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

The May 2015 edition of Private Client Scotland is now available.  The ‘preview edition’ published in November 2014 can be found here. If you would like to subscribe to Private Client Scotland please email me at james@legalknowledgescotland.com

“In this edition the editorial looks at two manifesto pledges concerning the tax status of ‘non doms’ and a new inheritance tax relief and also the launch of the two new Scottish taxes. There is also an article on Revenue Scotland’s LBTT opinions policy.  Included in ‘Case reviews’ is the Judgement of Sheriff McCormick on the appointment of an attorney by an executor. ‘Professional updates’ include updates on the ‘Certification of Death (Scotland) Act’ and the Scottish Law Commission’s annual report. Lastly the ‘News items’ section includes stories that range from the average cost of a funeral to the introduction of ‘guardians’ in England and Wales for missing persons.”

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Beatsons Building Supplies Limited v Michael Gardner Noble and others as Trustees of The Alex F Noble & Son Limited Executive Benefits Scheme, 28 April 2015 –extent of leased premises

Sheriff Court case considering the extent of leased premises situated in Eastfield Industrial Estate in Penicuik.

The premises were situated above the Loon Burn which flows through a culvert. The culvert became damaged and the tenant argued that repairs were the landlord’s responsibility and sought an order compelling the landlord to repair the culvert or pay damages sufficient to cover the costs of repair.

The question for the court was whether the leased premises included the culvert.

The landlord’s title, as shown on his land certificate, was a coelo usque ad centrum (i.e. from the heavens to the centre of the earth) and thus, if the tenant had taken a lease of the whole of the landlord’s interest, the leased premises would include the solum of the property and therefore the culvert. The tenant pointed out that the description of the property in the lease was different to that in the Land Certificate arguing that, if a full transfer of the premises had been intended, the landlord could have put the matter beyond doubt by including the full conveyancing description from the land certificate.

The tenant also referred to the definition of conduits which included various wires and pipes not serving the premises, noting that a tenant would not take on liability for conduits not serving the premises and suggesting that it was therefore unlikely the premises included the conduits.

The sheriff preferred the landlord’s arguments finding that, although the descriptions were different, the description of the premises in the lease was full and unlimited with no hint of reservation or separation of the solum (albeit there were some small differences in other boundaries of the property which the sheriff concluded were sufficient to explain any dissimilarity in descriptions in the land certificate and lease).

The sheriff also rejected the tenants arguments in relation to the conduits noting that, although some of the conduits did not serve the premises, the parties had expressly recognised and regulated that situation in the lease. As a result, the sheriff was not prepared to infer that the conduits did not form part of the premises on the basis that some did not serve the premises.

Accordingly, the sheriff found that the leased premises included the Loon Burn culvert.

The full judgement is available from Scottish Courts here.

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Glasgow City Council v Nagmana Chaudhry, 21 April 2015 – whether sequestration could be awarded where security for debt exists

Sheriff Court case concerning a petition for sequestration of a debtor by Glasgow City Council.

In terms of the Bankruptcy (Scotland) Act 1985[1], sequestration will not be awarded in favour of a creditor where the debtor “forthwith pays or satisfies, or produces written evidence of the payment or satisfaction of, or gives or shows that there is sufficient security for [the debt]”.

In this case the sheriff accepted an argument by the debtor that, because the Council held a standard security over subjects owned by the debtor’s brother in law, the debtor had shown that there was “sufficient security for payment of” the debt in question and refused the petition for sequestration.

That decision was appealed by the Council which argued that, in terms of the relevant provision of the 1985 Act, the debtor had to show not only that a security covering the debt existed but also that the security was capable of immediate realisation so as to lead to payment of the debt without undue delay. In that regard, Council pointed to the fact that the standard security in this case had been granted by a party other than the debtor and that the subjects secured were residential (meaning various statutory pre-actions requirements would have to be carried out before the security could be realised) thus leading to a delay in payment of the debt.

The Sheriff Principal found that the authorities supported the Council’s argument, allowed an appeal of the sheriff’s decision and awarded the sequestration.

 “Sufficient security for the payment of the debt, in my opinion, means a form of security which, by its nature, brings about immediate payment or guarantees such payment…”

 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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[1] Section 12(3A)(b).

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Homebase Limited v. Grantchester Developments (Falkirk) Limited, 30 April 2015 – Whether landlord unreasonably withholding consent to assignation.

Outer House case relating to a lease of retail premises in Falkirk. The landlord was Grantchester and the tenant was Homebase.

Background
The tenant sought to assign the lease of the premises to a third party (CDS). In terms of the relevant clauses of the lease, the tenant was not entitled to assign the lease without the prior written consent of the landlord. That consent could not be unreasonably withheld by the landlord in the case of an assignee of “sound financial standing demonstrably capable of fulfilling the tenant’s obligations” under the lease. (Further, the lease provided that the tenant could not sublet the premises for a rent less than the open market rent and could not require the payment of a premium to the tenant or other ‘unreasonable’ incentive).

When considering the tenant’s request for consent to the assign, the landlord requested to see the terms of agreement between the tenant and the proposed assignee regulating premiums or deals relating to payments due under the lease. The tenant refused to provide that information arguing that it was irrelevant to the landlord’s decision and that, in terms of the lease, the landlord should only be concerned with the a proposed tenant’s identity, character and ability to comply with the tenant’s obligations under the lease.

Arguments
Before the court, the tenant contended that the only relevant considerations which could be taken into account by the landlord were whether the proposed assignee was of sound financial standing and demonstrably capable of fulfilling the tenant’s obligations in terms of the lease. In the view of the tenant, if the proposed assignee satisfied those requirements, it would be unreasonable for the landlord to withhold consent.

