Background
Sheriff Court case considering a purported lease of chip shop (which was converted from a petrol station forecourt shop) on South Uist. In early 2005, the parties reached a verbal agreement under which Mr Gray would lease the premises from Mr MacNeil for 15 years in return for paying staffing and running costs which would constitute rent. The agreement was not put in writing. Mr Gray bought equipment and the property was converted for use as a chip shop which opened for business in July 2005. The relationship between the parties deteriorated and in 2008, following a dispute, Mr MacNeil cut the electricity to the property and refused Mr Gray entry to the property. Mr MacNeil died in 2015 and Mr Gray raised an action against Mr MacNeil’s excecutor (Mr MacNeil Jnr).

Issues
There were essentially two issues for the court:

1. Whether Mr Gray was entitled to the return of the chip shop equipment (or alternatively payment of the value of the chip shop equipment); and
2. Whether, despite the legal requirement for the lease to be in writing, Mr Gray could recover damages (i.e. his loss of future profits) for material breach of the purported lease on the basis of the personal bar provisions contained in the Requirements of Writing (Scotland) Act 1995.

Decision
Return of the equipment
The sheriff found, on the evidence, that the chip shop equipment belonged to Mr Gray. Although, Mr MacNeil Jnr argued that that the equipment had nonetheless acceded[1] to the property, he failed to provide evidence relating to the conditions required (physical union, functional subordination and permanency) for accession to occur and the sheriff found that accession had not taken place.[2]

Verbal lease
Although a lease for more than a year requires to be in writing[3], Mr Gray argued that, in terms of the personal bar provisions contained in the 1995 Act[4], because Mr Gray had acted in reliance of the verbal lease with the knowledge and acquiescence of Mr MacNeil, Mr MacNeil had not been entitled to withdraw from the contract. However, after considering previous authorities[5], the sheriff found that the personal bar provisions in the 1995 Act only apply to the creation of rights which are purely personal whereas the verbal lease would also create real rights[6] (i.e. rights which are enforceable against the world rather than rights enforceable only between contracting parties). As such, the verbal lease was invalid and Mr MacNeil had been entitled to withdraw from it[7].

The full judgement is available from Scottish Courts here.

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[1] I.e. that the equipment had been fixed to the building in such a way as to become part of it (meaning that the owner of the building would also become the owner of the equipment).

[2] However there were some technical difficulties with Mr Gray’s pleadings regarding relating to delivery of the equipment/payment of the value and a further heading was fixed in that regard.

[3] 1995 Act s1(7).

[4] Section 1(3) and (4).

[5] The Advice Centre for Mortgages v McNicoll 2006 SLT 591 and Gyle Shopping Centre General Partners Ltd v Marks and Spencer PLC, [2014] CSOH 122

[6] The verbal lease effected the creation of a real right in land (in the same way, for example, as a disposition effects the creation of real rights in land) in contrast to being purely a contract for the creation of a real right (i.e creating personal rights relating to the creation of a real right to be effected in a future conveyance, in the same way as missives are a contract for the creation of a real right in land – with the real right then being created by the subsequent registration of the disposition which the seller will be obliged to deliver in terms of the missives.) Although a lease can be seen both as a contract for the creation of a real right in land and as effecting a real right in land, the courts have taken the view (after consideration of the Scottish Law Commission’s, Report on Requirements of Writing (Report No112) at para 2.50) that the personal bar provisions contained in the 1995 Act cannot apply in situations where real rights are actually conveyed (even if a contract for the creation of an interest in land is created at the same time).

[7] The sheriff also noted that the result seemed harsh in the circumstances of the case.