Background
This is an Outer House case concerning a lease of premises at the Gyle Shopping Centre in Edinburgh under which Gyle was the landlord and Marks & Spencer, the tenant.

Gyle entered an agreement with Primark for the erection of a new store on land which included part of a car park. However, Marks & Spencer’s premises were let together with a one-third pro indiviso share of shared areas which included the car park. In two previous decisions Lord Tyre found (1) that M&S had not consented to the building of the Primark Store and that the building of the store without consent would be a breach of the lease[1] and (2) that M&S was not personally barred from preventing Gyle from erecting the store on the car park[2].

In this case Gyle sought declarator that any refusal of consent to the Primark development by M&S would be amount to an unreasonable withholding of consent. The relevant clause in the lease provided that works on the shared areas could be carried out with the consent of M&S (to the effect that they accepted that any works would not render the mall or shared areas materially less adequate, commodious or convenient to them) and that that consent could not be unreasonably withheld.

Arguments
After Lord Tyre rejected an argument by M&S that the relevant clause could not be construed so as to permit works which effected a permanent alteration to the extent of shared areas, the question for the court was whether it was unreasonable for M&S to withhold consent.

Gyle offered a number of arguments why it was unreasonable for M&S to refuse consent to the development including contentions that the proposed development would benefit public access to the shopping centre, that car parking would remain in excess of the requirements and that the alterations were sufficiently remote not to have a significant impact on the servicing and usage of the M&S store. As a result of the various arguments, Gyle expressed the opinion that it would be unreasonable to conclude that the development would render the Mall or the Shared Parts materially less adequate, commodious or convenient to M&S.

M&S did not challenge those arguments or Gyle’s opinion. However it argued that (1) that the proposed “works” were too unspecific; (2) that loss of ownership rights in relation to the shared areas was sufficient of itself to render them less adequate; and (3) that as the case was ongoing at the time when the Gyle sought M&S’s consent, it could not be said that M&S acted unreasonably in withholding consent.

Decision
Those arguments were rejected by Lord Tyre who found: (1) that the proposed works were detailed in plans provided to M&S prior to its refusal of consent (and in respect of which planning permission had been granted); (2) the loss of M&S’s interest in the shared areas as tenant under the lease did not of itself render the shared areas materially less adequate (the criteria of adequacy, commodiousness and convenience being concerned with practical consequences rather than the technicalities of characterisation of M&S’s right under the lease); and (3) M&S’s entitlement to withhold consent in terms of the relevant clause had to relate to the three specified criteria. (Thus the fact that there was subsisting litigation was not a relevant matter at the time when consent was refused.)

The full judgement is available from Scottish Courts here.

(NB: see appeal to Inner House here.)

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

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[1] Gyle Shopping Centre General Partners Ltd as Trustee for and General Partner of Gyle Shopping Centre Limited Partnership v. Marks and Spencer Plc, 25 March 2014. See summary here.

[2] Gyle Shopping Centre General Partners Ltd as Trustee for and General Partner of Gyle Shopping Centre Limited Partnership v. Marks and Spencer Plc, 6 August 2014. See summary here.

Case from the Lands Tribunal for Scotland considering the title to the common parts of a development at Corstorphine Road in Edinburgh.

The case follows on from PMP Plus Ltd v The Keeper of the Registers of Scotland and others[1] and Lundin Homes Ltd v. the Keeper. PMP confirmed that it was not competent to convey the common parts of a development which are described by reference to a future event (e.g. conveying what will be left when the development has been completed). Lundin also made it clear that, for titles registered in the Land Register, there must be a sufficient description[2] of property within the conveyance[3] (whereas for Sasines titles it is competent for the extent of property to be identified by extrinsic evidence).

This case considers whether the owners of houses within the development with titles recorded in the Register of Sasines[4] may have obtained rights in the common parts by prescriptive possession.

