In this month's issue we comment on two recent cases concerning the granting of rights to car parking spaces, a case involving the service of an invalid notice to break a lease and look at the first appeal of a decision by the Scottish Ministers regarding registration a community right to buy.

Recent Decisions

Parking mad

Two recent cases where developers get it wrong with parking spaces

In the March 2005 edition of Property Update we commented on a case considering the possibility of the existence of a servitude right of parking in Scots Law. Ever increasing congestion and competition for on- street parking mean that a parking space can be a very valuable asset. Two recent Sheriff Court cases highlight the importance of getting it right when allocating rights to car parking spaces in developments.

In Edinburgh a Sheriff awarded damages of £15,000 against a developer (Ashford Estates) who sold an inaccessible parking space to a couple (the Holms) at a development at Manor Place in Edinburgh. The space was shown on the Holms’ title plan numbered 42 and was one of three numbered 40, 41 and 42 marked on the title plan and also shown in the Deed of Conditions which related to the whole development. However, the developers subsequently sold another car parking space to Miss Mason, a neighbour of the Holms. This space was shown on Miss Mason’s title (numbered 43) but was not shown in any of the other deeds. Space 43 was positioned so that when a car was parked on it, the Holms were unable to park their car on space 42.

Sheriff Liddle held that the fact that the Holms could be prevented from parking in space 42 at any time Miss Mason chose to park her car on space 43 was sufficient to amount to a breach of the warrandice (a warranty that title to the property is good and unencumbered) granted by the developers on the sale of the property. Accordingly damages amounting to the value of the car parking space were awarded to the Holms.

In the second case, concerning a development at Glasgow Harbour, the purchaser refused to pay the purchase price and rescinded the contract on the basis that the developers were in breach of contract. The purchaser argued that missives bound the developers to transfer a car parking space to the purchaser whereas the draft disposition which the developers were insisting on granting in favour of the purchaser only conveyed a right of common ownership to the parking space (in common with all of the other proprietors in the development) albeit combined with “an exclusive right to use” the space.

The missives contained the following sentence “The purchase price will also include title to an exclusive car parking space or in the case of the penthouse properties two exclusive car parking spaces“. Sheriff Scott preferred the purchaser’s argument that “title to an exclusive car parking space” meant ownership of the land and rejected the developers’ contentions that the missives could be interpreted as giving the purchaser a right in common ownership to the solum of the car park.

The court took the view that the use of the word “exclusive” tended to contradict any notion of common property and that there was “little or no ambiguity” in the missives. As a result the developers were in material breach of the missives and the purchaser was entitled to walk away from the contract.

Simon Guest a Partner in our Housebuilding Team comments:

Taking into account the costs of litigation it is surprising that the parties persevered with these actions. The defenders’ arguments in both cases seemed to be particularly weak.

But there are lessons to be learned – care must always be given to the wording of missives for early pre-sales in large residential developments where the layout and decisions on parts of the development have not been finalised.

In the Glasgow Harbour case, the Sheriff’s decision was based largely on his interpretation of the word ‘exclusive’ which he said excluded any concept of common or joint ownership. It is the case that some planning permissions for modern residential developments direct that ownership of car parking areas are to be owned in common by all proprietors rather than title being granted to individual proprietors for each parking space. Some Deeds of Conditions have sought to get round this by providing for an ‘exclusive right to use’ a particular space whilst ownership of the car park area was retained in common ownership. So long as all the proprietors did not fall out, the equivalent of ownership had been achieved. It has very recently been suggested by academics that this device may be flawed, on the basis that an exclusive right to use a particular part of common property contradicts the concept of common ownership. The effect of this would be that the right to park had not been validly created and there would be a free for all for the spaces. Would this lead to “car park rage” in the underground car parks of modern residential developments?

Full text of both of the decisions referred to are available from the Scottish Courts Website:

Click here for Robert Andrew Holms and Anne Clark Holms v. Ashford Estates Limited

Click here for Park Lane Developments (Glasgow Harbour) Limited v. Jeffrey Jesner

Break Failure

Invalid notices rear their ugly head yet again

In the June 2005 Edition of Property Update we commented on a case where a mistake in an irritancy notice meant that a landlord inadvertently released a guarantor from continuing obligations under a lease.

Scottish Enterprise also recently suffered a “major disaster” when they failed to exercise a break option in a 25 year lease of premises on Lindsay Street in Dundee by serving a notice which was incorrectly addressed.

The Landlord (then Pacific Shelf 1145) acquired the property in October 2002. A notice of change of ownership was served on Scottish Enterprise and acknowledged by their in house counsel. The Landlord then changed its name to Ben Cleuch Estates Limited on 18 th October 2002 . Ben Cleuch was a wholly owned subsidiary of Bonnytoun Estates Limited, which invested funds in commercial property. Some properties were owned by Bonnytoun directly and others, such the Lindsay Street premises, in subsidiaries such as Ben Cleuch. The managing agents issued standard correspondence (including invoices and letters of consent) for both companies which indicated they were acting as agents for Bonnytoun Estates.

Scottish Enterprise was entitled to terminate the lease 10 years early. Scottish Enterprise sought to invoke that break option. However, the break notice was served on Bonnytoun, rather than Ben Cleuch. Ben Cleuch argued that the notice was invalid because it had not been correctly addressed to the Landlord and as a consequence Scottish Enterprise had failed to validly terminate the lease. Ben Cleuch subsequently raised court proceedings for a ruling that the lease should continue for a further 10 years until the contractual expiry date- notwithstanding that the notice had been sent to Ben Cleuch’s registered office (which was the same as Bonnytoun’s) and had come into the hands of Ben Cleuch’s managing director (who was also managing director of both companies).

