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You are here: BAILII >> Databases >> Scottish Law Commission >> Scottish Law Commission (Reports) >> Conversion of Long Leases (Report) [2006] SLC 204(3) (December 2006) URL: http://www.bailii.org/scot/other/SLC/Report/2006/204(3).html Cite as: [2006] SLC 204(3) |
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PART 3: CONVERSION
Voluntary or compulsory?
3.1 Compulsion. An initial question is whether the proposed scheme should be voluntary or compulsory. Naturally, any conversion scheme must be compulsory as respects the landlord; but it need not be compulsory for the tenant. Here there seem three choices. The scheme could be compulsory, or it could be voluntary, or it could be compulsory but subject to the possibility of an opt-out. The 1954 Act scheme was voluntary, as are the various schemes in force in England and Wales. The scheme for ultra-long leases which operates in Northern Ireland is essentially compulsory in character.[1]
3.2 In the case of ultra-long leases, we do not think that a conversion scheme should be wholly voluntary. If ultra-long leases are undesirable, then proper provision ought to be made for their removal. A voluntary scheme would do only half the job. As under the 1954 Act scheme, a significant number of tenants would fail to take the steps necessary to achieve conversion.[2] At best the conversion process would be slow and sporadic. At worst many leases would remain unconverted. Consultees accepted the principle that conversion should be compulsory.
3.3 An advantage of a compulsory scheme is that it solves the problem of subleases. Suppose, for example, that A leases to B for 999 years, that B subleases to C for the same period, and that C subleases to D also for 999 years. In respect of the same piece of land there are then three leases, all classified as ultra-long and all, in principle, capable of conversion under the scheme. As with the scheme for abolition of the feudal system, the ultimate right to become owner rests with the tenant holding under the lowest qualifying lease (D in the example).[3] If conversion is compulsory, therefore, the rule can simply be that, on the trigger event, the lowest qualifying lease is converted into ownership. All intermediate leases then fall. If, however, conversion is voluntary, the position is unavoidably more complex. The tenant with the ultimate right (D) might fail to take the necessary steps to achieve conversion; and rather than allow the complex chain of leases to remain in existence, it would seem preferable to give intermediate qualifying tenants the right to become owner. Thus B, for example, would be able to convert his lease into ownership. If this was done, B would replace A as owner and the chain would be one link shorter. But B's title would then be lost if either C or D sought to convert. B might therefore be owner for 30 years, or for 30 days. In practice he might conclude that the rewards from conversion were not worth the effort.
3.4 Exemption. It may be assumed that, in the normal case at least, a qualifying tenant will not be opposed to conversion. It is true that conversion may involve the payment of compensation,[4] based on a multiplier of the rent. But usually the rent is so small that the amount due is an acceptable price for becoming owner. In other cases the facility to spread payment over a number of years will make the position manageable. Occasionally, however, the arithmetic will seem less attractive. Sometimes the rent is high, or even very high. The highest rent disclosed by our survey was £5,000. Further, the amount due as compensation is increased if, for example, there is value in the landlord's reversionary interest or the lease contains conditions designed to reserve development value.[5] A person may prefer to stay as tenant than to make a substantial one-off payment, especially if the lease has hundreds of years to run. This points, as we suggested in our discussion paper,[6] to a scheme which is normally compulsory but from which it is possible to opt out. The result would then be a compromise. The principle of compulsion would produce a uniform and complete pattern of conversion, while the principle of opting-out would prevent a tenant having to accept a benefit for which he did not wish to pay. Opting out would involve the registration in the Land Register or Register of Sasines of a notice of exemption. It would be fully revocable, so that a lease, withdrawn from the scheme for the moment, could experience conversion at some point in the future.
