildings. Local authorities have other enforcement powers under the Building (Scotland) Act 2003 and in some instances have to undertake work when an owner does not comply with notices that are served on them under those powers. Those powers relate to building regulations compliance notices, under section 25 of the 2003 act; continuing requirement enforcement notices, under section 26; and building warrant enforcement notices, under section 27. The need to provide local authorities with greater certainty of cost recovery applies as much to those powers as to the powers on defective and dangerous buildings.
In the consultation on the proposed community empowerment (Scotland) bill, the Government asked whether improved cost recovery powers should be extended to those sections. There was overwhelming support for doing so, and I am pleased that the bill can accommodate that.
Amendments 22 to 24, 27 and 28 widen the application of the bill to cover the other enforcement powers in sections 25 to 27 of the 2003 act.
Amendments 27 and 28 change the short and long title, resulting in the title becoming the Buildings (Recovery of Expenses) (Scotland) Bill.
Amendments 25 and 26 cover an issue that arises from the widening of the application of the bill to those other enforcement powers. The owner is the person who is liable for the local authority’s costs in all sections except section 27. In that case, the 2003 act stipulates that it is “the relevant person”. In most cases that will be the owner, but it could be a tenant. Amendments 25 and 26 clarify that if the relevant person is not the owner, they are still responsible for all the repayable amount. However, under new section 46E of the 2003 act a charging order is enforceable only against the owner of the charged building.
Amendment 2 removes an unnecessary reference and ensures consistency within new section 46B of the 2003 act.
I trust that that explains the rationale for the amendments in the group and the impacts that they will have.
I move amendment 22.
I did not consult on this area but I am aware that the Scottish Government sought views on making charging orders available to local authorities when enforcing sections 25 to 27 of the Building (Scotland) Act 2003, which deal with compliance and enforcement.
On a practical level, it makes sense to deal with the matter within a single piece of legislation, as that will assist local authorities when implementing the act. I therefore have no objection to the amendments.
Amendment 22 agreed to.
I thank the minister for his explanation of amendments 1 and 19. The amendments displace my commitment to amend the bill to address the point that was raised by the Delegated Powers and Law Reform Committee in its 6th report 2014, as the Government will rely on section 36 of the 2003 act to specify the form and content of charging orders and discharges.
I am reassured that development of standard forms alongside the forms that are already set out in the Building (Forms) (Scotland) Regulations 2005 is not expected to delay commencement. I support the amendments.
Amendment 1 agreed to.
Amendments 23, 24 and 2 moved—[Derek Mackay]—and agreed to.
COSLA was keen that there be more flexibility in the charging order. Many local authorities thought that 30 years was far too long a repayment period for a relatively small sum. I think that the amendments in my name in this group are in accordance with the views of COSLA and the local authorities to which I have spoken over the past couple of years.
Amendment 5 agreed to.
Amendment 25 moved—[Derek Mackay]—and agreed to.
Amendments 6 and 7 moved—[David Stewart]—and agreed to.
Amendments 8, 9 and 26 moved—[Derek Mackay]—and agreed to.
Amendment 10, in the name of the minister, is grouped with amendments 11 to 14 and 16.
Mr Stewart referred to searches on titles in relation to any works that have been carried out and specifies a 14-day period for registration of a charging order in the amendment. I am trying to work out the legal aspects between the buyer and seller of a property and when the provision becomes relevant.
Could we end up in another legal dispute between the buyer and the seller if charging orders have been placed against a building? As I understood it, part of the idea behind the changes that the bill introduces was that, particularly if there was a 30-year repayment period, the repayment would be against the building. The question is how we secure that repayment against the building if we get involved in a legal dispute between the buyer and seller about what charging orders were put in place, when they were put in place and the notification of those charging orders if they had not been registered appropriately when solicitors carried out searches.
I can answer it by talking about charging orders in general terms; I will then respond on the specifics of the two-week issue.
