Inner House case concerning an occupancy agreement between Falkirk Council and Mr Gillies. Mr Gillies failed to pay rent and the Council gave notice bringing the occupancy to an end.

The notice given by the Council did not comply with the statutory provisions relating to the termination of Scottish secure tenancies. However, the Council argued that the provisions did not apply as the agreement was governed by separate provisions relating to temporary agreements in terms of paragraph 5 of Schedule 1 of the Housing (Scotland) 2001 Act:

“A tenancy is not a Scottish secure tenancy if the house is being let to the tenant expressly on a temporary basis, for a term of less than 6 months, in fulfilment of a duty imposed on a local authority by Part II (homeless persons) of the [Housing (Scotland) Act 1987]“.

The agreement in question provided:

 “1.4     The Occupancy Agreement will take effect from 9 December 2009 and will continue on a fortnightly basis until the Council has carried out a full investigation of your housing circumstances and, depending on the outcome of that investigation has provided you with an offer of secure permanent accommodation or given you a reasonable opportunity to secure alternative accommodation. You will be given 28 days notice when the Occupancy Agreement is being terminated as set out in part 5 of this agreement.”

The Council contended that this clause made express provision that the agreement was for a term of less than 6 months. In particular, they argued that that the phrase “on a fortnightly basis” was equivalent to an express reference to the agreement being for a term of two weeks.  They also referred a clause which provided: “The total charge for this accommodation is £304.12 per fortnight, payable in arrears, on the last day of each rental period” and argued that the words “rental period” were synonymous with “term” or “duration” and that specifying that the rent was “£304.12 per fortnight”, payable on the last day of “each rental period”, indicated that the rental period or term was a fortnight.

The court rejected the Council’s arguments and allowed an appeal. The most obvious meaning of the expression “on a fortnightly basis” was not that the agreement had a term of a single fortnight but that the right to occupancy would continue indefinitely from fortnight to fortnight. As to the words “rental period” the court took the view that, in their everyday use and in the context in which they had been used in the agreement, the words related to the period in respect of which instalments of rent were due and were not synonymous with “term” or “duration”.

The full judgement is available from Scottish Courts here.

Sheriff court case in which 3 students from the University of Edinburgh, who held a short assured tenancy over a flat on Drummond Street in Edinburgh, sought sanction from their landlady after the landlady failed to pay a tenancy deposit (of £1,550) into an approved tenancy deposit scheme in terms of the Tenancy Deposit Schemes (Scotland) Regulations 2011.

The landlady paid the deposit into an approved scheme 240 days late and only after the students raised the action against her. She also failed to provide the tenants with information (relating to the deposit and landlord registration) in terms of regulations 3 and 42 of the regulations. The tenants sought the maximum sum available of £4,650 (3 times value of the deposit.)

There was a fourth tenant who was not party to the action. Because of this, the landlady argued that the sanction granted should be reduced by 25% on the basis that the fourth tenant could make an additional application for sanction. However, the sheriff rejected that argument as he found that it was not open to the court to sanction the landlady twice. Serial sanctions against landlords by a number of co-tenants are not competent. Instead the fourth tenant had a right of relief which he could exercise against his co-tenants to receive a share of the sanction.

The sheriff took  the following into account when assessing the level of the sanction:

• for 270 days of a 334 day lease the deposit was unprotected (as a result, the sheriff multiplied the deposit by 270/334 to give a figure of £1,253);
• the landlady had admitted her breach of the regulations (and not wasted the courts time disputing it);
• the deposit was ultimately returned to the tenants in full and without dispute (meaning that, although the tenants had been deprived of their rights to protection, they had not actually been prejudiced); and
• the landlady had been specifically informed of her obligations under the regulations (twice) by the City of Edinburgh Council and so had to be taken to have known of her obligations (although the sheriff found that she had been slow in complying rather than wilfully defiant).

Taking into account the latter 3 points, the sheriff granted a further sum of £600 and awarded a total sanction of £1853.

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.

This is an Inner House case concerning the validity of a break option served by a tenant to a landlord in respect of premises in the Glover Pavilion at Aberdeen Science and Technology Park.

