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Signs of the times

17 January 11

A recent sheriff court decision has highlighted the complexity of the current law on enforcement of real burdens, particularly by someone other than a proprietor

by Eric Baijal

Given that in the lead-up to the “appointed day” practitioners were told “things would never be the same again”, it should really have come as no surprise when numerous litigations started to arise from the Title Conditions (Scotland) Act 2003. Numbers of cases are increasing, but judicial guidance on critical issues is still very limited.

Since the 2003 Act came into force, it has no longer been enough for real burdens to be valid (in the sense they are properly constituted and not repugnant with ownership). The party attempting to enforce the burden must have title and interest to enforce a particular burden. Barker v Lewis 2008 SLT (Sh Ct) 17 is, of course, the leading case on interest to enforce a real burden under the 2003 Act. In that case, several proprietors in a rural steading development attempted to stop a fellow proprietor from operating a bed & breakfast business, on the basis that the property was burdened to the effect that a business could not be operated from it. Ultimately their attempt failed, the sheriff principal ruling that the operation of the business did not result in material detriment to the pursuers’ use or enjoyment of their property.

Strathclyde Business Park (Management) Ltd v BAE Systems Pension Funds Trustees Ltd, Hamilton Sheriff Court, 14 September 2010, unreported, is less colourful than a case involving the antics of foreign tourists at a bed & breakfast. However, it is effectively the next in the line of cases where an attempt is being made to enforce a title condition which is ex facie valid, but where again issues have arisen about the measurement of title and interest to enforce it. In this decision of Temporary Sheriff Principal Stoddart, we also have a fresh analysis of the 2003 Act, which the courts seem generally to be finding challenging to interpret.

Background

In Strathclyde Business Park, the pursuers were the “promoter” (importantly not the owners) of the business park. They raised an action for interdict and declarator in Hamilton Sheriff Court. In broad terms, they argued that the defenders, who were tenants in the business park, were in breach of clause 11 of the deed of conditions applying to the development, registered on 29 July 1991.

Clause 11 provided: “No proprietor shall be permitted, without obtaining the prior written consent of the promoter (which consent shall not be unreasonably withheld or delayed) to erect upon the site including any building thereon, any signs, logos, devices, advertisements, notices or others.”

At first instance, the sheriff granted an interdict prohibiting the defenders from erecting signage. They appealed to the sheriff principal, arguing that (1) the pursuers had no title to sue as promoter of the business park; (2) the pursuers had no interest to enforce the burden in terms of s 8 of the 2003 Act; and (3) the pursuers had averred no prima facie case otherwise, in any event.

Title to sue

The pursuers argued that they were entitled to enforce the real burden, given they were promoter of the business park in terms of the deed. That right, they said, arose implicitly. They pointed out that in terms of s 25 of the Act, this burden was a “community burden” because the same burdens applied to each property in the business park so that each property was both benefited and burdened. Reference was then made to the fact that in terms of s 28, owners in a community could appoint a manager who would be empowered to enforce title conditions such as the one in question. The pursuers appear to have argued that the owners had implicitly delegated the power to enforce to the promoter.

The pursuers had an esto case to the effect that they were entitled to enforce as agent for the proprietor.

Although not directly related to the 2003 Act, the sheriff principal expressed doubt about pleading an alternative title to sue as the pursuers had done here.

Despite the arguments about implicit creation of enforcement rights, which are certainly novel to the author, the sheriff principal held in clear terms that no implied right to enforce had been created. The sheriff principal, in the author’s opinion correctly, held that if there are no delegated enforcement rights in the deed of conditions, they have to be conferred by a majority of owners in the community (2003 Act, ss 26, 28). That had not happened in this case. In the circumstances, it was not open to the promoter to claim that somehow enforcement rights had implicitly arisen. It was clear that appointment, and therefore delegation of powers, had to be express.

The sheriff principal held, however, that it could conceivably be competent for the pursuers to be entitled to sue as agents of the proprietor. Their averments on this issue made their claim to have title to sue statable.

Material interest

In terms of s 8 of the Act, a party requires to have both title and interest to enforce a real burden. Section 8(3) defines interest as follows: “A person has such interest if… in the circumstances of any case, failure to comply with the real burden is resulting in, or will result in, material detriment to the value or enjoyment of the person’s ownership of, or right in, the benefited property.”

