New style – Offer by landlord to accept renunciation of lease from tenant

The latest addition to the LKS style bank is style 1.3.4.2 -Offer by landlord to accept renunciation of lease from tenant with premium or reverse premium. It is available to our subscribers here and for individual purchase here.

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PDPF GP Limited v. Santander UK Plc, 14 April 2015 – Notice required for repair and reinstatement works on termination of lease.

Outer House case considering the lease of an office building in South Gyle Business Park in Edinburgh. The lease was one of 15 years in duration and was supplemented with two licence agreements authorising tenant’s alterations to the premises.

Background
Two weeks before the end of the lease the landlord (PDPF) served a lengthy schedule of dilapidations on the tenant (Santander) which sought removal of the tenant’s alterations and replacement of the floor coverings. The tenant refused to carry out the works as it said that it had not received enough notice. The landlord raised an action to recover the cost relating to the necessary works and preparation of the schedule of dilapidations (amounting to a total of over £755k).

The lease contained a clause obliging the tenant to keep the premises in good and substantial repair during the currency of the lease (paragraph 3), a clause obliging the tenant to leave the premises in good condition and to replace the floor coverings at the end of the lease (paragraph 28) and also a clause obliging the tenant to carry out any works contained in a notice served on it by the landlord within 3 months (paragraph 8).

There were 3 questions for the court to decide:

  1. whether the lease stipulated that the landlord had to provide at least 3 months’ notice prior to its expiry;
  2. whether a term of reasonable notice should be implied into the two licence agreements; and
  3. whether the schedule of dilapidations constituted a valid notice.

Decision
3 months’ notice?
After considering the relevant terms of the lease, Lord Woolman (approaching the question by considering the view of a reasonable person with all the relevant background knowledge) found that the obligations contained in paragraphs 3 and 28 were independent of the obligation requiring notice contained in paragraph 8 (the fact that only one of the clauses contained a time limit suggested that the others should not be qualified in the same way). As such, the landlord did not have to provide at least 3 months’ notice to carry out the works.

Reasonable notice implied into licence agreements
Lord Woolman also rejected the fall back argument that a reasonable notice period of 10 weeks should be implied into the licences finding that the introduction of implied terms would be warranted where such a term was required to spell out what a reasonable person would understand the licence agreements to mean. That was not the case here where the implied term would be inconsistent with the parties express stipulation that the landlord could issue its requirement on the termination of the lease.

Valid notice constituted by schedule of dilapidations
The tenant sought to argue that the service of the schedule of dilapidations was simply an assertion of the tenant’s existing repairing obligations under the lease and did not provide adequate notice in terms of removal of the works carried out under the licence agreements. This argument was also rejected by Lord Woolman who noted that the removal of licensed works requires no formality and that, at the time the notice to quit is served, the tenant can ask whether the Landlord insists on removal of the tenant’s alterations.

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.

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LKS Style Bank – new corporate styles added

We have added a new corporate section to our styles bank. The section includes new articles, dividends and a shareholder agreement.

The styles have been drafted by Iain Taylor of  e-corporate. You can access them here or from or from the styles menu on our home page.

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Just a few of the tax, revenue and legal changes a large group of SNP MPs could make happen  

