Outer House case in concerning the interpretation of the lease of a plot in a chalet park in Lochgoilhead.

Mr and Mrs Ramsay bought a (removable) chalet in the park (for £20.5k) from Drimsynie. As part of the same transaction, the Ramsays entered into a 10 year ground lease of the plot on which the chalet was located. The lease provided that, on expiry of the lease, Drimsynie would have:

 “..the option to acquire the chalet at a price to be agreed, failing agreement at a price to be determined by an arbiter to be appointed in terms of clause FIFTEENTH…or offer to (the Ramsays) a renewal of the lease for a period to be determined by (Drimsynie)….”

When Drimsynie terminated the lease (following a change policy which involved replacing chalets with newer, larger, and more expensive chalets), an arbiter was been appointed to determine the sum to be paid for the chalet and a dispute developed as to how the arbiter should approach the valuation of the chalet. The Ramsays argued that the chalet should be valued on the assumption of a continuing right to occupy it on the plot on which it was located. Alternatively, Drimsynie contended the arbiter should consider only the market value of the chalet itself on the basis it would be removed from the plot.

Lord Malcolm found that his task was to interpret the lease by reference to the understanding of a reasonable person in the position of the parties at the time the lease was entered. It was important to note that the lease was not a stand alone contract and was linked to the associated purchase of the chalet. The effect of the relevant clause was that the Ramsays could remain in occupation of the chalet on the plot in terms of the lease until the chalet was purchased by the Drimsynie. If Drimsynie wanted to put a new chalet on the site and sell it to someone else they would require to purchase the old chalet first. In Lord Malcolm’s view the parties would have understood that Drimsynie was buying out the Ramsays’ right to continue to use the chalet on the plot in terms of the lease. As such, a reasonable person in the position of the parties at the time of the lease would have understood that Drimsynie would purchase the chalet on the same footing as they sold it. He found support for this view from the element of permanence associated with the chalet, noting that:

• the lease described the chalet as having been “erected” on the plot
• although simply resting on its foundations, it was connected to services, including water and drainage
• the chalet had been on the site since about 1967 and was shown on the OS map
• the Ramsays paid council tax in respect of the chalet.

Lord Malcolm therefore held that that the arbiter should value the chalet on the basis that it could be used on the site for so long as it remained habitable.

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 arbitration proceedings in respect of a lease over Pentlandfield business park at Roslin in Midlothian. Midlothian Innovation let the premises from Robert W Ferguson & Co.

The lease was for 5 years and included an option to purchase as at 1 July 2007. The parties had also signed a minute of agreement. Both of the documents stipulated that, if the option were exercised, Robert W Ferguson would grant a renunciation of the lease.  Midlothian exercised the option on 1 December 2006 and a renunciation was signed on 2 July 2007. However, on 16 August 2007 both parties signed a joint application form seeking the appointment of an arbitrator in respect of a dispute over compliance with the repairing obligations in the lease. The arbitration proceeded slowly but in 2011 Robert Ferguson (the surviving partner of the firm of Robert W Ferguson & Co) changed his position and argued that, given the granting of the renunciation, the arbitrator had no power to make an award.

Lord Woolman rejected that argument. Although the acceptance of a renunciation by a landlord implies a discharge of all claims against the tenant, the renunciation is potentially subject to any further agreement made by the parties. The parties had freedom of contract and were entitled to agree not only that they had a dispute arising out of the lease, but also that they wished to resolve it by arbitration. The signing of the joint application form demonstrated the parties’ intention to have the dispute referred to arbitration and Mr Ferguson’s participation in the proceedings until 2011 implied that he consented to the arbitration. Lord Woolman found that the arbitrator had jurisdiction and the proceedings should proceed to a conclusion.

The full judgement is available from Scottish Courts here.

(See also related decision here).

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

Outer House case concerning an arbitration in relation to a lease and option to purchase (governed by missives, a minute of agreement and a minute of lease) Pentlandfield Business Park in Roslin.

Robert Ferguson had been a partner in a firm (subsequently dissolved) which was the landlord and seller of the business park. MITT was the purchaser and tenant. An arbitration commenced between the parties in respect of a clause imposing liability for repair and maintenance of the business park on the landlord. Mr Ferguson sought an interim interdict preventing the arbitration from progressing arguing:

1. that (by ruling on a claim that arose under the missives and minute of agreement rather than the lease when only the lease contained an arbitration clause) the arbiter had exceeded his jurisdiction; and
2. that the arbiter had no power to assess or award damages as the arbitration was governed by the common law.

Lord Hodge was not persuaded that Mr Ferguson had demonstrated a prima face case for interim interdict. The court would only interdict an arbiter from proceeding with an arbitration in exceptional circumstances which did not exist in this case. If, as Mr Ferguson contended, MITT did not have a valid claim under the clause in the lease, the arbiter would be able to dismiss the claim as irrelevant after a proof, the arbiter having jurisdiction to decide whether the claim under the lease was relevant.

With regard to the jurisdiction to award damages, Lord Hodge’s prima face view was that he was entitled to do so as the solicitors to both parties had signed an application to the chairman of RICS conferring a power to award damages. Also, by failing to raise any objections to the claims in the first three years of the arbitration, the parties had impliedly consented to confer on the arbiter the power to award damages.

 The full judgement of the Scottish courts is available here.

(See also related decision here.)

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