Background
Inner House case relating to a development at Rubislaw Quarry in Aberdeen. The developers sought the co-operation of those with interests (proprietors/tenants) in nearby office blocks (who were concerned that the new development would have a detrimental effect on the value of their properties) with respect to access to the development site. An agreement was entered into between the developers and the proprietors/tenants which included a restriction on the net lettable office space within the new development. The court action involved successors to the original parties to the agreement.

Arguments
The developers sought declarator that the relevant clause:

1. allowed the total amount of office space in the development to exceed the restriction (i.e. they argued that the restriction did not apply to owner occupied or vacant office space); and
2. was not a real burden and, as such, bound only the original parties to the agreement and not their successors.

Decision
Those arguments were rejected both in the Outer House and again on appeal to the Inner House.

Meaning of the clause
Taking account of the commercial purpose of the clause and the overall commercial context in which that agreement operated, the court found that the intention was to provide for a maximum floor area which was capable of being let for office use.

Whether binding on successors
Whether the burden was real (i.e. binding on successors) depended on whether the restriction on office space was:

1. purely a trading condition, designed solely to protect the personal commercial interests of those  interested in the offices; or
2. whether it, in addition to any personal benefit, also conveyed a material benefit on the properties themselves.

The proximity of the development to the offices was an important consideration (without physical proximity there can be no real burden). Not only were the properties adjacent to one another, it was intended that they should share the same access road.  The proprietors/tenants were seeking protection against reductions in rental values arising from the introduction of additional competition within the neighbourhood. The restriction therefore benefited the offices as commercial properties by protecting their rental value. The court also found that the clause did not result in an unreasonable restraint of trade noting that it had been negotiated as part of commercial agreement between the parties (there being no suggestion that there was any disparity in the parties’ bargaining power) which indicated that it was reasonable as between the parties. The clause merely restricted the amount of office space that could be constructed and did not prohibit use of the property as office space. Further, the court noted that there was no suggestion that the extent of the actual restriction imposed was in any way unreasonable or disproportionate in the context of the whole of the Rubislaw developments.

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 relating to a development at Rubislaw Quarry in Aberdeen. The developers sought the co-operation of those with interests (proprietors/tenants) in nearby office blocks (who were concerned that the new development would have a detrimental effect on the value of their properties) with respect to[1] access to the development site. An agreement was entered into between the developers and the proprietors/tenants which included a restriction on the office space available for rent within the new development in the following terms:

“The northern quarry proprietors undertake (to the relevant parties) that the maximum net lettable floor area of Office Space which may be provided within the northern quarry subjects at any given time shall not exceed 2,025.29 sq. m. (in total)”.

The court action involved successors to the original parties to the agreement. The developers sought declarator that the clause:

1. allowed the amount of office space in the development to exceed 2,025.29 sq. m but restricted the space actually available for let to 2,025.29 sq. m (i.e. they argued the figure did not include owner occupied or vacant office space); and
2. was not a real burden and, as such, bound only the original parties to the agreement and not their successors.

 Lord Malcolm rejected both of those arguments.

Meaning of the clause
After considering the whole terms of the contract “in the light of the general setting and purpose of the agreement”, Lord Malcolm found that the overall intention was to provide for a maximum floor area which was capable of being let for office use. In coming to this conclusion, account was taken of the preamble to the agreement, which required the developer “to accept certain restrictions with regard to office space within any development of the northern quarry subjects…”, and a further clause containing a requirement that developers exhibit floor plans and internal layout, which would have been irrelevant had the only restriction been on letting floor of space with no limit on the amount constructed.

Whether binding on successors
Whether the burden was real (i.e. binding on successors) depended on whether the restriction on office space was:

1. purely a trading condition, designed solely to protect the personal commercial interests of those  interested in the offices; or
2. whether it, in addition to any personal benefit, also conveyed a material benefit on the properties themselves.

The proximity of the development to the offices was an important consideration. The existing office blocks and the new development site presented a “distinct neighbourhood”. The proprietors/tenants were seeking protection against reductions in rental values arising from the introduction of additional competition within that neighbourhood. The restriction therefore benefited the offices as commercial properties by protecting their rental value. Also of relevance in coming to the judge’s conclusion that the burden was binding on successors, was the fact that the offices were specifically adapted for office use meaning future owners would be likely to use them for the same purpose and, consequently, the burden on the new development would be reflected in the value of the existing properties.

Title and Interest of the developers
Lord Malcolm also rejected an argument made on behalf of the proprietors/tenants to the effect that the developers did not have title and interest to bring the action as, although they had entered missives for the purchase of the site, they had not yet recorded title to it. The court would refuse to entertain declarators concerning purely academic, speculative or hypothetical issues, or where the pursuer has no practical interest in the outcome. However, in this case the developers had a good reason for discovering the correct legal position at the time they raised the action: they had entered into missives (with a view to developing the site) with the current owners who, as a result, had no interest in the matter.

The full judgement is available from Scottish Courts here.

(See appeal to the Inner House here.)

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