If memory serves me right, local authorities have £4 million-worth of outstanding debt. I am not suggesting that charging orders are the only game in town, but they would do a huge job in ensuring that local authorities have less outstanding debt on any work that is carried out.
There is precedent for the several liability approach: the Tenements (Scotland) Act 2004, the Historic Environment (Amendment) (Scotland) Act 2011 and, most recently—the act with which Mr McDonald will be most familiar—the High Hedges (Scotland) Act 2013 all contain provision for several liability. I am totally convinced, Mr McMillan, that in two or three years’ time, were you to look at where local authorities have used charging orders on dangerous and defective buildings, the outstanding debt of local authorities in the whole of Scotland would be reduced dramatically. I would be very happy at that stage to return to the committee, if it carries out post-legislative scrutiny, to make further comments on the issue.
As the convener said, it is very difficult for me to give a categoric assessment of the impact of amendment 15. However, it would close an exception that some more devious owners might use to get around paying local authorities. Amendment 15 is another way to capture debt and to ensure that if local authorities carry out work, it is incumbent on owners to pay any outstanding debt to the local authority.
The bill currently includes provision that charging orders and discharges have to be in such a form as the local authority may determine and that the content of the charging order includes the information set out in schedule 5 to the bill, unless otherwise required by an order by ministers—under new section 46A(3) of the 2003 act—that specifies the form that charging orders and discharges must be in. The Delegated Powers and Law Reform Committee commented at stage 1 that the provision
“should be amended to provide a power to amend new schedule 5A”.
The member in charge confirmed that he would amend the provision accordingly. However, the Government has subsequently discussed that with Registers for Scotland, which expressed its preference for local authorities to use standard forms for a charging order and a discharge of a charging order. That view is shared by the Government. Having heard the Delegated Powers and Law Reform Committee’s concerns, and being supportive of the bill, the Government has gone with a different route to meet those concerns, preferring to rely on the powers that exist under the 2003 act. By bringing forward an amendment to the Building (Forms) (Scotland) Regulations 2005, the Government wishes to develop standard forms alongside the standard forms that are already set out in the 2005 regulations, such as the building warrant and completion certificate. Those would be subject to the usual legislative scrutiny and consultation and, importantly, are not expected to delay the commencement of the act.
I move amendment 1.
I note that the amendments cover minor and technical points, and that some are of a consequential or tidying-up nature, and therefore I have nothing to add.
Amendment 3 agreed to.
Amendment 4 moved—[Derek Mackay]—and agreed to.
At stage 1, it became apparent that a number of local authorities had concerns about the fixed 30-year repayment term, particularly for lower sums. The Scottish Government also had concerns and, in its memorandum on the bill, stated that:
“Terms of repayment should be flexible, to take account of the variations in levels of possible expenditure”.
I readily acknowledged those concerns and, as such, gave a commitment to the committee to amend the bill to give local authorities greater discretion to set the term of a charging order. Amendments 5, 6 and 7 constitute a package of amendments that alter the repayment provisions in the bill to provide local authorities with greater discretion to set the repayment period, taking into account the circumstances of the owner and the amount that is owed.
Amendment 5 adds a new subsection to new section 46C of the 2003 act as inserted by the bill, on the repayable amount. The new subsection (3) places a duty on local authorities to determine the number of annual repayments that an owner must pay. The number of annual repayments can be no less than five and no more than 30.
In addition, the local authority must set a date on which the annual instalment is payable. Setting an instalment date does not prevent local authorities administratively from accepting monthly or other intervals of payment. In that situation, the amount that is due would need to have been paid in full by the annual instalment date.
Amendments 6 and 7 are consequential. Amendment 6 revises the repayment information to set out the charging order that was associated with having a fixed term of 30 years. The order is now to provide that the repayable amount is payable by means of the number of annual instalments and on the date of the year determined by the local authority in accordance with section 46C(3) as covered by the principal amendment in the package, which is amendment 5.