Background
The lease was originally of units 3 and 4 in the pavilion and was for a period of 10 years ending in February 2014 and contained a break option exercisable after 5 years. However, in October/November 2011 the parties entered a minute of variation, which amended the lease to include additional premises (unit 1), extended the term of the lease until August 2021 and included a new break option exercisable by the tenant 5 years after the “effective date” provided in the minute of variation (on providing 6 months’ prior notice).

Arguments
The tenant served a notice exercising the break option in January 2016. However, the landlord argued that the notice was invalid as the heading of the letter containing the notice referred only to units 3 and 4 (followed by the term “the Premises” in parenthesis) and not to unit 1. The landlord argued that this created confusion by attributing a new meaning to a defined term (i.e. arguing that the premises had been redefined in the letter as being units 3 and 4 without unit 1). In addition, it was argued that, when this was error was taken with the first paragraph of the letter which referred only to the lease and not to the minute of variation (although the tenant had referred to the minute of variation in the second paragraph of the letter), it had the effect that the notice applied only to the original lease and not the lease as varied by the minute of variation.

Decision
In the Outer House Lord Tyre rejected those arguments and granted declarator that the notice had been validly served.  The test to be applied was how a reasonable recipient with knowledge of the terms of the lease would have understood the notice[1] and Lord Tyre found that, when the notice was read as a whole, a reasonable recipient with knowledge of the lease would have understood the notice to refer to the lease as it had been at the date of the notice (i.e. as varied.).

The Inner House agreed with Lord Tyre’s findings and refused an appeal. Deciding the issue was a matter of assessing the impression immediately made on a reasonable recipient of the notice with knowledge of the relevant background and context. After considering the factors which were known by the Landlord in this case[2], the court said the following:

“Against that background, what would the reasonable landlord have understood as being the meaning of the letter received?  We accept that (s)he would, no doubt, observe that the heading of the letter – not the notice itself (which is contained in paragraph 2 of the letter) – refers to only two of the leased units.  But on proceeding to read the whole letter, it would be clear that the heading was simply incomplete; what the tenant plainly intended was to intimate that the right to terminate conferred in clause 4.2 was being exercised.  That was, for the purpose of the landlord/tenant relationship, the operative part of the letter.  It was not as if any part of the letter sought to open negotiation for the termination of Tyco’s tenancy of only two units and retention of a tenancy of unit 1.  We can accept that (s)he might have paused in respect of the definition of “the Lease” in paragraph one.  However, that pause would, we consider, have been a brief one.  We agree with the Lord Ordinary that, on reading the letter as a whole, there would have been no real doubt.  It was simply too improbable that Tyco were serving notice under a lease which had expired, particularly given the specific reference to the then current break option clause in paragraph 4.2 of the Minute of Variation.”

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] Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 as recently applied in Scotland in West Dunbartonshire Council v William Thompson and Son (Dumbarton) Ltd  2016 SLT 12.

[2] Which the court noted as follows:

• “that, by 11 January 2016, the date for the expiry of the lease entered into in 2004 was long since passed and by that time, parties’ contractual rights and obligations were contained in the whole terms of the 2004 and 2011 documents read together (the original lease read together with the Minute of Variation);
• that Tyco were tenants of units 1, 3 and 4 under contractual terms which were unitary in relation to those premises;
• that Tyco had never had any right to terminate their tenancy in relation to individual units;
• that clause 4.2 of the Minute of Variation provided only for termination of Tyco’s whole tenancy;
• that, to exercise the clause 4.2 right, Tyco required to provide written notice at least six months prior to 31 August 2016 but the notice did not need to be in any particular form;
• if Tyco were going to exercise the break option, it would be sensible to service the clause 4.2 notice well in advance of the end of February 2016 – notice in the course of January 2016 would not be at all surprising; and
• that if Tyco were, after 31 August 2016, to be tenants of unit 1 only, parties would require to enter into a new agreement as the terms of their existing agreement were not divisible and made no allowance for partial severance of the tenancy.”

Case from the Lands Tribunal for Scotland considering an application for rectification of a number of inaccuracies in the Land Register.

