HM Insights

Property and Construction Bulletin September - Cases

Partnership and leases

A recent case in the Outer House of the Court of Session considered the right of a GP practice in Dundee to occupy a health centre where there had been no assignation of the lease from the former partners of the practice.

The pursuers were doctors who formerly worked at the health centre and had retired from there in 2009. The defenders were the current partners of the GP practice based at the health centre and the partnership itself. The pursuers argued that they were the tenants of the health centre and that only one of the current partners, Dr Derek Ritchie, had the right or title to occupy the premises. Dr Ritchie was one of the original partners and tenant under the lease. He was still in the GP practice but chose not to pursue or lodge defences to the action.

Five doctors purchased the health centre from Dundee City Council in 1993 and two GP partnerships operated from it. The composition of the partnerships changed from time to time over the following years. In 2006 the then partners entered a sale and lease-back arrangement with MPIF Holdings Ltd. The two partnerships then combined into a single partnership and Medical Centres Scotland Limited acquired the landlord's interest from MPIF.

The lease contained a general prohibition on assignation and subletting but permitted assignations between partners in the GP practice without landlord's approval provided that any assignations were notified to the landlord's solicitors. The dispute arose because there had been no assignation of the lease to the new partners (the defenders) and 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, the landlord's claim would be against the pursuers and Dr Ritchie, not the defenders.

The defenders argued that during the whole period of the lease, the premises had been occupied by a partnership rather than by individuals and that the defenders had never occupied the premises as individuals. They further argued that the partnership paid the rent and occupied the premises with knowledge of the landlord and the agreement of the tenants and that consequently a right of occupancy subsidiary to the lease had been created.

Lord Woolman rejected these arguments and held that the new partners and partnership had no right or title to occupy the centre. The defenders had failed to follow the simple mechanism for transferring the tenancy, i.e. notification.

Lord Woolman also said that the transfer of a real right, which includes "a right to occupy or use land", must be in writing. The defenders did not produce any document in support of their claim and even if such an agreement could be established by actings, many questions would arise such as the details of the parties, when it was made, its duration etc. The absence of specification on these points demonstrated that there was no such agreement.

Comment

If you are a partner in a partnership and the composition of the partnership is about to change due to the retiral or assumption of a new partner, it is crucial to check the terms of any leases in place. Any conditions in alienation clauses must be met. If, as in this case, the landlord has retained the general prohibition against assignation or subletting but permits assignation amongst partners subject to notification to them, then this condition must be met. The landlord is entitled to know that a transfer has taken place and to be informed of the identity of the new person. This will also avoid any unwanted future liabilities such as payment of rent. If you have any questions or require further advice please contact a member of our real estate team and we can assist you.

The full judgement of Michael John Morris and others v Scott Eason and others [2012] CSOH can be read here.

Abandonment of a servitude?

The case of James and Jane Campbell ("the pursuers") v Susan Watling ("the defender") is an interesting case discussing the question of abandonment of a servitude right of access to a property, Belmont House, over a road within another property in Dunoon.

A servitude is a right over one property in favour of another property, e.g. rights of access and rights in respect of pipes, drains, cables etc. Servitudes can be created in a variety of ways: by express grant or reservation in a deed; by implied grant or reservation; by agreement on facts and circumstances; or by prescription.

The servitude right of access in this case was contained in the pursuers' title and also within the titles deeds of their predecessors. Contained within the pursuers' title to Belmont House was a servitude right of way granting the right of free ish and entry from Wellington Street to Belmont House which was owned by the pursuers. The essence of the defender's case was that the servitude right had been extinguished by prescription under the Prescription and Limitation (Scotland) Act 1973 or by abandonment.

The Act states that "if ...the right has subsisted for a continuous period of 20 years unexercised or unenforced, and without any relevant claim in relation to it having been made, then...the right shall be extinguished." The defender argued that the servitude right of access had remained unused and unenforced by the owners of Belmont House for a continuous period of at least 20 years between the years 1970 and 2005. The pursuers disputed this.

Servitudes can also be extinguished by "abandonment". This requires two elements; firstly, a cessation of use by the dominant proprietor (i.e. the owner of the land who enjoys the servitude over another property) and an intention on the part of the dominant proprietor to relinquish the servitude. The defender argued that the pursuers and their predecessors had given up their right to use the access road by non use and allowing the access road to be so overgrown as to become unusable by vehicles and pedestrians as a means of access to Belmont house.

The court heard from a number of witnesses including previous owners and residents of both properties. Based on this evidence Sheriff Ward decided that he was satisfied that the right of access had been used almost continuously, by vehicular and foot traffic, at least from 1970 and up until 2005. In addition, various proprietors and occupiers of Belmont House cut back vegetation and foliage to allow the access road.

Comment

This case is very useful as it examines what needs to be done physically to avoid abandonment of a servitude being successfully argued. Aside from the use of the road by both foot and vehicle, the fact that previous owners had cut back the overgrown foliage was important in helping prove that the servitude had not been abandoned. Carrying out repairs, tidying and cutting back any overgrowth can all be persuasive.

For further advice please contact Juliet McNeill.