3.6 An instalment scheme could not, we think, provide an adequate alternative. The 2000 Act scheme permits a maximum of 20 instalments spread over a 10-year period. This applies where the compensatory payment exceeds £1500.[7] Given that, in the conversion of leases, compensation is based on a multiplier of rent, and given that the likely multiplier is around 24,[8] even a former tenant who is able to take advantage of the full 10-year period will be making payments of nearly two and a half times the original rent. If, as quite often, the rent was not previously collected, the increase will be all the greater. In theory it would be possible to introduce a more benign scheme. For example it might be provided that compensation exceeding £1500 should be payable over 20 years and not over 10. But if a former landlord is to wait 20 years for payment - if, in effect, he is to act as a lender to the tenant on a long-term basis - some provision would be needed for security. Otherwise the risk of non-payment seems unacceptable. It would, of course, be possible so to provide. For example, if a former tenant opted to pay by instalments over 20 years, the former landlord might be permitted to register a notice which would have the effect of a standard security. But there are obvious difficulties. In many cases the land will already be burdened by one or more securities. If so, there might be little or no 'equity', or even negative 'equity'. Some of the land which is subject to ultra-long leases is of low, or declining, value. A decision must then be taken as to the ranking of the new security. If it ranks last the landlord may receive nothing; but if it ranks ahead of the existing securities, the other creditors may be prejudiced. Then there is the question of remedies. A standard security is usually enforced by calling up followed by sale of the security subjects.[9] It would be ironic, and unwelcome, if the end result of conversion was for the former tenant to lose his house. Finally, it seems likely that a security for the landlord would, at a technical level, be at least as complex as opting out for the tenant. In that case opting out seems preferable.
7. Except where a tenant opts out of conversion by registration of a notice of exemption, conversion of a qualifying lease should be mandatory.
(Draft Bill s 3)
The mechanics of opting out are the subject of part 7.
One day or many?
3.9 If conversion is to be compulsory, it must also occur automatically, without either landlord or tenant being required to do anything. For otherwise there is the risk that the relevant action would not, or could not, be taken. A requirement that the landlord do something, such as grant a disposition, would face the difficulty that in a significant number of cases the landlord is untraceable. More rarely it may be the tenant who cannot be traced.[10]
3.10 Automatic conversion can be achieved in broadly two ways. One is to say that on a particular day (which we may refer to as the "appointed day"),[11] all ultra-long leases are converted into ownership. The other is to provide for conversion on the occurrence of a particular event, such as the first time the lease is assigned after the legislation comes into force. The choice, in other words, is between conversion on a single day and conversion on different days running some years into the future.
3.11 One consultee[12] argued strongly for conversion on different days:
"There is no immediate necessity for every lease to be converted. Most of the perceived evils of leasehold tenure have been removed by the [Leasehold] Casualties Act and the opportunity to convert at short notice will be an answer to any problems that may arise for a tenant ... [I]t is not possible to irritate a lease, demand a casualty or, because of the powers of the Lands Tribunal, enforce unreasonable conditions. Had the 1954 Act not had a time limit on it we would by now have hardly any long leases. I would therefore adopt the same approach to conversion as was adopted to the redemption of feu duties.[13] Every tenant should have the right to convert and every tenant should be compelled to convert on the sale, gift or inheritance of the tenant's interest in the lease. At this point the Register can be altered to reflect the tenure and the Keeper is not burdened with more work than he is capable of."
That such a scheme would be both workable and, to a certain extent, advantageous can hardly be doubted. Nonetheless, in common with the other consultees, we consider that the balance of advantage favours conversion on a single day. A once and for all conversion would be simpler, and also much quicker. It would provide a fixed date which would be known to both landlord and tenant and which could be used as a baseline for the registration of notices (for the preservation of conditions, for example, or for opting out) and for the collection of compensation for the extinction of rent. In the case of tenements and other properties with shared facilities, conversion on a single day would ensure uniformity of holding and would avoid a situation where, for many years to come, some occupiers are owners and others hold on ultra-long leases. Finally, conversion on a single day would allow the use, with adaptations, of the scheme already enacted for the abolition of the feudal system. Not only does that save time and effort, but it also means that the scheme for leases would be recognisable and familiar to solicitors and other advisers.