The dispositions in favour of the home owners contained the following clause:

 “… (Three) a right in common with the proprietors of all the other dwellinghouses in the development of which the subjects hereby disponed form part to areas of open space amenity ground and/or wooded areas and unallocated parking spaces formed or to be formed in accordance with the requirements of the Local Planning Authority (the exact extent of which areas may not yet have been defined) unless and until said areas and unallocated parking spaces may be formally taken over by the Local Authority …”.

The developer (Miller Homes) received a conveyance of an undeveloped area of ground within the development from a group company and registered a title to it in the Land Register. The Keeper excluded indemnity on the basis that proprietors of the houses who held Sasine titles may have acquired prescriptive rights of common ownership in the area.

Miller argued that, in accordance with the decision in PMP, the house owner’s titles were not habile to found prescription as they were described by reference to an uncertain future event.

The Tribunal found that, whilst it was not possible to found prescription on titles to common areas still to be formed or to be defined[5] at the time the dispositions of the individual plots within the development were granted, the clause also refers to areas which had been formed and defined and it was possible that prescription could run on Sasine titles where the common area had been formed and defined at the time a disposition[6] of the relevant plot was granted.

No individual owner had entered appearance in appeal and the Tribunal decided to re-intimate the appeal to all the individual proprietors in order that they should have an opportunity to enter appearance and attempt to set up a competing title.

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

A blog on Registers of Scotland’s policy with regard to development common areas is available here.

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

Sheriff Court case concerning the division and sale of a property on Shiskine Drive, Maryhill in Glasgow. Mr Collins and Ms Sweeney each had a one half pro-indiviso share in the property (which was incapable of division). Mr Collins sought a sale of the property on the open market and division of the proceeds. Whereas Ms Sweeney sought an order compelling the sale of Mr Collins share of the property to her arguing that there were equitable considerations which justified the granting of such an order. The principle issue was whether the court could grant decree for the sale to a co-proprietor, against the will of the other proprietor, rather than on the open market.

The sheriff concluded that, even if proved, the equitable considerations did not constitute a defence to Mr Collins’ absolute right to insist on a sale on the open market. Although there was authority for the court to make an order for the sale of a pro-indiviso share to a co-proprietor, this only applied where both parties consented. In the absence of consent, where the property cannot be divided, a co-proprietor has an absolute right to insist upon sale on the open market and cannot be obliged to sell to a co-proprietor against his will.

On appeal Ms Sweeney argued that the sheriff had erred contending, by reference to prior authority[1], that the court was bound to follow a two stage process when giving consideration to an action of division and sale. The first consideration involved recognition that the right to raise and pursue such an action is absolute. However, she also argued that there was a second consideration which involved the full equitable jurisdiction of the court in working out the remedy.

The sheriff principal rejected that argument finding that the reference to the equitable jurisdiction of the court in the prior cases referred to the courts discretion when considering (on an action for division and sale) whether the property can be divided between the parties or whether it cannot be divided and has to be sold (with the proceeds being divided between the parties). However, the court has no discretion to refuse an action for division and sale. Thus, in this case, Mr Collins could insist on upon a division and sale of the property and, as there was no question of the property being divided, the court’s discretion did not arise and a sale of the property had to take place (after which the proceeds would be divided).

The full judgment is available from Scottish Courts here.

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

The problem
It has long been common practice for developers to dispose of the common parts to developments by selling individual plots with a right of common property in whatever is left at the completion of the development. (This has the advantage that the developer does not have to decide on the ultimate layout of the development before it starts and has the flexibility to change the layout as building proceeds).

However, in terms of both property law [1] and registration law [2], it is incompetent to convey an area that is indeterminate. Although there have long been doubts about the competence of the practice [3], the practical benefits to developers have meant that it was nevertheless common practice and the common areas of many developments have been described in this way.