Amendment 7 takes account of the move to a flexible repayment period by referring to the “final” instalment rather than the “thirtieth” instalment. The committee’s stage 1 report welcomed amendments at stage 2 to allow local authorities to recover expenses over a suitable timescale related to the amount incurred and the debtor’s ability to pay. I hope that the committee will support the amendment to address the issue of what were overly inflexible repayment provisions in the bill.
10:15
Amendments 8 and 9 remove the powers for ministers to determine cases in which the owner and local authority cannot agree on the settlement amount. I am aware that a similar power in the Housing (Scotland) Act 2006 in relation to repayment charges has not been used—it is not known why that is the case. With that in mind, and given that the bill should be straightforward to operate, I am content to support amendments 8 and 9, which make clear that the repayable amount is a matter for the building owner and the local authority.
I move amendment 5.
Amendment 15, in the name of David Stewart, is in a group on its own.
During stage 1, I indicated that I would consider ways of closing the gap between a local authority carrying out work and the registration of a charging order. With the assistance of the Scottish Government—which, in turn, sought advice from Registers of Scotland—I investigated whether there was potential to register a notice of potential liability in advance of the charging order being registered. I have concluded that a mechanism that was intended to close a gap would in fact create a layer of bureaucracy. That would detract from the simplicity of the bill and would incur additional costs to local authorities.
The crux of the problem appears to be timing. It should be possible for the local authority to register a charging order very soon after work has been carried out. Local authorities would not view charging orders as a tool of last resort, but would be proactive in using them to secure the debt. However, I recognise that liability might become an issue over the longer term, as property changes hands. That is why I have lodged an amendment to clarify liability and to ensure that those who seek to avoid their responsibilities cannot do so.
Amendment 15 represents a significant addition to the bill. It provides that the buyer of a property, where a charging order has been registered, is to be severally liable, with the seller, for any unpaid amounts due by the seller under the charging order. Payment might be made by the seller or the buyer at the point of sale. However, if the liability is discharged by the buyer, the provision enables the buyer to pursue the seller for the debt. That might happen where the outstanding liability has not been factored into the sale price of the property in question.
New section 46F of the 2003 act, which amendment 15 would introduce, deals with the liability of a new owner for the repayable amount. Proposed new section 46F(1)(b) provides an important safeguard for the new owner. The buyer would not be liable if the charging order had been registered within 14 days of the new owner acquiring the property. That is to take account of the possibility that the conveyancing search process would not necessarily uncover a very recently registered charging order and that a buyer would not, therefore, be aware of it and could not take that factor into account when negotiating the purchase. It is appropriate that, where a charging order has been registered within 14 days of purchase, the new owner should not be liable along with the former owner. As far as a local authority is concerned, the proposed measures would encourage registration of the charging order at the earliest opportunity.
Proposed new section 46G deals with the continuing liability of the former owner following a sale. It provides that the original owner cannot escape liability by selling the property on, and that they can be pursued by a subsequent owner for the repayable amount, if it is not paid, or for any part of the repayable amount that is paid by the subsequent owner.
I believe that the new severally liable provision will strengthen the existing debt recovery powers in the bill.
I move amendment 15.
I thank Mr Wilson for that comment. There is quite a lot in it so I will go into a little bit of detail, if the convener does not mind.
The main point that I stress to the committee is that charging orders are a well-recognised and well-rehearsed technique that goes back to, I think, 1959. The great beauty of them is that they are attached to the title of the building and it is normally hard to escape the fact that there is a charge on the title of the building.
For example, if Mr Wilson bought a property from me, his lawyers would do a search through the conveyancing procedure. That search would normally identify whether a charging order was attached to the title of the building. Most new purchasers would rather have a clean title—no complications on it—so, if anything was outstanding, that would be taken into account in any negotiations. If the property was worth £200,000 and there was a £50,000 charging order on it, the price that Mr Wilson and I would negotiate would reflect the fact that there was an outstanding charging order.
