The Title Conditions (Scotland) Act 2003 was passed during the first Scottish Parliament. It codifies the kinds of restrictions or burdens that can be included in titles to land and property. Among them is something called a conservation burden that can be used to protect aspects of the natural and cultural heritage. One of the bodies allowed to impose such burdens is the National Trust for Scotland (NTS).

Helen Finan owns a croft in the village of Inveralligin in Wester Ross. She inherited the croft from her mother, Donaldina Maclean Finan who passed away in 2011. The croft has been in her family since before the 1886 crofting act. Her great-grandfather’s family was a victim of the Highland Clearances. Helen moved to the croft in 2009 to nurse her mother in the last two years of her life.

In 2006, Donaldina had decrofted (removed from crofting tenure) the house and garden. Later, in 2009 she exercised her legal right to acquire the whole croft and, in so doing became an owner-occupier crofter.

Under the crofting acts, if the croft land is sold to anyone who is not a member of the crofters’ family within 10 years of being bought, the landlord is entitled to clawback 50% of the difference between the open-market value and the price paid to acquire it. This condition relates only to the croft land and not to the dwelling house. Helen is content with this statutory condition.

This blog is not about the croft-land. It is about the house and garden which Helen now owns outright. The house and garden are shown bounded in blue in the title plan above. The croft-land is the remaining land bounded by the red line.

At the time of the sale of the croft, NTS, who bought the estate in 1967, insisted that a conservation burden was imposed on the croft house, garden and croft-land. (1)

The burden requires the consent of NTS for the following.

– the sub-division of the house or its permanent occupation by more than one family

– the development of the building for anything other than a single dwelling house

– any internal or external alterations.

The burdens require that,

– the owner shall paint the house at least ever five years with a colour approved by NTS

– the garden be kept in a neat and tidy condition.

Helen and her late mother have done a very good job abiding by these conditions.

The most significant of the conservation burden conditions, however, has nothing to do with appearance or amenity but insists that the house and garden,

“shall be used as a private dwelling house only and as the main residence of the Proprietor, and for no other purpose, including a holiday home or let for holiday purposes.”

Helen is not in a position to reside permanently in Inveralligin and thus she wishes to sell the whole croft. But she faces a problem because the potential buyer has been advised that the burden will make it difficult to re-sell the property in future. The croft house is now difficult to sell and leaves Helen in a tricky position. She cannot live and work there as there is no work. She cannot let the house because that contravenes the conservation burden and it looks like she may not be able to sell it. Her future is in the hands of the NTS.

I understand that others are in a similar situation.

Now it may or may not be desirable that the owners of such properties be compelled to live in the house they own. Indeed Section 33(2) of the Crofting Reform (Scotland) Act 2010 insists that crofters should live within 20 miles of their croft (though this do not apply to the croft house if it is sold independently from the croft). The issue here is not the desirability or otherwise of such conditions but whether it is appropriate or even lawful for the NTS or any other private body to impose and police them.

Helen has therefore applied to the NTS to waive the conservation burden. The application was considered by the NTS’s “Conservation Agreement Scrutiny Panel”. It decided that it was willing to grant the waiver in respect of the residency condition but that all other conditions (the colour of the house etc) remain in place. But the panel placed a condition on the granting of the waiver viz.

the Panel recognised that the condition diminishes the market value of the property. In recognition of this the Panel requests that a payment be made to the trust equivalent to 50% of the uplift in the value of the Property arising from the granting of the waiver. The payment shall be applied to the trust’s charitable purposes which include the care and protection of the wider Torridon Estate for the benefit of the public.”

This is a quite breathtaking statement. The only reason the croft house is devalued is because of the conservation burden which NTS imposed and in exchange for waiving the burden, NTS wants to be paid a substantial sum of money!

The problem with the approach of the NTS is that it is not clear that the conservation burden is lawful in the first place. In 2002, the NTS argued for such burdens in written and oral evidence to the Scottish Parliament and made no mention of any wish to become involved in social engineering of any kind.

Section 38 of the Title Conditions (Scotland) Act 2003 reads as follows

38 Conservation burdens

(1) On and after the day on which this section comes into force it shall, subject to subsection (2) below, be competent to create a real burden in favour of a conservation body, or of the Scottish Ministers, for the purpose of preserving, or protecting, for the benefit of the public—

(a) the architectural or historical characteristics of any land; or

(b) any other special characteristics of any land (including, without prejudice to the generality of this paragraph, a special characteristic derived from the flora, fauna or general appearance of the land);

and any such burden shall be known as a “conservation burden

What architectural, historic of other (flora, fauna etc.) characteristic of the land is preserved or protected for the benefit of the public by insisting that the owner of the house shall use it as their main residence and for no other purpose?

Answer – none.

Whether someone lives in a  house or not bears no relation to any characteristics of the land.

In this instance an absentee conservation landlord is seeking to impose its values and will on another property owner who stands to be disadvantaged as a consequence. Is this right?