PMP
In 2008 the case of PMP Plus Ltd v The Keeper of the Registers of Scotland and others [4] confirmed that the practice is not competent. In that case a developer sold plots in a development with a share in the common areas (which were described as being those areas not exclusively alienated to the home owners) but decided prior to the completion of the development to sell a part of the development (which would otherwise have formed part of the common areas) to PMP for the building of a health centre. The Keeper excluded indemnity in respect of PMP’s title  on the grounds that the home owners may have acquired title to the common parts as a result of the conveyances in their favour. However, the Lands Tribunal for Scotland decided that the home owners did not have an effective title to the common areas due to the absence of a sufficient description.

Update 27
In response to PMP, the Keeper issued update 27 which contained guidance on how the Keeper would deal with applications relating to such developments post PMP. It made it clear that, for developments where the first split off deed/plot sale occurred on or after 3 August 2009 (described as “new developments”) there was a change in policy and, where identification of the common areas depended on completion of the development (or other future uncertain event), the Keeper would no longer show the conveyance of the common areas in the title sheet.

However, for developments where plots had been sold before 3 August 2009 (described as “existing developments”), the Keeper would continue to reflect the terms of the conveyancing showing the conveyance of common areas in the title sheet even where identification of the common areas was dependent on completion of the development (or other future uncertain event). This approach was intended to ensure consistency and equality within developments. It was also intended to take account of the possibility that rights in the common areas may be created when the last plot is sold[5].

Lundin
In June 2013, the Lands Tribunal for Scotland issued the decision in Lundin Homes v Keeper of Registers of Scotland[6]. Lundin went a step further than PMP as it made it clear that the identity of the common areas does not become fixed merely because the last plot in the development has been sold and, where the common parts have been insufficiently described in the original purchases from developers, subsequent sales of the properties will not cure the defect[7].

AI27
Following Lundin, rather than issue a replacement for Update 27, the Keeper issued an “additional information” paper (referred to here as “AI27”) to be read alongside it. This approach can be slightly confusing as some of the guidance in AI27 conflicts with Update 27. The following is an attempt at consolidating the provisions of Update 27 and AI27.

New developments (First registrations)
AI27 makes no change to the guidance issued in Update 27 in respect of “new developments”. In such cases, the Keeper will continue to take steps to remove wording from the title sheets which identifies the common areas by reference a future uncertain event.

Existing developments

First Registrations and transfers of part
As noted above Update 27 takes account of the possibility that rights in the common areas may be created when the last plot is sold.  AI27 acknowledges that, following the decision in Lundin, the occurrence of a future event/sale of the final plot by itself will not create rights in the common areas.

However, AI27 also makes the point that, if a deed is drafted so as to properly identify the common areas, it may[8] (along with the positive effect of registration/“the Midas touch”) have the effect of creating rights in the common areas. The Keeper will therefore consider applications for a first registration or transfer of part within an existing development where there is an attempt to identify the common areas and recommends that solicitors considering this approach should contact pre-registration enquiries.

AI27 makes it clear that, where there is no attempt to identify the common areas, the Keeper will continue to reflect the terms of the conveyancing. This is the same approach as Update 27. However AI27 goes on to suggest that, where a solicitor considers that rights in common have not been validly created in a split off disposition, he or she may wish to reflect that in the deed submitted for registration.

Dealing of a whole
The hierarchy of the headings in Update 27 is slightly confusing and may at first sight seem to indicate that the guidance relating to applications for the registration of the dealing of a whole falls under “new developments”. However, as noted above, the Keeper will remove wording transferring rights in common areas from the title sheets to new developments where it refers to a future uncertain event[9]. Such wording will not therefore arise on a “dealing” occurring in a “new development”. On the dealing of a whole within “existing developments”, Update 27 made it clear that the Keeper’s policy (as with first registrations) will be to make no changes to wording relating to common areas (and not to exclude indemnity). That does not change. However, Update 27 did indicate that completion of the development may create rights in common areas. Whereas, AI27 makes it clear that it will not.

In addition AI27 acknowledges that it may be possible in some cases to fix the problem with some remedial conveyancing. In this regard we are advised that the Keeper will consider applications which attempt to identify the common areas[10].