Highland Ventures was the former owner of a hotel in Crieff. The company sold the hotel (whilst retaining some land for the personal use of a director and his wife) to a Mr Sancto in 2006 (the transaction triggered first registration) and the property was registered the Land Register. The hotel was subsequently repossessed and the bank sold it to MMSL, at which point Highland Ventures became aware of inaccuracies in Mr Sancto’s registered title.

The possibility of inaccuracy in the register was raised with the Keeper in November 2014. At that time, section 9 of the Land Registration (Scotland) Act 1979 was in force. Under s9, except in very limited circumstances, it is not possible to rectify the register to the prejudice of the proprietor in possession (in this case, MMSL). The application to the Lands Tribunal was made after the “designated day” on which the Land Registration etc. (Scotland) Act 2012 came into force[1]. The tribunal found that, in terms of the 2012 Act, transitional provisions[2] applied under which there is a presumption[3] that the registered proprietor (in this case MMSL) is in possession of the property. However, in this case the Tribunal found that Highland Ventures (which led evidence of use of the property by the director and his wife) had demonstrated possession of the subjects and consequently had rebutted the presumption that MMSL possessed the subjects.

As such, the tribunal found that that register was inaccurate and that the presumption in favour of the possession of the registered proprietor had been rebutted.

The full decision is available from the Lands Tribunal for Scotland here.

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

__________________________________________________________-

[1] 8 December 2014.

[2] Contained in Schedule 4 of the 2012 Act.

[3] Para 18 of Schedule 4.

Sheriff court case relating to a standard security granted in favour of Outlook Finance over Harperfield Farm near Lanark.

Background
The standard security was granted by Euan Lindsay in October 2010 as security for a loan of £1,355,000. Euan Lindsay died in June 2011 and his executor continued to make contractual monthly interests payments on the loan until October 2012 but no payments were made after that. Outlook served a calling up notice in September 2014 and sought to recover possession of the property.

The description of the subjects in the standard security contained a description of the subjects by reference to the name of the subjects and by reference to a Sasines title recorded in the Register of Sasines (all of which was accurate). However, it also contained a particular description (i.e. a description identifying the boundaries of the property) of the subjects in a schedule which was incorrect (it had been taken from a prior title but text referring to exceptions from the property had been omitted.). The error was then repeated in the calling up notice.

Arguments
The executor argued that the error in the particular descriptions invalidated the documents and meant that Outlook’s action seeking repossession of the property was incompetent. The executor also argued that Outlook had failed to comply with pre-action requirements[1] requiring the provision of information to the debtor.

Decision
Descriptions
After considering the authorities, the sheriff found that a faulty description of subjects in a standard security will be sufficient so long as what is contained within the descriptions enable the subjects of the security to be correctly identified (after reasonable search and enquiry if necessary) with certainty.

The sheriff said the following:

“I conclude that there is in the standard security an error in that while the subjects were correctly described by reference, owing to a mere clerical error or oversight, part of the full particular description was omitted. So, if one sets aside the particular description, what remains is a fully sufficient description of the subjects, sufficient to accurately identify them without any reasonable doubt. That error has not led to any practical error in identifying the subjects of the standard security which is Harperfield Farm in the standard security. The precise boundaries of those subjects are apparent from the description by reference. The error has led to no confusion about that fact in anyone’s mind, not least, the present defender.”

As such, the sheriff found that both the standard security and the calling up notice were valid despite the errors in the particular description.[2]

Pre-action requirements

In terms of the legislation[3] (before commencing repossession proceedings): “the creditor must provide the debtor with clear information about-

(a) the terms of the standard security;

(b) the amount due to the creditor under the standard security, including any arrears and any charges in respect of late payment or redemption; and

(c) any other obligation under the standard security in respect of which the debtor is in default.”