For reasons addressed below, the sheriff principal did not require to look at interest to enforce in any depth (interestingly Barker v Lewis is not mentioned in the report and the author therefore assumes there was little in-depth debate on the point: it is impossible to say with any certainty without findings in fact, but if the ratio in Barker was followed, it again seems unlikely that interdict would have been granted). However, he seems to have accepted much of the defenders’ argument. This focused on the fact that the pursuers had made no averments about their interests and the interests of the proprietors, and how these were affected by the alleged breach of the condition. In these circumstances, extraordinary remedies should not be granted. The sheriff principal agreed, saying: “I think this is a fundamental point; it is completely unclear whether their interest is one which is protected by s 8(3). Nor can it be assumed that [the proprietors’] interest coincides with any the respondents may have.”

He therefore held that it could not be said there was a prima facie case of “material interest” to enforce the condition. Again, this respectfully seems to the author to be the sensible conclusion to reach.

Having reached this conclusion, the sheriff principal did not have to look at the question of material interest in any great depth.

Enforceability

A separate question arose as to whether the provision in clause 11 on which the pursuers sought to rely required to be disregarded.

Apparently the sheriff had been referred to s 73(2A) of the Abolition of Feudal Tenure (Scotland) Act 2000, but made no mention of it in his note. That section provides (as read short by the sheriff principal): “In construing, after the appointed day and in relation to a right enforceable on or after that day, a document… which (a) sets out the terms of a real burden…, any provision of the document… to the effect that a person other than the person entitled to enforce the burden may waive compliance with, or mitigate or otherwise vary a condition of, the burden shall be disregarded.”

The defenders argued that the effect of the section here was to render the burden unenforceable. Parliament had decided that it was a holder of a title condition (s 3(8) of the 2003 Act sets out the position for new burdens) that had the right to waive compliance. Here the right was purportedly delegated to the promoter, and that was not acceptable in terms of s 73(2A).

The pursuers argued they still had a prima facie case under this head. First, they claimed that, properly construed, the clause did not necessarily have the effect of allowing the promoter to waive or mitigate the burden. Secondly, they argued that Parliament had not intended to cut down existing burdens, and in any case this particular condition reflected only one of a series of delegated management powers. Lastly, the pursuers appear to have advanced an argument to the effect that to construe s 73(2A) as the defenders had done would be to undermine Parliament’s purpose in relation to community burdens.

The sheriff principal rejected the pursuers’ arguments. He held that the wording of the condition was unambiguous and did attempt to allow the promoter to waive or vary the condition. He further held that s 73(2A) did catch burdens created before the appointed day and noted that the pursuers seemed to have no answer to that. In the author’s opinion, that view must be correct. Section 73(2A) appears to mirror s 3(8) of the 2003 Act in relation to pre-28 November 2004 burdens, and this particular condition seems clear in its terms.

Complex questions

In the event, the sheriff principal allowed the appeal, having been satisfied that there was no prima facie case. The legal principles appear straightforward in hindsight. However, their application is extremely challenging. The fact that the case made it to the sheriff principal reflects the continuing unease caused by, and the complexity found in, the 2000 and 2003 Acts. There are particular lessons to note. Managers must be appointed expressly. If a waiver provision is contained in a burden, then perhaps community variation (see for example s 33 of the 2003 Act) should be considered (property lawyers acting for those purchasing similar developments with such conditions should give serious consideration to advising on variation if their clients are going to be without practical means of enforcement). If enforcement remedies are being considered, this case emphasises that specific and relevant allegations will have to be pled; the days of pointing to a valid condition and a breach seem to be over.

More generally, the profession is still left with questions about advising on real burdens. The writer is admittedly a litigator, but assumes that conveyancers must find themselves in an almost impossible position. The ratio of Barker seems to be that, given that “material” has to be given its ordinary meaning (perhaps in this context, “significant” or “objectively important”), one can only judge the enforceability of a real burden on a case by case, circumstance by circumstance basis. There is no further guidance on the meaning of “material interest” here. The profession is therefore left with a situation where not only is it complex to advise on whether a burden is valid (in the sense that the 2000 Act cuts through many burdens with the abolition of superiorities), but it is even more difficult to say with any certainty whether a burden can practically be enforced.

In this case, it seems reasonable that a business park manager can control the amenity and environment of the site; however, it appears that in this situation that may have to be done contractually as opposed to control by title condition.

This case serves the profession with a reminder of a difficult set of statutes, which require to be read and understood. Meanwhile, it is left hoping for some further judicial guidance on when and where enforcement of real burdens can be effected.

Eric Baijal is a partner in BBM Solicitors, Wick.

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