Outer House case relating to a lease of retail premises in Falkirk. The landlord was Grantchester and the tenant was Homebase.

Background
The tenant sought to assign the lease of the premises to a third party (CDS). In terms of the relevant clauses of the lease, the tenant was not entitled to assign the lease without the prior written consent of the landlord. That consent could not be unreasonably withheld by the landlord in the case of an assignee of “sound financial standing demonstrably capable of fulfilling the tenant’s obligations” under the lease. (Further, the lease provided that the tenant could not sublet the premises for a rent less than the open market rent and could not require the payment of a premium to the tenant or other ‘unreasonable’ incentive).

When considering the tenant’s request for consent to the assign, the landlord requested to see the terms of agreement between the tenant and the proposed assignee regulating premiums or deals relating to payments due under the lease. The tenant refused to provide that information arguing that it was irrelevant to the landlord’s decision and that, in terms of the lease, the landlord should only be concerned with the a proposed tenant’s identity, character and ability to comply with the tenant’s obligations under the lease.

Arguments
Before the court, the tenant contended that the only relevant considerations which could be taken into account by the landlord were whether the proposed assignee was of sound financial standing and demonstrably capable of fulfilling the tenant’s obligations in terms of the lease. In the view of the tenant, if the proposed assignee satisfied those requirements, it would be unreasonable for the landlord to withhold consent.

Decision
After considering the authorities[1], Lord Tyre rejected the tenant’s arguments and preferred the arguments made on behalf of the landlord to the effect that the lease provided a two stage test. The first stage was to determine whether the proposed assignee’s covenant was good, i.e. whether it was of sound financial standing and demonstrably capable of fulfilling the tenant’s obligations.  If and only if that test was satisfied, one passed to the second stage, which was to determine whether there were reasonable grounds for a refusal of consent by the landlord. In that regard there may be good reasons unconnected with the financial standing of the proposed tenant which would entitle the landlord to withhold consent[2].  In this case it had been reasonable for the landlord to request the information relating to any rent subsidy or reverse premium and to withhold consent unless and until it was supplied. In coming to that conclusion Lord Tyre noted previous authority[3] recognising that the payment of rents subsidies or reverse premiums could affect the rental value of the property and that was something that a landlord could reasonably take into account when deciding whether to withhold consent.

 The full judgement is available from Scottish Courts here

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

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[1] Including Burgerking Ltd v Castlebrook Holdings Ltd [2014] CSOH 36. (See summary here).

[2] Although a landlord would not be entitled to withhold consent if the reasons for doing so had nothing to do with the relationship of landlord and tenant in regard to the subjects leased.

[3] Norwich Union Life Insurance Society v Shopmoor Ltd [1999] 1 WLR 531 and Burgerking Ltd v Rachel Charitable Trust 2006 SLT 224.

The May 2015 edition of Private Client Scotland is now available.  The ‘preview edition’ published in November 2014 can be found here. 

“In this edition the editorial looks at two manifesto pledges concerning the tax status of ‘non doms’ and a new inheritance tax relief and also the launch of the two new Scottish taxes. There is also an article on Revenue Scotland’s LBTT opinions policy.

Included in ‘Case reviews’ is the Judgement of Sheriff McCormick on the appointment of an attorney by an executor. ‘Professional updates’ include updates on the ‘Certification of Death (Scotland) Act’ and the Scottish Law Commission’s annual report. Lastly the ‘News items’ section includes stories that range from the average cost of a funeral to the introduction of ‘guardians’ in England and Wales for missing persons.”

If you would like to subscribe to Private Client Scotland please email me at james@legalknowledgescotland.com

Inner House case concerning a decision of the Land Tribunal relating to the Keeper’s refusal to rectify the Land Register in Ms Rivendale’s favour.