Vague verbal descriptions (no reference to future uncertain events)
PMP made reference to deeds containing verbal descriptions of common areas which do not specifically identify the common areas by reference to the OS map. Update 27 advises that the Keeper’s policy is, and will continue to be, to reflect the terms of the conveyancing without requiring a full bounding description of or plan delineating such common areas[11]. However, Update 27 also notes comments in PMP to the effect a description without reference to extraneous material might well be thought to be a central feature of a map based registration system and suggests that applicants consider those comments. This advice proved to be well founded as Lundin makes it clear that reference to extraneous material (with the possible exception of other publicly accessible registered titles) for description is incompetent. Consequently, where such wording appears on a registered title it will be superfluous and ineffectual. (However, see comments on prescription below.)

Update 27 also suggests than an applicants may want to request (with the support of a certified plan or deed plan) to have such areas mapped on to the title plan for its interest (albeit indemnity is likely to be excluded unless the other owners and developer are also parties to the plan). No further guidance on this issue was given in AI27.

Sale of potential common areas by developer

Registered titles
This policy on the sale of potential common parts by a developer perhaps represents the biggest change in policy. Update 27 provides that, where a developer was attempting to convey possible common areas, the Keeper would require evidence that the developer’s title to the land being sold was not void or voidable.  That is changed in AI27. In cases where the developer’s title is registered in the Land Register the Keeper will no longer require such evidence and will register titles without exclusion of indemnity.

Sasine titles
However, where the developer’s title and subsequent plots sales have been recorded in Sasines the situation is treated differently as prescription may play a role in creating rights to the common areas[12]. Where the relevant split off deed has been recorded in Sasines, and the title is habile[13] prescription may have cured defects in the title thus giving the owners of individual units in the development title to the common areas. Thus, where a developer is attempting to sell parts of a development in which the dispositions conveying individual plots have been recorded in the Register of Sasines, the developer will require to provide evidence that there is no conflicting possession by persons other than the developer.

Superfluous wording
The Keeper’s policy with regard to “existing developments”[14] will result in superfluous and ineffective wording in registered titles and we are again told that no steps will be taken to remove such wording at present due to the effect of prescription. In addition to its role with regard to Sasine titles, AI27 also refers to the impact of prescription on Land Register titles.

Land Registration (Scotland) Act 2012 and prescription
Whilst prescription does not currently play a part in Land Register titles[15], the Land Registration (Scotland) Act 2012[16], changes that and will allow prescription to run on deeds presented for registration[17]. AI27 advises that the Keeper is currently considering the implications of the 2012 Act. She will not  therefore take steps to rectify the Register (unless she receives an application for rectification) until that consideration is complete.

It may be that the operation of prescription under the 2012 Act helps to shore up titles in need of fortification. However, we should bear in mind that it will also bring about an end to the “Midas touch” (which, where common areas are correctly identified, can presently cure defective descriptions).

Prescription as a cure
Whether under Land Register titles or Sasine titles, it will seldom be that prescription provides a complete fix for the problem and we should also bear in mind some of the limitations of possession to demonstrate title. Whilst a proprietor is likely to be able to show prescriptive possession of the common areas it uses regularly (e.g. a communal bin store), there will be other areas for which it may be hard to show (and harder yet to prove) possession (e.g. communal flower beds). And others that may prove more useful to some people than others (e.g. communal parking bays may not be of too much to a plot owner who doesn’t own a car). Consequently relying on prescription is therefore likely to lead to patchy, inconsistent and unclear ownership of the common areas in developments.

The lack of a share in a communal flowerbed will most likely not be of huge importance to most owners. Carless proprietors are unlikely to be overly concerned about the parking bays until they come to sell the property to someone with a car. However, in all cases a lack of ownership in the common areas is likely be more of an issue if they come to be sold by the developer and used for something the plot owners find undesirable.