3.12 There is one case in which automatic conversion would not be possible. A real right of lease can be acquired without registration in the property registers.[14] A real right of ownership cannot. This difference precludes automatic conversion in a case where the lease is unregistered, for it would be contrary to principle, as well as unworkable in practice, for a person to be owner without a registered title. Nor would it be acceptable, following conversion, for the person with a registered title (the former landlord) not to be owner. For these reasons a lease does not qualify for conversion unless it has been registered.[15] It should be emphasised that our concern is with unregistered leases and not with an unregistered title to a lease which has itself been registered. It sometimes happens, for example, that, while the lease has been registered, the current holder has not completed his title by registration - in the same way as a person entitled to ownership may not have completed title. Failure to complete title is not a disqualification for conversion, for the conversion affects, not the title, but the lease itself. On the appointed day all qualifying leases will be converted into ownership. The effect, for the unregistered holder, will be to convert a right to become tenant into a right to become owner.[16] If, however, the lease itself remains unregistered on the appointed day, there can be no question of automatic conversion. Later we suggest that a lease registered for the first time after the appointed day should be capable of conversion by service and registration of a notice of recall.[17] Until that time the lease will remain in force.
3.13 We recommend that
8. On a day to be appointed (the "appointed day") there should be automatic conversion of all qualifying leases.
(Draft Bill s 3)
From lease to ownership
3.16 In the first place, to characterise conversion as involving a transfer is to invoke the rules of the general law applying to transfers.[18] In particular, it is to invoke the rule that the transferee receives no better title than was held by the transferor. The risk here is not a title that is radically bad. If a person's title is void, he is not the landlord. Someone else is. Rather the risk is from a title which is subsistent but imperfect.[19] It is easy to imagine how such a title might arise. The landlord might be the donee under a gratuitous alienation.[20] His acquisition of the property might have been in breach of trust, or of a prior contract. The person from whom the property was acquired might himself have held on a voidable title. The landlord's title, if unregistered, might be defeated by the registration after the appointed day of a rival disposition of which the former tenant has no knowledge. In short, the concept of transfer carries a title risk for the tenant. Indeed it carries the wrong title risk. That the former tenant should be affected by an inadequacy in his own title (ie in the title to the tenant's interest) is just as it should be, but nonetheless would be prevented by the model under consideration.[21] That he should be affected by an inadequacy in the title to the landlord's interest is unjustifiable.
3.17 In the second place, there is the problem of too many landlords and tenants. The difficulty is both definitional and one of substance. Since at any given time there may be no one with a registered title to the interest of landlord or tenant, the draft bill defines "landlord" and "tenant" to include a person who has right to the interest in question but without a completed title.[22] This can easily lead to a multiplication of parties. Take the following example. A, who has the tenant's interest under a 999-year lease, dies. B (A's executor) confirms to A's estate. B executes a docket transfer to C (A's widow).[23] C sells the lease to D and grants an assignation. C is then sequestrated and a trustee in sequestration, E, is appointed. Who is the "tenant" within the statutory definition? Unless one of the parties has managed to register before the appointed day, the answer is that all are "tenants" apart from A (who is deceased). Of course, multiplication of parties on this scale would be highly unusual in practice, but to have two, or even three, unregistered parties is an everyday occurrence. And what is true of the tenant's interest is true also of the landlord's. This poses a difficulty for a rule based on the transfer of rights, for if ownership is to pass from landlord to tenant, it will be necessary to identify which landlord and which tenant. The obvious solution is to say that, where there is more than one "landlord" or "tenant", the qualifying party is the last to acquire the right in question - E in the example. But while even this solution as it applies to the tenant's interest[24] is imperfect - it is not clear, for example, why E should be preferred over D - the real difficulty lies with the parties who are not so nominated. On conversion E receives the property, but what of the others? Before the appointed day they hold rights in respect of property which may be of considerable value. After the appointed day they hold nothing. That also is unjustifiable.