Background
Ms Rivendale purchased a cottage in Tarbert, Argyll in 2010 but was unable to register title to an area of ground in front of the cottage as it was included in her neighbour’s title.  After investigation, the tribunal found that, whilst Ms Rivendale did not own part of the disputed area, she was the “true owner” of another part of the area of ground and that the register was inaccurate in that respect. However, in terms of s9(3) of the Land Registration (Scotland) Act 1979[1], the register cannot be rectified where rectification would result in prejudice to a proprietor in possession. Ms Rivendale’s neighbour, who had used the disputed area to access two building plots and other land owned by her, argued that she was a proprietor in possession and would suffer prejudice if the register were rectified.

The tribunal refused to allow rectification of the register in respect of part of the property which it found that Ms Rivendale did not own and also part of the property of which her neighbour was found to be in possession. However, rectification was allowed in respect of parts of the property found to have been owned by Ms Rivendale but not possessed by her neighbour.

Arguments
Ms Rivendale appealed, arguing that she was entitled to rectification of the register in respect of a larger area of the property than had been granted by the tribunal on the basis:

1. That she was also the “true owner” of a larger part of the property than had been decided by the tribunal.
2. That the evidence of the neighbour’s use of the property was not sufficient to establish possession under s9(3) of the 1979 Act.
3. That the tribunal had erred in finding that the neighbour would suffer prejudice if the register were rectified.

Decision
The Inner House rejected all three arguments and refused the appeal.

The extent of the register’s inaccuracy
Ms Rivendale’s argument that she was the “true owner” of the additional parts of the disputed area was based on her contention that she had acquired it under the law of prescription. For that to be the case, the title on which she relied required to be habile for prescription (i.e. capable of being interpreted as including the track). On its own, the written description in the relevant disposition was habile to include the track. However the plan attached to the relevant disposition (to which written description referred) was not. The Court found that the particular wording in the description and the professionalism with which the plan had been prepared indicated that the plan was to have effect and Ms Rivendale’s title was not capable of founding the prescriptive possession on which she relied.

The neighbour’s possession
Ms Rivendale argued that her neighbour’s use of the part of the property of which the tribunal had found Ms Rivendale to be the true owner was not sufficient to amount to establish possession under the 1979 Act. However, the court found that, when taken together, the neighbours acts (which included culverting a burn (outwith the disputed area) through contractors, allowing the widening and improvement of the track and some slight personal use) were sufficient to put the neighbour in the position of a proprietor in possession in terms of s9(3) of the 1979 Act.

Prejudice
The Court also found that the neighbour’s loss of heritable rights (if the Register were to be rectified in favour of Ms Rivendale) would in itself amount to prejudice noting that it would allow Ms Rivendale to remove part of the track and impede access taken via the track.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

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[1] This aspect of the law has changed under the Land Registration (Scotland) Act 2012 which replaces the 1979 Act.

The latest addition to the LKS style bank is style 1.3.4.2 -Offer by landlord to accept renunciation of lease from tenant with premium or reverse premium. It is available to our subscribers here and for individual purchase here.

Outer House case considering the lease of an office building in South Gyle Business Park in Edinburgh. The lease was one of 15 years in duration and was supplemented with two licence agreements authorising tenant’s alterations to the premises.

Background
Two weeks before the end of the lease the landlord (PDPF) served a lengthy schedule of dilapidations on the tenant (Santander) which sought removal of the tenant’s alterations and replacement of the floor coverings. The tenant refused to carry out the works as it said that it had not received enough notice. The landlord raised an action to recover the cost relating to the necessary works and preparation of the schedule of dilapidations (amounting to a total of over £755k).

The lease contained a clause obliging the tenant to keep the premises in good and substantial repair during the currency of the lease (paragraph 3), a clause obliging the tenant to leave the premises in good condition and to replace the floor coverings at the end of the lease (paragraph 28) and also a clause obliging the tenant to carry out any works contained in a notice served on it by the landlord within 3 months (paragraph 8).

There were 3 questions for the court to decide:

1. whether the lease stipulated that the landlord had to provide at least 3 months’ notice prior to its expiry;
2. whether a term of reasonable notice should be implied into the two licence agreements; and
3. whether the schedule of dilapidations constituted a valid notice.

