Latest Real Estate Cases

The Outer House of the Court of Session has recently considered the question whether the right to a pro indiviso share in a shopping centre car park under a lease conferred a real right.

The pursuer in the case is the owner of the Gyle Shopping Centre in Edinburgh and the defender is the tenant of subjects in the shopping centre which were leased to it in 1992 by the City of Edinburgh District Council, a predecessor in title of the pursuer. The pursuer argued that it had entered an agreement with Primark Stores Ltd for the erection and lease of a new retail store building which would be adjacent to the existing shopping centre and would be built on currently unbuilt-upon land including part of the car park. The defender’s premises were leased together with a one-third pro indiviso share of “Shared Areas” which included the car park.

The pursuer sought declarator from the court that (1) that the construction of the Primark store did not breach the defender’s lease and (2) the defender had consented to the construction of the new store.

The nature of the defender’s interest in the “Shared Areas”

The pursuer argued that the pro indiviso right to the car park granted to the defender was not a real right and that a self-standing grant of an alleged tenancy of a one-third pro indiviso share of an area of land could not meet the requirements of a lease conferring a real right and, as a consequence, the right was only enforceable against the original landlord (i.e. the Council) and not the pursuer.

Decision

Lord Tyre said that the starting point was the correct characterisation in law of the interest in the “Shared Areas” granted to the defender and the issue to be resolved was whether this interest was a real right enforceable against the pursuer as successor in title to the Council as owner of the subjects. He rejected the pursuer’s argument and held that the right in the car park was granted as a pertinent of the lease which did confer a real right enforceable against the landlord’s successors and, as such, the right in the car park was also enforceable against the landlord’s successors. As a result, constructing the Primark store in the car park would constitute a breach of Marks and Spencer’s lease.

The pursuer had also argued that the defender had approved the construction of the store at a meeting of the shopping centre management committee and that the approval had been recorded in the minutes and signed by all of the parties, including the defender. Lord Tyre held that there was nothing in the lease conferring a power to vary the lease upon the management committee.

The full judgement of Gyle Shopping Centre General Partners Ltd v Marks and Spencer PLC can be read here.

The Outer House has considered whether a tenant’s refusal of consent under a lease was unreasonable.

The defender, McDonald’s, leased premises at CorstorphineRoadRetailPark in Edinburgh from the pursuers, Aviva. McDonald’s operated their restaurant with a “drive-thru” lane. Aviva entered an agreement with Costa Ltd for the construction of a free standing retail unit with a drive-thru lane on a part of the car park, which was to be leased to Costa and used as a coffee shop. In terms of McDonald’s lease, McDonald’s consent was required for such an arrangement, “such consent not to be unreasonably withheld or delayed”. McDonald’s refused consent and the question for the court was whether their refusal of consent was unreasonable.

Arguments

McDonald’s had concerns as to the potential impact of the lease to Costa upon traffic and parking and requested information from Aviva on those matters. They also instructed expert advice from a traffic engineer who advised that, following construction of the coffee shop, the car park would not be fit for purpose at peak times and the development would impact negatively on McDonald’s. Following that advice, McDonald’s concluded that the proposals would materially adversely affect its trade and accordingly refused consent.

Aviva obtained a report from its own traffic engineer which indicated that sufficient parking would remain after construction of the Costa unit. They argued that McDonald’s should have been aware of their engineer’s report and it was not reasonable for them to rely solely on their own engineer’s report.

Decision

Lord Malcolm held that McDonald’s had given careful consideration to Aviva’s request by instructing expert advice from a firm of traffic engineers. There was no instant rejection and it was therefore unlikely that they had acted unreasonably, particularly given that the expert’s advice was followed. The onus was on Aviva to demonstrate that the refusal was unreasonable, not on McDonald’ s to prove the opposite and in all the circumstances there was nothing unreasonable in McDonald’s choosing to follow their traffic engineer’s views.

Lord Malcolm was satisfied that, especially in light of the expert advice received, the conclusions which underpinned the refusal of consent were open to McDonald’s and that it acted in a reasonable manner.

The full judgement of Aviva Investors Pensions Ltd v McDonald’s Restaurant Ltd can be read here.