3.18 In the third place there is the converse problem of no landlord or no tenant. A transfer rule presupposes the existence of both, and yet there may be a landlord and no tenant, or a tenant and no landlord, or indeed neither a landlord nor a tenant. This may come about in a number of different ways. The landlord or tenant may have died without, by the appointed day, confirmation of an executor having been obtained. There may be a lapsed trust, that is to say, a trust in which the last trustee has died. A juristic person might have been dissolved.[25] Or the landlord or tenant may simply have disappeared. This last situation is familiar enough with landlords, because the cost of conveyancing may exceed the value of the reversionary interest; but, as our advisory group emphasised to us, it also occurs in the case of tenants.[26]
3.20 Conversion of lease to ownership. The final model involves the conversion of the lease into ownership. At the tenant's end, existing relationships are undisturbed. In the example given earlier, B, C, D and E would hold precisely the same rights in relation to each other after the appointed day as before, and precisely the same rights to the land, minus the landlord's right. This model solves the difficulties which affect the other two. A mechanism which focuses on the right (the lease and ownership) rather than on the person (the landlord and tenant) avoids the problem of too many persons or of none. Equally, there is no loss of rights among those with a claim to the (former) tenant's interest; and any imperfections of title remain with the former tenant. Broadly this was the mechanism for conversion used in the 2000 Act, and for much the same reasons.[27]
3.22 Evaluation. Some of the difficulties with the first two models could be solved by making special provision. Others seem inherently insoluble. And with a model which does not properly represent the change taking place there is always a risk of further problems which are not anticipated and hence not provided for. Our proposal, in the discussion paper,[28] that the third model be adopted was accepted by consultees without dissent. We adhere to it now and recommend that
9. For the purposes of the scheme a lease is converted by becoming the ownership of the land.
(Draft Bill s 3(1)(a))
Extinction of landlord's interest and of intermediate leases
3.23 Conversion of the qualifying lease would, necessarily, be accompanied by the extinction of the landlord's right of ownership and of any intermediate leases. An "intermediate" or "superior" lease is one that is higher in the hierarchy of leases than the lease which is being converted (ie than the "qualifying lease").[29] It is "intermediate" in the sense that is placed between the qualifying lease and the landlord's interest. As already seen, the qualifying lease is the lowest lease in the hierarchy which fulfils the criteria for conversion.[30] Any lease which is beneath the qualifying lease - a sublease of that lease, in other words - would be unaffected by the conversion. So if A, the owner of land, leases to B for 999 years, who subleases to C for 900 years, who subleases to D for 899 years, who subleases to E for 15 years, the person holding the lowest ultra-long lease is D. On the appointed day D becomes owner, but subject to the (unconverted) 15-year lease held by E.[31] A's right of ownership is extinguished, as are the intermediate rights of lease held by B and C.
3.24 We recommend that
10. There should be extinguished on the appointed day
(i) the landlord's ownership, and
(ii) any lease intermediate between that ownership and the qualifying lease.
(Draft Bill s 3(1)(b), (c), (2))
Real rights and conditions of the lease
3.25 Real rights. Conversion is a purely technical change. Insofar as the right was encumbered before the appointed day, it should continue to be encumbered thereafter. Existing subordinate real rights, in other words, should remain in place.[32] At this point, however, it is necessary to distinguish (i) encumbrances affecting the lease from (ii) encumbrances affecting the land itself.[33] If the tenant grants a standard security, that is an encumbrance affecting the lease. But if the landlord grants a security, that is an encumbrance affecting the land. The security subjects, in other words, are different in the two cases.[34] The two classes of encumbrance need not be treated in the same way. It seems self-evident that encumbrances affecting the lease before conversion should affect the land after conversion. Ownership is merely enlargement of the lease. So a standard security over the lease becomes a standard security over the land. But it is less clear that existing encumbrances affecting the land should survive the extinction of the landlord's interest. Here it may be necessary to distinguish between what may be termed "occupational" and "non-occupational" encumbrances. If an encumbrance affects the manner in which the land is occupied and used, then, arguably, it should survive conversion. Otherwise there is both a windfall gain and an unjustified loss. Servitudes, real burdens and public rights of way are the main examples falling into this category: although granted by the owner, all bind the tenant and affect his use. Conversely, an encumbrance which has no impact on occupation and use should fall with the extinction of the landlord's interest. Here the only examples seem to be security and proper liferent.[35] A security over land encumbered by an ultra-long lease is of no more value than a security over a feudal superiority and, like the latter, should be extinguished on the appointed day. Naturally, extinction would have no effect on the personal obligation of the debtor; and the security itself would survive insofar as it affected other subjects, as usually it would. Proper liferents, in this context at least, are more or less unknown.