Decision
3 months’ notice?
After considering the relevant terms of the lease, Lord Woolman (approaching the question by considering the view of a reasonable person with all the relevant background knowledge) found that the obligations contained in paragraphs 3 and 28 were independent of the obligation requiring notice contained in paragraph 8 (the fact that only one of the clauses contained a time limit suggested that the others should not be qualified in the same way). As such, the landlord did not have to provide at least 3 months’ notice to carry out the works.

Reasonable notice implied into licence agreements
Lord Woolman also rejected the fall back argument that a reasonable notice period of 10 weeks should be implied into the licences finding that the introduction of implied terms would be warranted where such a term was required to spell out what a reasonable person would understand the licence agreements to mean. That was not the case here where the implied term would be inconsistent with the parties express stipulation that the landlord could issue its requirement on the termination of the lease.

Valid notice constituted by schedule of dilapidations
The tenant sought to argue that the service of the schedule of dilapidations was simply an assertion of the tenant’s existing repairing obligations under the lease and did not provide adequate notice in terms of removal of the works carried out under the licence agreements. This argument was also rejected by Lord Woolman who noted that the removal of licensed works requires no formality and that, at the time the notice to quit is served, the tenant can ask whether the Landlord insists on removal of the tenant’s alterations.

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

1. Reform of income tax rates and bands. One option would be to create 10%, 20%, 30%, 40% and 50% income tax rates and bands. This would ensure a more progressive system of income tax and in particular removes the large gap between the 20% and 40% income tax rate and band. There was a similar issue with Stamp Duty Land Tax until the recent reforms by both Westminster and Holyrood.
2. Devolve control of the approval of charitable tax status to Revenue Scotland and OSCR.  A Scottish charity should not have to deal with both OSCR and HMRC when OSCR could easily deal with these tax matters.  Revenue Scotland have already done something similar with the two new Scottish taxes.  Registers Scotland are involved with the collection of the Land and Buildings Transaction Tax and SEPA is involved the collection of the Scottish Landfill Tax.
3. Reduce the rate of VAT charged on home repairs and improvements to 5%.  HM Treasury already allows this in the Isle of Man.
4. Allow Police Scotland and the Scottish Fire and Rescue Service to recover VAT.  This is another example of Scottish institutions being penalised by the UK Government when they wish to do things differently.  A previous example was the withholding of Attendance Allowance funding when the Scottish Parliament introduced Free Personal and Nursing Care.
5. Ensure that UK institutions must take Scots law and practice into consideration when dealing with international matters.  For example the United Nations Convention on the rights of persons with disabilities.  This directly impacts on our Adults with Incapacity legislation.
6. Devolve control of stamp duty on shares to the Scottish Parliament.  The Scottish Government could then abolish stamp duty charged on the sale of shares of Scottish registered companies.
7. Devolve control, complete control, of the Crown Estate, air passenger duty and aggregates levy by the end of 2015.  Control of income tax should also be devolved completely.  The new ‘shared’ income tax gives the Scottish Parliament almost no worthwhile control over income tax. All funds from fines, forfeitures and fixed penalties imposed by our courts and tribunals as well as sums recovered under the Proceeds of Crime legislation should also remain in Scotland.
8. Devolve control of inheritance tax to the Scottish Parliament.  It makes no sense for succession law to be controlled by the Scottish Parliament but not the main succession tax. This would also ensure that the reform of Scottish succession law can be done in a joined up manner.  Another reason to do this is tax simplification both in Scotland and the rest of the UK.  The applicable forms and guidance would no longer need to include explanations of the Scottish and the rest of the UKs laws of succession.  This argument can just as easily be made with a number of transport and environmental taxes.
9. The Scottish GAAR (General AntI-Avoidance Rule) which goes further than its UK counterpart as it targets artificial, not merely abusive schemes, should be made to apply throughout the UK.
10. Devolve control of the Annual Tax on Enveloped Dwellings to the Scottish Parliament so that the Scottish Parliament can abolish it.  It is not likely to be needed in Scotland now that we have a Scottish Land and Buildings Transaction Tax.  If the underlying issue were to become a problem in Scotland we can easily create our own anti-avoidance provision.