It would be interesting to see what the Land Court or Lands Tribunal for Scotland would make of of this question if it were to be presented to them given both the question over the legitimacy of the conservation burden and the more general conflict arising between the rights of crofting tenants under the law and the aims of the NTS.

NOTES

(1) Of course the conditions of sale were accepted by Helen’s late mother. Had she not accepted them, she may have had to go to the Land Court to contest them. She was ill and in the last two years of her life. On a reasonable interpretation of the circumstances she appeared not to have had a great deal of choice in the matter.

29. August 2012 · Comments Off on Scottish Land & Buildings Transaction Tax · Categories: Finance & Money, Fiscal Policy, Housing, Land Reform, Politics

Scottish Government’s Council of Economic Advisers with Professor James Mirrlees 2nd from right.

The Scottish Government has been consulting on a replacement for Stamp Duty Land Tax (SDLT) – one of the devolved taxes in the Scotland Act 2012. The consultation closes tomorrow (30 August 2012) and I have submitted a response. Yesterday, I spent a stimulating afternoon as a member of a panel discussing property and land tax organised by the Scottish Policy and Innovation Forum where my personal highlight was hearing from Eugene Creighton, Head of Income and Capital Taxes in the Irish Revenue.

As has become the norm in Government consultations, we are invited to answer a set of questions. In the case of this consultation, I declined to answer these questions for the simple reason that they all assume that it is a good idea to replace SDLT with what is being called a Scottish Land and Buildings Transaction Tax. My view is that such a transaction tax should be abolished in its entirety.

I cite in support of my view no less an authority than Professor James Mirrlees, Scottish economist, Nobel prize winner and member of the Scottish Government’s Council of Economic Advisers. Professor Mirrlees led an exhaustive 5-year review of the UK tax system funded by the Economic and Social Research Council and the Nuffield Foundation.

Their view of Stamp duty land tax?

“Stamp duty is among the most inefficient and damaging of all taxes.

There is no sound case for maintaining stamp duty and we believe it should be abolished”(1)

The Mirrlees Review recommends the abolition of business rates, council tax and stamp duty land tax to be replaced by a Housing Services Tax and a Land Value Tax. (2)

My recommendation to the Scottish Government is to conduct a comprehensive review of property and land tax in Scotland rather than the present ad-hoc approach where stamp duty land tax, council tax and business rates are all subject (or soon to be subject) to separate ad-hoc reform processes. There are a range of issues that need to be addressed in addition to purely fiscal matters. These include the important question of local governance and who should be responsible for setting property tax rates.

I also think that the Scottish Government should pay close attention to the findings of a comprehensive review of tax led by one of their own economic advisers which recommends abolition of transactions taxes on land and property. For a full review of their conclusions read Chapter 16 of the Mirrlees Review Tax by Design especially sections 16.3 and 16.4.

UPDATE 31 AUGUST 2012

The above debate is closely linked to the debate on a wealth tax in the UK kicked off by Nick Clegg’s interview in the Guardian on Tuesday. In the Financial Times on Wednesday, former Deputy Governor of the Bank of England, Howard Davies, dismissed the practicalities of the idea but did advocate a land value tax as workable alternative.

UPDATE 2 NOVEMBER 2012

The responses to the SDLT consultation can be viewed here and an analysis is published here.

UPDATE 3 DECEMBER 2012

The Land and Buildings transaction Tax (Scotland) Bill was published on 29 November 2012.

(1) Press Release 14 September 2011
(2) For further details of Land Value Tax, see my October 2010 paper and other material under “Hot Topics/LVT in the main menu.

UPDATE 22 JANUARY 2013

The Land and Buildings Transaction Tax (Scotland) Bill is now being considered by the Finance Committee of the Scottish Parliament. I have submitted evidence. The Scottish Parliament Information Centre has produced a briefing on the Bill in which they make the important point (page 8 of the briefing) that the power that has been devolved to the Scottish Parliament is a power to levy a tax on transactions. I argue that we should abolish such a tax. Such an option is open to Parliament but it would have to raise the lost tax receipts from other sources which is why I argue for a proper review of all property tax and the introduction of a land value tax. That, however, is not going to happen. The Scottish Government are committed to this clumsy and complex tax that produces revenues that are unpredictable, necessitates a new bureaucracy and has been criticised by the Scottish Government’s own economic adviser, Professor Mirrlees.

UPDATE 28 MARCH 2013

The Finance Committee today published its Stage One Report on the Land and Buildings Transaction Tax (Scotland) Bill. My evidence and the views of Professor Mirrlees are dealt with under “Alternative Approaches” paras. 102 – 108. The Committee recognises that the Scotland Act 2012 requires any replacement tax for SDLT to be a tax on land transactions. The Committee has asked the Scottish Government whether it considered the findings of the Mirrlees Review in bringing forward a replacement tax for Stamp Duty Land Tax.

UPDATE 25 JUNE 2013

Scottish Parliament passes the Land and Buildings Transaction Tax (Scotland) Act.

UPDATE 31 JULY 2013

Land and Buildings Transaction Tax (Scotland) Act receives Royal Assent