3.27 Conditions of the lease. Subordinate real rights, as encumbrances external to the lease,[36] should normally survive conversion. Actual conditions of the lease should not. Following conversion, therefore, the former tenant should no longer be liable for rent or for any of the other obligations under the lease, and the remedy of irritancy should cease to be available.[37] The landlord, similarly, should be relieved of his obligations under the lease. Later, however, we propose a scheme whereby certain of the tenant's obligations can be converted into real burdens.[38]
3.28 There is a need for transitional arrangements.[39] Once the obligations in the lease are extinguished it should cease to be possible to sue for past breaches and any current proceedings should be deemed abandoned. This is an application of the standard rule that an obligation, once extinguished, is extinguished for all purposes. Furthermore, any decree or interlocutor already pronounced should be deemed recalled on the appointed day. In this way interdicts enforcing use restrictions would cease to apply. An exception is necessary for rights and obligations which survive the appointed day in one form or another.[40] A further exception is necessary for debts already due by the appointed day, whether in the form of an ordinary money debt (such as rent) or of a claim for damages.
3.29 Finally, with a view to mirroring the protection from irritancy given to feus by the 2000 Act,[41] we propose that it should not be possible to terminate a lease by irritancy after the date that the bill receives Royal Assent.[42]
3.30 Recommendation. We recommend that
11. (a) Following conversion, ownership of the land should be subject to
(i) the subordinate real rights that formerly affected the qualifying lease, and
(ii) the subordinate real rights, other than any right in security or proper liferent, that formerly affected the land itself.
(b) There should be extinguished on the appointed day all rights and obligations arising under the qualifying lease or any intermediate lease; and on or after that day
(i) it should not be possible to bring new proceedings for enforcement;
(ii) any current proceedings should be deemed abandoned; and
(iii) any decree or interlocutor already pronounced should be deemed reduced.
(c) Paragraph (b)(i)(iii) should not affect
(i) a right to the payment of money or the recovery of damages; or
(ii) any right or obligation which continues after the appointed day.
(d) No qualifying or intermediate lease may be terminated by irritancy after the date that the legislation implementing this recommendation receives Royal Assent.
(Draft Bill s 4(1), (3)(5), s 5(1)(4), s 61)
Reservations and pertinents
3.31 The position of the former tenant should, as far as possible, be the same after conversion as before, except for the mutation of the right from lease into ownership. Thus any reservations from the property formerly let should be reflected in the property now owned; and any pertinents of the lease - additional rights exercised in association with the property but beyond its boundaries[43] - should become pertinents of ownership. This principle is, however, subject to the rules of pertinents and separate tenements as they apply to ownership. Occasionally a lease may contain reservations or pertinents which would not be recognised in the context of ownership. For example, only certain rights can be reserved, as separate tenements, from the ownership of the surface of the land itself.[44] The standard example is minerals.[45] A reservation which fell outside this limited category would be inept and would need to be disregarded on conversion into ownership.[46] Later, however, we suggest a special rule for sporting rights.[47]
3.32 Pertinents may be either corporeal or incorporeal. The principal incorporeal pertinents (servitudes and real burdens) are considered more fully below.[48] Corporeal pertinents are usually shared with other properties and so are held pro indiviso. The standard example occurs in tenements. Where whole tenements are held on leasehold tenure, the lease of each flat includes, expressly or, probably, by implication, a shared right to certain common parts, such as the common passage and stair. On conversion of the lease, the shared right would become a right of ownership in common.