Decision
After considering the authorities[1], Lord Tyre rejected the tenant’s arguments and preferred the arguments made on behalf of the landlord to the effect that the lease provided a two stage test. The first stage was to determine whether the proposed assignee’s covenant was good, i.e. whether it was of sound financial standing and demonstrably capable of fulfilling the tenant’s obligations.  If and only if that test was satisfied, one passed to the second stage, which was to determine whether there were reasonable grounds for a refusal of consent by the landlord. In that regard there may be good reasons unconnected with the financial standing of the proposed tenant which would entitle the landlord to withhold consent[2].  In this case it had been reasonable for the landlord to request the information relating to any rent subsidy or reverse premium and to withhold consent unless and until it was supplied. In coming to that conclusion Lord Tyre noted previous authority[3] recognising that the payment of rents subsidies or reverse premiums could affect the rental value of the property and that was something that a landlord could reasonably take into account when deciding whether to withhold consent.

 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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[1] Including Burgerking Ltd v Castlebrook Holdings Ltd [2014] CSOH 36. (See summary here).

[2] Although a landlord would not be entitled to withhold consent if the reasons for doing so had nothing to do with the relationship of landlord and tenant in regard to the subjects leased.

[3] Norwich Union Life Insurance Society v Shopmoor Ltd [1999] 1 WLR 531 and Burgerking Ltd v Rachel Charitable Trust 2006 SLT 224.

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

The May 2015 edition of Private Client Scotland is now available.  The ‘preview edition’ published in November 2014 can be found here. 

“In this edition the editorial looks at two manifesto pledges concerning the tax status of ‘non doms’ and a new inheritance tax relief and also the launch of the two new Scottish taxes. There is also an article on Revenue Scotland’s LBTT opinions policy.

Included in ‘Case reviews’ is the Judgement of Sheriff McCormick on the appointment of an attorney by an executor. ‘Professional updates’ include updates on the ‘Certification of Death (Scotland) Act’ and the Scottish Law Commission’s annual report. Lastly the ‘News items’ section includes stories that range from the average cost of a funeral to the introduction of ‘guardians’ in England and Wales for missing persons.”

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

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New style – Sub-lease of Whole of Commercial Premises

The latest addition to the LKS style bank is style 2.3.1b - Sub-lease of Whole of Commercial Premises . It is available to our subscribers here and for individual purchase here.

 

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Rose Rivendale against a decision of the Lands Tribunal for Scotland dated 30 October 2013, 16 April 2015 – Rectification of the Land Register and proprietor in possession (1979 Act)

Outer House case concerning a decision of the Land Tribunal relating to the Keeper’s refusal to rectify the Land Register in Ms Rivendale’s favour.

Background
Ms Rivendale purchased a cottage in Tarbert, Argyll in 2010 but was unable to register title to an area of ground in front of the cottage as it was included in her neighbour’s title.  After investigation, the tribunal found that, whilst Ms Rivendale did not own part of the disputed area, she was the “true owner” of another part of the area of ground and that the register was inaccurate in that respect. However, in terms of s9(3) of the Land Registration (Scotland) Act 1979[1], the register cannot be rectified where rectification would result in prejudice to a proprietor in possession. Ms Rivendale’s neighbour, who had used the disputed area to access two building plots and other land owned by her, argued that she was a proprietor in possession and would suffer prejudice if the register were rectified.

The tribunal refused to allow rectification of the register in respect of part of the property which it found that Ms Rivendale did not own and also part of the property of which her neighbour was found to be in possession. However, rectification was allowed in respect of parts of the property found to have been owned by Ms Rivendale but not possessed by her neighbour.

Arguments
Ms Rivendale appealed, arguing that she was entitled to rectification of the register in respect of a larger area of the property than had been granted by the tribunal on the basis:

  1. That she was also the “true owner” of a larger part of the property than had been decided by the tribunal.
  2. That the evidence of the neighbour’s use of the property was not sufficient to establish possession under s9(3) of the 1979 Act.
  3. That the tribunal had erred in finding that the neighbour would suffer prejudice if the register were rectified.

Decision
The Outer House rejected all three arguments and refused the appeal.

The extent of the register’s inaccuracy
Ms Rivendale’s argument that she was the “true owner” of the additional parts of the disputed area was based on her contention that she had acquired it under the law of prescription. For that to be the case, the title on which she relied required to be habile for prescription (i.e. capable of being interpreted as including the track). On its own, the written description in the relevant disposition was habile to include the track. However the plan attached to the relevant disposition (to which written description referred) was not. The Court found that the particular wording in the description and the professionalism with which the plan had been prepared indicated that the plan was to have effect and Ms Rivendale’s title was not capable of founding the prescriptive possession on which she relied.

The neighbour’s possession
Ms Rivendale argued that her neighbour’s use of the part of the property of which the tribunal had found Ms Rivendale to be the true owner was not sufficient to amount to establish possession under the 1979 Act. However, the court found that, when taken together, the neighbours acts (which included culverting a burn (outwith the disputed area) through contractors, allowing the widening and improvement of the track and some slight personal use) were sufficient to put the neighbour in the position of a proprietor in possession in terms of s9(3) of the 1979 Act.

Prejudice
The Court also found that the neighbour’s loss of heritable rights (if the Register were to be rectified in favour of Ms Rivendale) would in itself amount to prejudice noting that it would allow Ms Rivendale to remove part of the track and impede access taken via the track.

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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[1] This aspect of the law has changed under the Land Registration (Scotland) Act 2012 which replaces the 1979 Act.

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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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