Outlook argued that it had done this in a letter of 14 December 2014 but the sheriff disagreed. The main problem for Outlook related to the specification of the amount due in the letter. The letter stated that the account balance (and also the account arrears) amounted to £2,884,536.97. However, the letter did not specify how that figure had been arrived at. The sheriff found that the obligation to provide clear information meant that there should be no reasonable doubt as to how the total amount said to be due had been arrived at and that an accounting should be provided showing the principal sum borrowed, the arrears of payments due and also the charges attributable to the default. That had not been done in this case. Although it may have been possible for Mr Lindsay to attempt to work out how the figure had been arrived at, the obligation was on the creditor to provide the clear information, not for the debtor to attempt to work it out.

The full judgement is available from Scottish Courts here.

__________________________________________________________________________

[1] In terms of the Conveyancing and Feudal Reform (Scotland) Act 1970 as amended by the Home Owner and Debtor Protection (Scotland) Act 2010. (The pre-action requirements were applicable because part of the property was residential.)

[2] Outlook also sought rectification of the documents (under s 8 and 9 of the Law Reform (Miscellaneous Provisions) Scotland Act 1985). However, although the sheriff found that rectification was not competent in the course of these proceedings, he found it was not necessary as the deeds were valid despite the errors.

[3] Section 24A(2) of the Conveyancing and Feudal Reform (Scotland) Act 1970.

Inner House case considering a dispute as to the existence of a servitude right of access in the title of a property at Coates Crescent in Edinburgh.

Background
Nos. 6 and 7 Coates Crescent had both previously been owned by National Mutual who sold no. 6 in 1994 and no. 7 in 1996. ASA subsequently acquired title to number 6 and Kashmiri subsequently acquired title to no.7.

Although no express grant of servitude had been included in the disposition, ASA argued that when National Mutual had sold no. 6, a servitude right of access (in favour of no.6) had been granted by implication over a car parking area forming part of no.7 (to a garage and further parking area used by the owners of no.6).

Arguments
ASA pointed to the following factors in support of their contention:

1. there were steps and a gate leading from the rear garden of No 6 into the car park at No 7;
2. tenants and sub-tenants at no.6 had used the steps and gate to obtain access from the rear of No 6 across the car parking area of No 7 since at least 1988; and
3. the need for effective fire escapes from no.6 across the disputed area.

As such, ASA argued that, when National Mutual separated the ownership of no.6 from no.7, there was an inference or presumption that National Mutual would have intended that a servitude over the car park would be created as an incident of the conveyance.

Decision
In the sheriff court, the sheriff rejected ASA’s arguments and found that there was no implied servitude, noting that the crucial question to be considered was whether the alleged servitude was reasonably necessary for the enjoyment of no.6. In the sheriff’s view, whilst use of the servitude was convenient, the evidence produced by ASA did not show it to be reasonably necessary for the enjoyment of no.6 (Although there was evidence that occupiers of number 6 preferred to use the disputed access route through the rear of no.7, it was not far from the garage and parking area used by no.6 to the front entrance of no.6 via the street).

The Inner House refused ASA’s appeal stating that the law should be slow in recognising servitudes by implied grant for a number of reasons:

“First, when property is divided, it is always possible to create servitudes by express grant.  If a servitude right is important, it can generally be expected that the matter will be raised in negotiation and that an appropriate clause will be inserted into the disposition.  The question of an implied grant only arises where no express provision has been made. Secondly, claims for implied rights inevitably involve a degree of uncertainty, and if an expansive approach is taken to the creation of such rights there is a risk that a substantial number of dubious or even extravagant claims may be made.  Thirdly, and more importantly, servitude rights are real rights created over heritable property.  In this area of the law certainty has always been regarded as crucial, because of the perpetual existence of such rights.  Fourthly, perhaps the most important factor is that real rights bind the whole world, and will be binding on any future purchaser of the servient property.  Any such purchaser should be able to discover the existence of real rights easily.  Normally this is achieved by express grant and the recording of the relevant deeds in the Land Register.  Implied rights, however, do not appear in the Land Register.  Thus there are strong policy reasons for restricting the recognition of such rights to cases where their existence is reasonably obvious from the surrounding facts and circumstances.  Cases where the right is reasonably necessary for the enjoyment of the dominant tenement can be said to fall into the latter category.”

In this case, although ASA had been able to show substantial use[1] of the route, they had been unable to show that that the alleged servitude was reasonably necessary for the convenient and comfortable enjoyment of no.6.