3.33 We recommend that
12. (a) Following conversion, ownership of the land should
(i) include any pertinents (express or implied) of the lease but
(ii) exclude any rights reserved (expressly or by implication) from the lease.
(b) Paragraph (a) does not apply to a right which
(i) can be a pertinent of a lease but not of the land;
(ii) can be reserved from a lease but not from ownership of the land.
(c) This recommendation is subject to recommendation 27.
(Draft Bill s 5(5))
Servitudes
3.34 A servitude requires two properties in separate ownership, for there must be both a burdened property and a benefited property.[49] Almost always, this requirement prevents servitudes from being created in leases. So if A leases to B reserving a right of access over the land leased in favour of other land not leased, the fact that A owns both areas of land prevents the right from qualifying as a servitude. The same is true if right and obligation are reversed, and the access right is conferred on B. At most the parties have a leasehold right which operates as a kind of quasi-servitude.[50] In theory, of course, a lease might reserve or create a right which affected land owned by some third party, thus allowing a proper servitude to come into existence, but this is almost unknown in practice.
3.36 This proposal may not go far enough. It is not uncommon for tenants (or landlords) to exercise "rights" over the others' property which are not expressly provided for in the lease. Thus the pipes and other services to the landlord's property may pass through the property which is tenanted; or the only reasonable access to the back garden of the tenanted property may be by way of a lane forming part of the landlord's property. Often the other property belonging to the landlord will itself be leased to someone else, perhaps on another ultra-long lease; but the principle is the same whether it is leased or not. If the two properties were already in separate ownership, a right exercised in the manner just described would usually be classified as a servitude. Sometimes this would be because a servitude was implied into the original conveyance which separated the properties, but in any event a servitude would usually have been acquired by exercise of the right for the twenty years of positive prescription.[51]
3.37 A reasonable solution would be to give the former tenant (or landlord), on conversion, the benefit of any period of quasi-prescription. Thus the rule might be that, on the appointed day, the property should have the benefit of, but also be subject to, all servitudes which, if the properties had been separately owned since the date of the lease, would have been constituted by positive prescription or otherwise. This gives weight to past use. Without such a rule the former tenant (or landlord) might be deprived of a right which was reasonably required for the proper enjoyment of his property. A possible objection is the absence of the opportunity to interrupt prescription. If, at the time when the "right" was being exercised, the landlord (or tenant) had known that statute would later allow such exercise to qualify for the purposes of prescription, then he might have been less forbearing. He should not be penalised for his neighbourliness. There is some force in this objection. But it should be set in the context of the fact that the running of prescription is rarely interrupted and that the proposed rule will operate even-handedly as between landlord and tenant. Further, it is possible that weight is already given by the current law to possession of quasi-servitudes by a tenant.[52] All consultees who expressed a view were in favour of the suggested rule. The only reasonable alternative would be to treat conversion itself as a deemed conveyance by landlord to tenant, thus invoking the existing law of implied servitudes. This would produce much the same result, although giving rise to greater uncertainty.
3.38 In theory implied servitudes might equally be part of the rule now proposed, for if the properties were deemed to have been separately owned since the date of the lease, servitudes might have been implied at the time of the deemed separation. But that would be of significance only in the rare case of a qualifying lease granted within the last twenty years. For leases older than that, the "right" will either have been exercised, in which case it would be established by positive prescription on the principle already mentioned, or it will not have been exercised, in which case it will have been extinguished by negative prescription.[53]
3.40 No special rule would be needed in relation to property not owned by the landlord.[54] For the purposes of prescription, possession by a tenant is as good as possession by the landlord.[55] Hence if a tenant exercises a right in the nature of a servitude over property belonging to a third party, at the end of twenty years a servitude will have been created by prescription in the usual way. The right attaches to the tenanted property as a pertinent, and will continue to do so when, as a result of conversion, the property ceases to be tenanted.