Normally, it is not possible to escape a charging order because it is clearly registered in the register of sasines and the various other registers that are available. However, if a sale was made within a short time—for example, two weeks—the fact that there was a charging order would not normally be picked up because of the issue about registration.
The key point is that notices are flagged up in conveyancing. If Mr Wilson’s solicitors checked my property, there would be a red light saying that the property had an outstanding charging order. That is the key in the conveyancing procedures. We have taken clear legal advice and think that the bill is fairly rock solid. However, if a sale was made within two weeks, that red-light issue might not be picked up. The amendment would ensure that the new owner, which would be Mr Wilson in my example, would not be liable if a sale was made within two weeks of the charging order of being registered, because it would not be picked up.
The general advice that I give the committee is that charging orders are an extremely good way for local authorities to recover moneys. As I said at stage 1, I am not suggesting that they be used in every situation. My advice to local authorities is that assessments should be made jointly by building control officers and a legal team. Where it is clear that there is a clean title, it may be a good candidate for a charging order. I certainly recommend that if the bill is passed, local authorities do not sit on their hands on the issue. It is important that they get a charging order in place as soon as possible on any works that are carried out if they think that that is appropriate.
The amendment reinforces the bill and makes it much stronger than it was before. It would make it very difficult to avoid a charging order and the debt. Even if somebody was selling a property, the order would be flagged up by the lawyer because that is the nature of the conveyancing system.
I am pleased to see amendment 15 lodged by Mr Stewart to provide a mechanism to ensure that the original owner does not escape liability if the property is sold or transferred. The amendment will also ensure that, subject to certain conditions in respect of registration of the charging order, a new owner is severally liable with any former owner.
The Government supports the amendment, as Mr Stewart has mentioned. The amendment follows the approach taken in the recent High Hedges (Scotland) Act 2013 and the Historic Environment (Amendment) (Scotland) Act 2011 to make former and new owners severally liable. That is the right way forward. It also follows the approach taken in the Title Conditions (Scotland) Act 2003 and the Tenements (Scotland) Act 2004. That approach was also included in the proposals in the community empowerment (Scotland) bill consultation.
In considering the application of the bill’s provisions, the most influential factor in reducing the likelihood of an owner using avoidance tactics is there being no unnecessary delay in a local authority registering a charging order. Therefore, it is essential that a local authority manages effectively the enforcement process from initial investigation through to final cost recovery.
Charging orders should be registered at the most appropriate time and should not be seen simply as a last resort. Although early registration of an order turns that into an annuity with annual payments, an owner can still repay the full amount early and can even agree a reduced settlement with the local authority, thereby allowing the charging order to be discharged earlier than the full term.
Amendment 15 agreed to.
Amendments 16 to 19 moved—[Derek Mackay]—and agreed to.
Section 1, as amended, agreed to.
After section 1
Amendment 20, in the name of the minister, is in a group on its own.
I note the minister’s point that the power is limited and can be used only in relation to this act and that any order which adds to, replaces or omits any part of the text of the act will be subject to the affirmative procedure. I therefore support the amendment.
Amendment 20 agreed to.
Section 2—Commencement
Amendment 21 moved—[Derek Mackay]—and agreed to.
Section 2, as amended, agreed to.
Section 3—Short title
Amendment 27 moved—[Derek Mackay]—and agreed to.
Section 3, as amended, agreed to.
Long title
Amendment 28 moved—[Derek Mackay]—and agreed to.
Long title, as amended, agreed to.
That ends stage 2 consideration of the bill. The bill will now be reprinted as amended and will be available in print and on the Parliament website tomorrow morning.
The Parliament has not yet determined the date on which stage 3 proceedings will take place but members can now lodge stage 3 amendments at any time with the legislation team. Members will be informed of the deadline for amendments once it has been determined.
I thank David Stewart and the Minister for Local Government and Planning for attending and I thank members for their participation. The next committee meeting is next week, on Wednesday 11 June, at 11.30 am.
Meeting closed at 10:37.