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] But not for a sufficient period for a servitude to be created by prescription. (ASA also attempted to argue that, because the reason they were not able to rely on prescription for creation of the servitude was that the properties had been in common ownership until 1996, their application for a servitude by implication should be looked on favourably. However, the court found that it had to apply the law relating to implied servitudes on the evidence available.)

Sheriff court case considering the existence of a servitude right of parking.

Johnson, Thomson and Thomson owned an area of land in Rutherglen (part of the Cuningar Loop) which was used as a residential site for showmans’ caravans. They sought declarator that they had a servitude right of parking over a narrow strip of vacant ground owned by T G & V Properties Limited. JT&T argued that the right had been created by prescription as they and their tenants had parked vehicles on the strip openly, peaceably and without judicial interruption, for over 20 years.

The case raised the following preliminary questions for the court:

1. whether Scots law recognises a “free-standing” servitude right of vehicular parking (i.e. an independent right which is not merely ancillary/secondary to a primary right of vehicular access); and
2. whether such a right (which could be unlimited as to the number and type of vehicles to be parked there, and potentially covering the whole of the burdened property at all times) is repugnant[1] with ownership of the servient tenement.

Free standing right of parking?
After considering the authorities, the sheriff found that Scots law does recognise a free-standing servitude of parking. Although servitudes created by prescription[2] require to be “known to the law” (there is some times said to be a “fixed list” of servitudes), that requirement has some flexibility to deal with changing circumstances and modern conditions. As such, servitudes rights can be acceptable where they are “similar in nature” to existing known servitudes. The sheriff considered Moncrieff v Jamieson[3], in which it was found that a servitude right of vehicular parking could exist as ancillary to a servitude of access. The sheriff noted that, although it was not the point the case decided, the judgements had indicated in passing that a free-standing right of parking could exist and the sheriff could think of no compelling reason why a right of parking should be confined to an ancillary status:

“In summary, while I acknowledge that Moncrieff does not represent a strictly binding judicial recognition of the existence of a free-standing servitude right, in my judgment the debate on this narrow issue is ended for all practical purposes by the overwhelming current of eminent obiter dicta in that case.  It is futile to stand Canute-like against it.  From Moncrieff, it is but a short skip in logic to conclude, by analogy with the ancillary right recognised in that case, that an independent free-standing servitude right is, at least, similar in nature thereto.”

Repugnant with ownership?
T G & V and the other defenders argued that the alleged servitude was repugnant with their ownership of the servient land because the exercise of the right could result in the entire area of the servient tenement being covered by vehicles, every day and all day, thus excluding them from any practical or realistic enjoyment or use of their land. However, the sheriff took the view that the repugnancy issue was not engaged in this case and referred to the judgements in Moncrieff which pointed out that many well known servitudes involve structures being erected or objects being placed on the servient land. The sheriff pointed to Lord Stott’s test in Moncrieff which asks whether the servient owner retains “possession and control” of the servient land”:

“For my own part, I see much force in Lord Scott’s reasoned articulation of the repugnancy principle.  A servitude right of parking may well substantially restrict the rights of the owner of the servient tenement and the uses to which, from time to time, he can put the surface of the land, but his rights as proprietor are not sterilised.  He can build over the servient tenement, he can build under it, he can advertise on hoardings around it, or otherwise utilise the boundary walls.  Indeed, he can park on it himself, or use it for any other purpose, provided he does not interfere to any material extent with the reasonable exercise of the servitude right by the dominant proprietor.  The servient proprietor may not have physical occupation of the surface of the land when the servitude right is being exercised, but he remains the owner of the land, he remains in control of it, he remains in (legal) possession of it, and he is at liberty to exploit its residual uses.”

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] i.e. so restrictive that the value of ownership would be lost. Servitudes which are repugnant with ownership are not permitted in terms of s76(2) of the Title Conditions (Scotland) Act 2003.

[2] Servitude rights constituted by express written grant no longer require to be of a known type as a result of section 76(1) of the Title Conditions (Scotland) Act 2003.

[3] Moncrieff v Jamieson 2008 SC (HL) 1.