3.41 We recommend that
13. Following conversion, ownership of the land should be subject to or, as the case may be, include as a pertinent such servitudes as would have existed if
(i) the qualifying lease and any superior lease, and
(ii) any partial assignation of such leases,
had been dispositions to the effect of conveying ownership but otherwise expressed in the same terms.
(Draft Bill s 6)
Leases without tenants
3.42 Sometimes a lease has no traceable landlord, and much less frequently it is the tenant who cannot be traced. As conversion occurs automatically, by force of law, it is not dependent on the presence of either a landlord or tenant.[56] But if, exceptionally, there was a landlord but no tenant, conversion will create uncertainty as to ownership. In some cases the issue is self-resolving. A lease in which the tenant has long since disappeared is probably to be regarded as renounced by implication.[57] In that case there is no extant lease which is capable of conversion, and the (former) landlord remains owner after the appointed day as before. If the tenant's absence is less prolonged, the landlord may be able to rescind for material breach - for example of the obligation, express or implied, to sustain possession.[58] To prevent conversion, however, rescission would have to occur before the appointed day. For certain ultra-long leases irritancy would be available as an easier alternative.[59] Whatever the basis of the landlord's claim it would not in practice be accepted by the Keeper without a declarator in appropriate terms. A lease which had not fallen by the appointed day would be converted into ownership in the usual way, but the right might lie unclaimed. The position is then the same as for any land in respect of which ownership is uncertain.
Note 1 Ground Rents Act (Northern Ireland) 2001 s 2. [Back] Note 3 Paras 2.45 and 2.46. [Back] Note 6 Scot Law Com DP No 112 para 2.43. [Back] Note 7 2000 Act s 10. This is the scheme which we recommend for leasehold conversion also: see paras 6.656.69. [Back] Note 9 Subject, now, to the Mortgage Rights (Scotland) Act 2001. [Back] Note 10 See further para 3.42. [Back] Note 11 This was the technique used in the 2000 Act (s 1). [Back] Note 12 Mr B G Hamilton. [Back] Note 13 ie under part I of the Land Tenure Reform (Scotland) Act 1974. [Back] Note 14 The real right is completed by possession, under the Leases Act 1449. [Back] Note 16 Feudal abolition works in precisely the same way. What is converted into ownership, by s 2(1) of the 2000 Act, is the "estate of dominium utile". The question of entitlement to that estate is then resolved by the usual rules of property law. [Back] Note 17 Para 8.15. We also suggest that a lease registered for the first time in the year before the appointed day should be treated in the same way (para 8.16). [Back] Note 18 Reid, Property paras 669700. [Back] Note 19 Reid, Property para 601. [Back] Note 20 Bankruptcy (Scotland) Act 1985 s 34. [Back] Note 21 This is unfair to those holding competing titles. In the example set out in the next paragraph, it would defeat the claims of D. [Back] Note 22 Draft bill s 68(1). [Back] Note 23 Under s 15(2) of the Succession (Scotland) Act 1964. [Back] Note 24 The difficulty is far less acute in relation to the modest claims for compensation in respect of the landlord's interest. See para 6.57. [Back] Note 25 In the most common cases, however, legislation will provide a substitute tenant, even if it is only the Crown. See eg Companies Act 1985 s 654. [Back] Note 26 See para 3.42 below. [Back] Note 27 Thus dominium utile was upgraded to simpledominium, 2000 Act s 2(1). [Back] Note 28 Scot Law Com DP No 112 para 3.2. [Back] Note 29 The draft Bill (s 3) uses the term "superior lease". [Back] Note 30 Paras 2.45 and 2.46. [Back] Note 31 A variant is that the land may have been divided and only a part sublet to D. In that case D becomes owner of the part, and C owner of the rest. The lease from A to B and the lease from B to C so far as relating to the land sublet to D are superior leases (see s 3(2)). A's right