Outer House Case considering a lease of premises at Wardpark South Industrial Estate in Cumbernauld.  Batley acquired the tenant’s interest in the lease and North Lanarkshire Council were sub-tenants.

Central to the dispute was a minute of agreement entered into between Batley’s predecessors as tenants and North Lanarkshire Council regulating the terms and conditions on which the Council could carry out alterations to the property.  It provided:

“By the expiration and sooner determination of the period of the sub lease (or as soon as the license hereby granted shall become void) if so required by the mid landlord and at the cost of the sub tenant to dismantle and remove the Works and to reinstate and make good the premises and to restore it to its appearance at the date of entry under the sub lease, such reinstatement to be carried out on the same terms (mutatis mutandis) as are stipulated in this license with respect to the carrying out of the works in the first place (including as to consents, the manner of carrying out works, reinstatement, inspection, indemnity, costs and otherwise).”

 The lease came to an end on 18 February 2009. On 20 February 2009 the Council received a schedule of dilapidations in respect of the property.  However, they claimed that, as they had received the schedule after the expiry of the sublease, there was no obligation to remove the alterations (it having died on expiry of the lease). They argued that the notice provisions from the head lease were incorporated in the sub lease and any notice required to be in writing and to be served prior to the end of the lease.

This argument was rejected by the temporary judge (Morag Wise QC) who noted:

 “the wording of clause 2.5 which obliges the sub-tenant “if so required by the mid-landlord to remove the works” makes no mention of a notice. The means by which the sub tenant can be so required are not specified. In my opinion, it cannot be said to be a mandatory term of the Minute of Agreement that the mid-landlords convey in writing to the sub-tenants the requirement to remove the works unless [it] can be implied that service of some form of notice or request is part of that term.  If written notification of the type envisaged in clause 5.8 of the head lease cannot be so implied, then clause 2.5 would seem to me to permit the pursuers to offer to prove that they required the defenders to remove the work by conveying that to them orally.”

 And further:

“It seems to me that the [Council's] argument is predicated upon a notice being necessary for the purposes of clause 2.5. However, there is nothing in that provision of the Minute of Agreement to support the contention that something formal is necessary before the sub-tenants can be required to remove the works. For that reason I do not accept the submission that the notice provisions of the lease automatically apply to the “if so required” provision of clause 2.5.”

 An amendment to the pleadings was allowed in which Batley claimed that surveyors acting on their behalf had contacted the Council on 22 December 2008 and, after receiving confirmation that the Council were intending to leave the premises, advised them that the surveyors would require access to the property to prepare a schedule of dilapidations and that Batley would require reinstatement of the premises to their original condition.

The temporary judge found that this was ‘just’ sufficient to entitle Batley to a proof before answer on the question of whether or not they had adequately conveyed the requirement for reinstatement of the premises to the Council before the expiry of the sub lease.

 The full judgement is available from Scottish Courts here.

(NB: See also appeals to Inner House and Supreme Court)

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