This is an Inner House case in which the John Muir Trust sought reduction of the Scottish Ministers’ decision to grant consent for the construction of 67 wind turbines at Stronelairg near Fort Augustus.

Background
In their decision letter the Ministers intimated that they had decided not to hold a public local inquiry stating that they had taken into account 96 objections “and all material considerations”.  They expressed the view that there were no significant issues which had not been adequately considered “in the application, Environmental Statement and Supplementary Environmental Information, consultation responses and third-party representations” and that they had had sufficient information to be able to make an informed decision on the application without the need for a public local inquiry.

Outer House
The trust argued challenged the consent on the basis that the Ministers acted unlawfully and/or unreasonably in granting the consent:

• without the advertising of, and/or consulting on, the supplementary environmental information; and
• without giving adequate reasons for not following Scottish Natural Heritage advice (SNH having objected in principle to the wind farm on the ground of its impact on wild land).

The trust also argued that the reasons given in the decision letter for granting the consent were inadequate.In the Outer House, Lord Jones found that the trust’s challenge to the Ministers’ decision should succeed for the following reasons.

• A report recommending that Highland Council did not object to the wind farm on condition that the developer make changes to the layout of the proposed wind farm was additional information which had required notification by way of advertisement and/or consultation (in terms of The Electricity Works (Environmental Impact Assessment) (Scotland) Regulations 2000 and Environmental Impact Assessment Directive 2011/92/EU).
• The Ministers decision letter did not take into account SNH’s objection in principle to the wind farm (on the basis that it would have significant adverse impacts resulting in a loss of wild land and that it was not possible to mitigate those impacts).
• With regard to SNH’s objection in principle to the wind farm, the Ministers had failed to give adequate reasons for their decision in the decision letter.

Inner House
The Scottish Ministers appealed the decision of Lord Jones. After Lord Jones’ decision was issued, the Scottish Ministers amended their pleadings to state that notices advertising the fact that additional information had been received by the Scottish Ministers (and that it would be placed on the Council’s planning register and made available for public inspection) had been published in September 2012. That notice indicated that any further additional information would also be placed on the planning register and made available for inspection but stated that no further public notices would be issued.

The 2012 notice was published advertising the receipt of additional information after the Scottish Ministers had received a response from the Scottish Environment Protection Agency to the effect that SEPA were not objecting to the wind farm. The trust argued that the regulations should be interpreted so as to require the publication of a notice each time additional information was received and, in particular, that a further notice should have been published on the receipt of the Council’s decision letter.

The Inner House allowed the appeal.

• The Regulations and Directive require notification of receipt of additional information (including notification of where it can be found although the notice does not require to include the content itself) by the Scottish Ministers. However, they do not require that there is more than one notice. (Indeed the Regulations are clear that only one notification of additional information is required.) The court noted that the notice puts interested members of the public on guard that additional information will appear on the Council’s website and the public can then check the website from time to see the information. The court also noted that, if the trust’s arguments were correct, multiple notices would be required where the public was already aware of the potential for additional information and the fact that they could find it on the Council’s website.
• As regards the Ministers’ decision letter, the court found that Lord Jones’ erred by focussing on the absence of the words “in principle” from the letter. Despite the absence of those words, the court held that the letter had clearly addressed the substance of the SNH objection. It was apparent that careful consideration had been given to the visual impact of the development and its effect on wild land.
• The Ministers had concluded that the energy benefits and the contribution the development would make to sustainable economic growth outweighed the environmental aspects.  That was a planning judgement which they were entitled to make and the terms of the decision letter left no real doubt as to what the reasons for the decision had been.

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 considering the repairing obligations contained in a lease and sub-lease of 3 floors of Riverside House at Riverside Drive in Aberdeen.

The lease and sublease referred to common parts which included a car park. Defects were found in the concrete decking of the car park and remedial works had to be carried out. The question for the court was whether, in terms of the lease and sublease, the cost of the works was to be met by the sub-tenant or by the landlord.