  1. Reform of income tax rates and bands. One option would be to create 10%, 20%, 30%, 40% and 50% income tax rates and bands. This would ensure a more progressive system of income tax and in particular removes the large gap between the 20% and 40% income tax rate and band. There was a similar issue with Stamp Duty Land Tax until the recent reforms by both Westminster and Holyrood.
  2. Devolve control of the approval of charitable tax status to Revenue Scotland and OSCR.  A Scottish charity should not have to deal with both OSCR and HMRC when OSCR could easily deal with these tax matters.  Revenue Scotland have already done something similar with the two new Scottish taxes.  Registers Scotland are involved with the collection of the Land and Buildings Transaction Tax and SEPA is involved the collection of the Scottish Landfill Tax.
  3. Reduce the rate of VAT charged on home repairs and improvements to 5%.  HM Treasury already allows this in the Isle of Man.
  4. Allow Police Scotland and the Scottish Fire and Rescue Service to recover VAT.  This is another example of Scottish institutions being penalised by the UK Government when they wish to do things differently.  A previous example was the withholding of Attendance Allowance funding when the Scottish Parliament introduced Free Personal and Nursing Care.
  5. Ensure that UK institutions must take Scots law and practice into consideration when dealing with international matters.  For example the United Nations Convention on the rights of persons with disabilities.  This directly impacts on our Adults with Incapacity legislation.
  6. Devolve control of stamp duty on shares to the Scottish Parliament.  The Scottish Government could then abolish stamp duty charged on the sale of shares of Scottish registered companies.
  7. Devolve control, complete control, of the Crown Estate, air passenger duty and aggregates levy by the end of 2015.  Control of income tax should also be devolved completely.  The new ‘shared’ income tax gives the Scottish Parliament almost no worthwhile control over income tax. All funds from fines, forfeitures and fixed penalties imposed by our courts and tribunals as well as sums recovered under the Proceeds of Crime legislation should also remain in Scotland.
  8. Devolve control of inheritance tax to the Scottish Parliament.  It makes no sense for succession law to be controlled by the Scottish Parliament but not the main succession tax. This would also ensure that the reform of Scottish succession law can be done in a joined up manner.  Another reason to do this is tax simplification both in Scotland and the rest of the UK.  The applicable forms and guidance would no longer need to include explanations of the Scottish and the rest of the UKs laws of succession.  This argument can just as easily be made with a number of transport and environmental taxes.
  9. The Scottish GAAR (General AntI-Avoidance Rule) which goes further than its UK counterpart as it targets artificial, not merely abusive schemes, should be made to apply throughout the UK.
  10. Devolve control of the Annual Tax on Enveloped Dwellings to the Scottish Parliament so that the Scottish Parliament can abolish it.  It is not likely to be needed in Scotland now that we have a Scottish Land and Buildings Transaction Tax.  If the underlying issue were to become a problem in Scotland we can easily create our own anti-avoidance provision.
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Mapeley Acquisition Co (3) Limited (in Receivership) v. City of Edinburgh Council, 24 March 2015 – Interpretation of tenants’ repairing obligations in lease

Outer House case concerning the nature and extent of tenants’ obligations under a lease of office premises at Chesser House on Georgie Road in Edinburgh. Mapeley were the landlords and the City of  Edinburgh Council, the tenants.

At the expiry of the lease Mapeley served a schedule of dilapidations on the Council and sought payment of just over £8m.The interpretation of the tenant’s repairing obligations under the lease were at the centre of the dispute. There were two issues of interpretation for the court:

  1. whether, in terms of the lease, the landlord was entitled to receive a sum equivalent to the cost of repairing the premises even if it had no intention of carrying out the required repairs; and
  2. whether, in terms of the lease, the tenant was obliged to replace the plant and equipment on the premises at the end of the lease whatever the condition of those items (i.e. even if not missing, broken, worn, damaged or destroyed.)

In essence, the Council argued that, in terms of the lease, (a) the landlord was not entitled to recover the costs of putting the property into the standard of repair contained in the lease where the landlord did not intend to undertake the work and (b) the tenant did not require to replace or renew items of plant and equipment where the items were not missing, broken, worn, damaged or destroyed.

Lord Doherty found that the precise wording contained in lease was capable of bearing both that interpretation and the interpretation argued for by the landlord (per 1. and 2. above). However, where such wording is capable of bearing more than one meaning, the court requires to adopt the interpretation which best accords with business common sense. As such Lord Doherty preferred the interpretation contended for by the Council noting that, to adopt Mapeley’s approach, would have involved a radical departure from the common law which would have resulted in excessive and disproportionate consequences and, as a result, would have required to have been clearly indicated in the lease (which it had not been in the lease in question).

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.

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Additions to the LKS style bank

The following property styles have now been added to the LKS style Bank:

  • 1.3.2.3 Offer by tenant to take lease of commercial property with tenant’s fitting out works
  • 3.3.7 Licence for tenant works – standard version
  • 3.3.8 Licence for tenant works – simplified version
  • 1.3.5.2 Offer By Sub-tenant To Take Sub-lease Of Whole Commercial Premises From Mid-landlord.

These are available to our subscribers here. (Contact  andy@legalknowledgescotland.com to receive a subscription quotation.)

And for individual purchase here.

You can see a complete list of all property styles currently available here.