Where we are now?
The combination of PMP, Lundin, Update 27 and AI27 leaves us in the following situation.

• Many units within developments do not include a share of the common areas[18]. Clients and their lenders will require to be advised accordingly.
  • This should be clear from the land certificate on the dealing of property within a “new development”[19]. (Albeit there may be some instances where the applicant has not paid heed to the advice in update 27 and ineffectual vague verbal descriptions which do not identify the common areas by reference to a future event remain on the title.)
  • When involved with first registrations, or dealings of properties in “existing developments”, descriptions will need to be examined carefully. Those purporting to identify and convey common areas by reference to a future event[20] will be ineffective[21]. However, AI27 makes it clear that the Keeper will consider attempts to rectify the situation which do correctly identify the common areas.
• On a purchase of potential common areas (identified by reference to a future event) from the developer, the Keeper’s approach, after Update 27 but prior to AI27, was to require evidence that the applicant’s title was not void or voidable and would exclude indemnity if not satisfied.  Since AI27:
  • The Keeper will not require such evidence nor exclude indemnity for Land Register titles.
  • But, where plot sales have been recorded in Sasines, she will require evidence that there has been no possession adverse to that of the developer.

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Case from the Lands Tribunal for Scotland in which Lundin homes appealed against the Keeper’s decision to exclude indemnity from their title to a development site.

Background
The site had been part of a larger development and had been intended as a detention pond for surface drainage run off but was not required for that purpose. Lundin bought the site from the receiver of the original developer. However, the Keeper excluded indemnity from Lundin’s title on the basis that the site could have been conveyed to the proprietors of the houses in the larger development as part of the common parts.

In the case of PMP Plus Ltd v The Keeper of the Registers of Scotland and others[1] it was established that it is not possible to create rights in common areas where the identification of those areas is dependent on a future uncertain event; for example, where a developer dispones properties (before the development has been completed) with a right of common property in the areas of the development which will be left over after the houses have been erected[2].

Keeper’s Argument
The Keeper argued that this case differed from PMP in that the development had been completed and the owner of the last of the houses in the larger development could have obtained title to the common areas (including Lundin’s site) as, at the time the last property was conveyed, the common areas became identified and were no longer uncertain.  On this reasoning, the Keeper argued, subsequent re-sales of the houses (after the common areas became identified by the sale of the last house in the development) would also carry a share of the common parts. The “Midas effect” effect (under which an entry on the register cannot be void, meaning that, if a title is registered, and so long as the subjects can be identified[3], that title becomes the actual title even if that does not represent the correct legal position) was important to the Keeper’s argument.

Decision
The tribunal rejected this argument finding that the common parts had not been sufficiently identified in the title to the last of the houses and noted the difficulty in determining with certainty when a development has been completed[4]. The title to the last of the houses did not show or attempt to describe the extent of the common parts or all of the boundaries of the other properties. The development title which had been marked up with progressive titles by the keeper did show all of the boundaries and common parts but it had been “closed” meaning that it was not public and could only be searched internally by Registers’ staff.

The tribunal found that reference to extraneous material, (with the possible exception of other publicly accessible registered titles) in order to establish completion and identify common parts is incompetent. As such, the owner of the last house to be sold in the larger development had no right to the Lundin site (or indeed the rest of the intended common areas within the development) and the Keeper had not been entitled to exclude indemnity when registering Lundin’s title.

It was also noted that re-sales of the houses did not include a right to the common areas as, even with the assistance of the “Midas” effect, the conveyance only disponed what was contained in the title sheets and the titles in the re-sales suffered from the same lack of description as the first purchases.

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

(See also Miller Homes Limited v The Keeper of the Registers of Scotland, LTS/LR/2013/06).

A blog on Registers of Scotland’s policy with regard to development common areas is available here.