The lease (between the landlord and tenant) was a full repairing and insuring lease under which the tenant was obliged to pay a service charge which was defined by reference to “Service Expenditure” which was incurred by the landlord in carrying out “Landlord Services” (which included repairs). An express exception from the Service Expenditure was “expenditure incurred in respect of or pertaining to the initial construction of the Building or the Service Systems”.

In terms of the sub-lease, the sub-tenant was obliged to pay to the tenant the sums which the tenant was obliged to pay to the landlord by way of the service charge under the lease.

The tenant paid the costs of remedial works to the car park as part of the service charge and sought to recover those from the sub-tenant. However, the sub-tenant argued that in terms of the exception from Service Expenditure, latent defects (such as the defects in the car park) “pertained to” the initial construction of the building and could not be recovered by way of the service charge.

Lord Tyre rejected the sub-tenants argument finding that it was appropriate to place emphasis[1] on the fact that the lease was a full repairing and insuring lease under which it was intended that the tenant would relieve the landlord of the cost of repair and rebuilding even in relation to inherent or latent defects.

 In Lord Tyre’s view, a reasonable person having all the background knowledge available to the parties would have understood the phrase “in respect of or pertaining to the initial construction of the Building” extended only to works carried out during the construction phase and any related snagging. The sub- tenants interpretation placed too much weight upon the words “or pertaining to”.  Lord Tyre found that those words could be seen as a reference to costs such as professional fees associated with the construction of the building, which were not strictly costs of construction.

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] Per the approach in @SIPP Pension Trustees v Insight Travel Services Ltd 2016 SLT 131

Outer House case concerning the validity of a break option served by a tenant to a landlord in respect of premises in the Glover Pavilion at Aberdeen Science and Technology Park.

Background
The lease was originally of units 3 and 4 in the pavilion and was for a period of 10 years ending in February 2014 and contained a break option exercisable after 5 years. However, in October/November 2011 the parties entered a minute of variation, which amended the lease to include additional premises (unit 1), extended the term of the lease until August 2021 and included a new break option exercisable by the tenant 5 years after the “effective date” provided in the minute of variation (on providing 6 months’ prior notice).

Arguments
The tenant served a notice exercising the break option in January 2016. However, the landlord argued that the notice was invalid as the heading of the letter containing the notice referred only to units 3 and 4 (followed by the term “the Premises” in parenthesis) and not to unit 1. The landlord argued that this created confusion by attributing a new meaning to a defined term (i.e. arguing that the premises had been redefined in the letter as being units 3 and 4 without unit 1). In addition, it was argued that, when this was error was taken with the first paragraph of the letter which referred only to the lease and not to the minute of variation (although the tenant had referred to the minute of variation in the second paragraph of the letter), it had the effect that the notice applied only to the original lease and not the lease as varied by the minute of variation.

Decision
Lord Tyre rejected those arguments and granted declarator that the notice had been validly served.

The test to be applied was how a reasonable recipient with knowledge of the terms of the lease would have understood the notice[1]. Lord Tyre began by rejecting the landlord’s argument that the reference in the first paragraph of the letter to “the Lease” was to the lease prior to it being varied by the minute of variation.  The notice required to be read as a whole and it was readily apparent from the notice that the sender was fully aware of the existence of the variation and of its terms. A reasonable recipient of the notice with knowledge of the lease would have understood the notice to refer to the lease as it had been at the date of the notice (i.e. as varied.). Lord Tyre took the view there was no ambiguity.

With regard to the omission of unit 1 in the heading in the letter, Lord Tyre, despite noting that careless drafting was to be discouraged, said the following:

“…in my opinion no reasonable recipient would be misled into interpreting the notice [so as to redefine the definition of “the Premises” in the contract] or even of being left in any reasonable doubt that [there had simply been a clerical error]… I am satisfied that the reasonable recipient would not have been perplexed in any way by the error in the letter heading.  The operative element of the notice is sufficiently clear and unambiguous to avoid any such perplexity, and the fact that the ingenuity of lawyers can suggest theoretical ambiguities is not to the point.”

The full judgement is available from Scottish Courts here.

[1] Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 as recently applied in Scotland in West Dunbartonshire Council v William Thompson and Son (Dumbarton) Ltd  2016 SLT 12.