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LKS Style updates -LBTT and CDM Regs

All relevant LKS property styles have been updated to take account of Land and Buildings Transaction Tax (which came into force on 1 April) and the  Construction (Design and Management) Regulations 2015 (which come into force on 6 April).

These are available to our subscribers here. (Contact  andy@legalknowledgescotland.com to receive a subscription quotation.)

And for individual purchase here.

 

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And there shall be a Scottish tax system

A big day in the journey towards a Scottish tax system.

Today the Scottish Parliament has two more economic levers, the Land and Buildings Transaction Tax (LBTT) and the Scottish Landfill Tax (SLfT).  Up till today the Scottish Parliament only has control of two minor taxes; council tax and business rates. The revenue from each of these taxes is approximately £2bn.  The revenue from LBTT will be approximately £300m and SLfT £100m.

The Scottish Government has also shown that it wishes to do things differently. The Scottish Government decided to not use HMRC to administer the new Scottish taxes and instead has adopted the innovative approach of using two existing Scottish public bodies to collect these new taxes. An idea first proposed by myself in 2005. That means that whilst Revenue Scotland will be the collection authority accountable to the Scottish Parliament, some powers will be delegated to the Registers of Scotland and the Scottish Environmental Protection Agency. The importance of the creation of Revenue Scotland should not be underestimated.

I wrote an article for the Journal of the Law Society of Scotland predicting much of this almost ten years ago.  This article an be found here.

Further evidence of how things are going to be done differently here in Scotland is a ‘General Anti-Avoidance Rule’ (GAAR) that is stronger than the UK version. The Scottish GAAR goes further than its UK counterpart as it targets artificial, not merely abusive schemes as with UK GARR.

Recent announcements from the Scottish Government on corporation tax, air passenger duty, reform of council tax and the re-introduction of the 50p rate of income tax also, I suspect, show that this is just the beginning.

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St Andrews Environmental Protection Association Limited for Judicial Review of a decision of Fife Council dated, 16 May 2014

Outer House case concerning a petition for judicial review of the decision of Fife Council to grant planning permission for the building of a new Madras College on land at Pipeland on the outskirts of St Andrews.

The current Madras College is located on two sites and in need of replacement. The Executive Committee of Fife Council agreed that a replacement school should, where possible, be situated on a single site. Planning permission for the building of a new school on a single site at Pipeland was issued on 16 May 2014.

The Petitioners argued that in granting the permission the Council:

1)    had not considered an alternative site at North Haugh which could be used in conjunction with playing fields at Station Park (on the other side of the A91);

2)    if that argument was wrong and the Council had considered the North Haugh site then the Council had wrongly considered it to be a split site; and

3)    If the Council had been entitled to treat the North Haugh site as being split, then it had erred in excluding it from further consideration on that ground.

Lord Doherty rejected those arguments finding that the North Haugh site had been considered as an option and, after noting that North Haugh and Station Park are split by a major A class road and were not contiguous, that the Council’s consideration that the site was a split site was neither perverse nor erroneous. Lord Doherty also found that the North Haugh site had not been discounted solely on the basis that it was a split site and account had been taken of actual disadvantages of the site such as travel time for staff and pupils and the fact that North Haugh was a small site without space which may prove necessary to deal with a developing curriculum in the future. The petition was therefore refused.

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

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The second edition of ‘Private Client Scotland’ is now available

The second edition of Private Client Scotland is now available.  The ‘preview edition’ published in November 2014 can be found here.  

“In this edition there are articles on the Scottish Government’s proposal to reform our law of succession and an update and hopefully some closure on the validity or otherwise of continuing Powers of Attorney made in the standard form recommended by OPG (Scotland). Included in ‘Case reviews’ is the decision of Sheriff Hammond that a relationship of approximately 13 months qualifies as ‘cohabitation’ for the purposes of section 25 of the Family Law (Scotland) Act 2006. ‘Professional updates’ include a link to HMRC’s December ‘Trusts and Estates newsletter’ and confirmation of a new and designated guardianship court sitting in Edinburgh. Lastly the ‘News items’ section includes stories that range from a new Cabinet Secretary for Justice to an unexpected tax bill for Boris Johnson.”

If you would like to subscribe to Private Client Scotland please email me at james@legalknowledgescotland.com

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