Outer House case concerning the nature and extent of tenants’ obligations under a lease of office premises at Chesser House on Gorgie Road in Edinburgh. Mapeley were the landlords and the City of  Edinburgh Council, the tenants.

At the expiry of the lease Mapeley served a schedule of dilapidations on the Council and sought payment of just over £8m.The interpretation of the tenant’s repairing obligations under the lease were at the centre of the dispute. There were two issues of interpretation for the court:

1. whether, in terms of the lease, the landlord was entitled to receive a sum equivalent to the cost of repairing the premises even if it had no intention of carrying out the required repairs; and
2. whether, in terms of the lease, the tenant was obliged to replace the plant and equipment on the premises at the end of the lease whatever the condition of those items (i.e. even if not missing, broken, worn, damaged or destroyed.)

In essence, the Council argued that, in terms of the lease, (a) the landlord was not entitled to recover the costs of putting the property into the standard of repair contained in the lease where the landlord did not intend to undertake the work and (b) the tenant did not require to replace or renew items of plant and equipment where the items were not missing, broken, worn, damaged or destroyed.

Lord Doherty found that the precise wording contained in lease was capable of bearing both that interpretation and the interpretation argued for by the landlord (per 1. and 2. above). However, where such wording is capable of bearing more than one meaning, the court requires to adopt the interpretation which best accords with business common sense. As such Lord Doherty preferred the interpretation contended for by the Council noting that, to adopt Mapeley’s approach, would have involved a radical departure from the common law which would have resulted in excessive and disproportionate consequences and, as a result, would have required to have been clearly indicated in the lease (which it had not been in the lease in question).

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Outer House case concerning a petition for judicial review of the decision of Fife Council to grant planning permission for the building of a new Madras College on land at Pipeland on the outskirts of St Andrews.

The current Madras College is located on two sites and in need of replacement. The Executive Committee of Fife Council agreed that a replacement school should, where possible, be situated on a single site. Planning permission for the building of a new school on a single site at Pipeland was issued on 16 May 2014.

The Petitioners argued that in granting the permission the Council:

1)    had not considered an alternative site at North Haugh which could be used in conjunction with playing fields at Station Park (on the other side of the A91);

2)    if that argument was wrong and the Council had considered the North Haugh site then the Council had wrongly considered it to be a split site; and

3)    If the Council had been entitled to treat the North Haugh site as being split, then it had erred in excluding it from further consideration on that ground.

Lord Doherty rejected those arguments finding that the North Haugh site had been considered as an option and, after noting that North Haugh and Station Park are split by a major A class road and were not contiguous, that the Council’s consideration that the site was a split site was neither perverse nor erroneous. Lord Doherty also found that the North Haugh site had not been discounted solely on the basis that it was a split site and account had been taken of actual disadvantages of the site such as travel time for staff and pupils and the fact that North Haugh was a small site without space which may prove necessary to deal with a developing curriculum in the future. The petition was therefore refused.

The full judgement is available from Scottish Courts here.

(NB: See appeal to Inner House here.)

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here

The second edition of Private Client Scotland is now available.  The ‘preview edition’ published in November 2014 can be found here.  

“In this edition there are articles on the Scottish Government’s proposal to reform our law of succession and an update and hopefully some closure on the validity or otherwise of continuing Powers of Attorney made in the standard form recommended by OPG (Scotland). Included in ‘Case reviews’ is the decision of Sheriff Hammond that a relationship of approximately 13 months qualifies as ‘cohabitation’ for the purposes of section 25 of the Family Law (Scotland) Act 2006. ‘Professional updates’ include a link to HMRC’s December ‘Trusts and Estates newsletter’ and confirmation of a new and designated guardianship court sitting in Edinburgh. Lastly the ‘News items’ section includes stories that range from a new Cabinet Secretary for Justice to an unexpected tax bill for Boris Johnson.”

If you would like to subscribe to Private Client Scotland please email me at james@legalknowledgescotland.com