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

Sheriff Court case concerning the division and sale of a property on Shiskine Drive, Maryhill in Glasgow. Mr Collins and Ms Sweeny each had a one half pro-indiviso share in the property (which was incapable of division). Mr Collins sought a sale of the property on the open market and division of the proceeds. Ms Sweeney sought an order compelling the sale of Mr Collins share of the property to her. She argued that there were equitable considerations which justified the granting of such an order; pointing to the fact that she could afford to acquire and maintain the property whereas Mr Collins could not, referring to other litigation between the parties (including an exclusion order) and making a case for the purchase of the property by her for the sake of a child of the relationship between the parties.

The principle issue for the court was whether the court could competently grant decree for the sale to a co-proprietor, against the will of the other proprietor, rather than on the open market.

After considering the authorities, the sheriff concluded that, even if proved, the equitable considerations did not constitute a defence to Mr Collins’ absolute right to insist on a sale on the open market. Although there was authority for the court to make an order for the sale of a pro-indiviso share to a co-proprietor, this only applied where both parties consented. In the absence of consent, where the property cannot be divided, a co-proprietor has an absolute right to insist upon sale on the open market and cannot be obliged to sell to a co-proprietor against his will.

The full judgment is available from Scottish Courts here.

(See appeal to sheriff principal here.)

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

Outer House case concerning a GP practice operating at the Terra Nova Medical Centre on Dura Street, Dundee.  Michael John Morris and others (the pursuers) were doctors who had retired from the practice. They argued that they were the current tenants of the centre and that (following a number of changes in the composition of the practice) all bar one of the current partners and the partnership practising at the centre had no right or title to occupy the premises.  One of the original partners (and tenant under the lease), Dr Ritchie remained in the practice but chose neither to pursue the action nor raise defences to it.

The pursuers had bought the centre from the Dundee City Council in 1993 then entered a sale and leaseback transaction with MPIF Holdings Ltd in 2006. The lease contained a general prohibition on assignation and subletting but allowed assignations between partners in the practice without the landlord’s consent whilst requiring notification of assignations to the landlord. Despite the pursuers’ retirement from the practice, there had been no assignation of the lease to the new partners. Indeed the new partners had refused to accept an assignation of the lease from the pursuers. As a consequence, the pursuers and Dr Ritchie retained the tenancy obligations meaning that if the partnership failed to pay the rent, MPIF’s claim would be against the pursuers and Dr Ritchie rather than the partnership.

The new partners and partnership contended that none of the pursuers had occupied the premises as individuals and argued that the partnership paid the rent and occupied the centre with knowledge of the landlord and the agreement of the tenants (i.e. the pursuers and Dr Ritchie).  As such, a right of occupancy subsidiary to the lease (possibly similar to a licence) had been created.

Lord Woolman rejected these arguments:

“The transfer of a real right, which includes “a right to occupy or use land”, requires to be in writing: Requirements of Writing (Scotland) Act 1995 s. 1(2) and 1(7). The defenders do not point to any document in support of their claim. Even if such an agreement could be established by actings, many questions would arise about the contours of the agreement. Who are the parties? When was it made? What is its duration? Was a new agreement made each time a new partner was assumed? Can the permission be withdrawn and if so by whom – the landlord or the pursuers or both? The complete absence of specification on these points is in my view unsurprising. It demonstrates that there was no such agreement. It is also unclear how this private arrangement would fit with the Lease. I cannot see how an agreement arose which is in some way derivative of the lease, yet contradicts its terms.”

Consequently, it was held that the new partners and partnership had no right or title to occupy the centre.

Lord Woolman also rejected an argument by the new partners that the pursuers had no title to sue due to the absence of Dr Ritchie from the action. This argument was based on the rule of common property that the consent of all common owners must be obtained in decisions relating to the management of the property (including in the granting of a lease and in a removing). However, after reviewing the authorities, Lord Woolman noted a modification of the rule to the effect that a mere squatter would not be entitled to a defence based on the rule. As it had been held that the new partners and partnership were in occupation without a right, they were therefore not entitled to query the pursuers’ title to sue.

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.