Lord Reed rejected Scottish Enterprise’s argument, that the managing agents led them to believe that Bonnytoun was the Landlord and that the managing director’s receipt of the notice personally barred him from insisting that the notice was not valid in his capacity as managing director of Ben Cleuch. Lord Reed accepted that it was tempting to view Scottish Enterprise’s mistake as to the identity of the Landlord as a mere technicality but held that that approach would be inconsistent with the agreement of the parties expressed in the lease. The result leaves Scottish Enterprise liable for annual rent of over £210,000 for the remaining 10 years of the lease. Scottish Enterprise have indicated that they are to appeal the decision.

Dawn Henderson, an Associate in our Retail and Leisure team comments:

I am sure this case sends a shiver down the spine of all of us. I thought initially that the Court’s decision was very harsh, given the disastrous consequences it has for the Tenant. After all, the registered office of both companies was the same, the companies had a common managing director, correspondence and invoices had been issued by managing agents purporting to be “on behalf of the Landlord above named” namely Bonnytoun Estates and correspondence had passed between both parties’ agents in which the Tenant had referred to Bonnytoun Estates in the headings of its letters and this had not been challenged by the Landlord’s agent. However, the parties did agree the precise notice requirements at the time they entered into the Lease so each party knew, or ought to have known, what was required of it at the relevant time. If the Court had not decided in favour of the Landlord, this would have undoubtedly introduced a great degree of uncertainty amongst landlords and tenants alike - if serving on a wrong party does not invalidate a notice then what would? Parties need to know at any one time what is expected of them and the Court has kept that requirement intact. Although I have sympathy for the Tenant in this case, on reflection, I think that the Court’s decision is the right one.

Whilst the facts of this case seem fairly involved and complex, it is by no means impossible that such a scenario could not happen again. After all, it is common place for companies to share the same registered offices and operate single management and billing systems. The main point to take from this case is that the importance of serving (and receiving) formal notices cannot be underestimated. It might be worthwhile bearing in mind the following key points:-

• Take action early – the relevant deadline will be here before you know it;

• Put in place systems that alert of deadlines and manage the receipt and sending of formal notices;

• Spend time identifying the crucial elements of the notice provision including the parties, time limits and addresses. Once you have checked this, check again and again;

• Carry out property and company searches to clarify the identity of the current owner of the property;

• At the negotiation stage, check that the notice provisions reflect your company’s requirements and procedures;

• If there is any uncertainty, seek legal advice as early as possible.

Case referred to: Ben Cleuch Estates Ltd v Scottish Enterprise

Full text of the decision is available from the Scottish Courts Website here.

News

Right to buy?

First appeal of a refusal to register a Community Interest in land considered at Stirling Sheriff Court

Part 2 of the Land Reform (Scotland) Act 2003 gives rural communities (communities with a population of less than 10,000) the right to register a notice of interest in land which they wish to buy. By forming a community body and registering a notice, the community gains an option to purchase the land whenever the land owner takes any action to sell it. Any attempted sale which does not comply with the procedure set out in the Act is of no effect.

However, in terms of the legislation, before the community body’s notice of interest can be registered, it must first be approved by the Scottish Ministers. If the Scottish Ministers reject registration of the interest the community body can appeal the decision by summary application to the sheriff. What is believed to the first such appeal was considered at the end of last month at Stirling Sheriff Court.

The application for registration of the notice in that case was a “Late Application” in terms of the Act. This means that it was made after the landowner had taken action to sell the land. An interest can only be registered in such circumstances if there are “good reasons” for the application being late and it meets stricter requirements relating to the level of community support for the application and also stricter requirements relating to the public interest element in registering the application.

The legislation does not define the term “good reasons” but in this case the Scottish Ministers were not satisfied that there were good reasons for the late application as the reasons given did not adequately address why the application had not been registered timeously and the application was as seen as being merely a reaction to the sale of the property.

When considering public interest matters, the Scottish Ministers took the view that the factors considered in relation to the public interest were not “strongly indicative” that it was in the public interest to register the interest. The purpose of the community right to buy is that of sustainable development yet the Ministers noted a number of references within the application directly relating to preventing future development on the land and found that, in this case, there was evidence that the right to buy could actually be used to thwart the planning process. The Sheriff did not find the decision of the Scottish Ministers to be unreasonable and refused the community body’s appeal.

Case referred to: Holmehill Limited v. The Scottish Ministers and Stakis Limited and Stirling Council

Full text of the decision is available from the Scottish Courts Website here.

New green belt policy published

Scottish Planning Policy 21: Green Belts

In August 2005 the Scottish Executive published its draft planning policy on Green Belts for consultation (see Property Update September 2005). The consultation period finished at the end of the October 2005 and at the end of last month an analysis of responses to the consultation paper was published alongside the planning policy paper, SPP21 which now replaces the old Green Belt policy contained in Circular 24/85.

The Scottish Executive says that the most important of the changes made to the policy is the strengthening of links between development plans and green belts which is said to mirror the high profile for development plans in the wider modernisation of the planning system.

The policy objectives are set out in SPP21 as:

• Directing planned growth to the most appropriate locations and supporting regeneration
• Protecting and enhancing the character, landscape setting and identity of town and cities
• Protecting and giving access to open space within and around towns and cities, as part of the wider structure of green space.

The paper concludes by stating that Green Belts will continue to play a key role in managing change in Scotland's towns and cities and emphasises the need to “robustly protect” Green Belts once in place.

SPP21 is available from the Scottish Executive here.

An analysis of the responses to the consultation paper can also be seen here.