of ownership in that land is extinguished as are the intermediate rights of lease held by B and C in that land. [Back] Note 32 A subordinate real right is a real right other than ownership. See Reid, Property paras 5 and 6. The main subordinate real rights are security, proper liferent, lease, servitude and real burden. [Back] Note 33 That is, over the right of ownership of the land. [Back] Note 34 Thus s 9(2) of the Conveyancing and Feudal Reform (Scotland) Act 1970 provides that a standard security may be granted over "any land or real right in land". A lease is a real right in land. The distinction is not, however, always so clear with other real rights. For example, if the tenant grants a sublease, it seems a matter of analytical preference whether this is classified as a real right in the land or as a real right in the lease. [Back] Note 35 A third example, but one already accounted for, is leases higher up in the chain. [Back] Note 36 See Reid, Property para 349 for the distinction between intrinsic and extrinsic encumbrances. [Back] Note 37 Insofar as not already abolished by the Leasehold Casualties (Scotland) Act 2001 ss 6 and 7. [Back] Note 39 The recommendations that follow are modelled on ss 17(2) and (3) of the 2000 Act. [Back] Note 40 See ss 5 and 6 and Part 2 of the bill. [Back] Note 42 Section 61 of the bill. In fact most long leases which fall within the scope of the conversion scheme are already protected from irritancy as a result of ss 5 and 6 of the Leasehold Casualties (Scotland) Act 2001. It should be noted that s 61 also applies to an unregistered lease and a lease which subsequently becomes exempt on service of a notice under s 54. [Back] Note 43 Reid, Property paras 199206. A right may either be a pertinent of the land that is leased, or a pertinent of the lease itself. Take the case of the common parts in a tenement. If the flat leased is the only flat in that tenement owned by the landlord, the common parts are pertinents of the flat. If, however, the landlord owns all of the flats, they are pertinents of the lease (for there is no common ownership as such). Our recommendations are intended to apply to pertinents of both types. [Back] Note 44 Reid, Property paras 207212. [Back] Note 45 For minerals see further paras 5.35.6. [Back] Note 46 An example is woods, which are reserved by implication from agricultural leases: see Rankine, Leases p 210. Woods are not separate tenements: Paul v Cuthbertson (1840) 2 D 1286. [Back] Note 48 Respectively at paras 3.343.41 and in part 4. [Back] Note 49 The discussion here is limited to servitudes which are positive in character. Negative servitudes have been assimilated with real burdens: Title Conditions (Scotland) Act 2003 ss 79 and 80. Any provision in a lease which is capable of forming a negative servitude will be governed by the rules, discussed in part 4, for real burdens. [Back] Note 50 Rankine, Leases pp 20607; D J Cusine and R R M Paisley, Servitudes and Rights of Way (1998) paras 1.181.21. [Back] Note 51 Prescription and Limitation (Scotland) Act 1973 s 3(2). [Back] Note 52 Little v Irving (2000), reported and commented on in R R M Paisley and D J Cusine (eds), Unreported Property Cases from the Sheriff Courts (2000) pp 12037. [Back] Note 53 Prescription and Limitation (Scotland) Act 1973 s 8. Of course what is being extinguished here is a deemed, and not an actual, servitude. The effect of the proposed rule is to put the former landlord and tenant in precisely the same position as if the original lease had been a conveyance. Thus the deemed conveyance and deemed servitudes are accompanied by deemed negative prescription. [Back] Note 54 Sometimes, of course, property not owned by the landlord today would have been so owned at the time of the granting of the lease and so would be subject to the rule described above. [Back] Note 55 Prescription and Limitation (Scotland) Act 1973 s 15(1) (definition of "possession"). [Back] Note 57 Hume, Lectures IV, 115-6; Taylor v Maxwell (1728) Mor 15310. [Back] Note 58 Blair Trust Co v Gilbert 1940 SLT 322. If the property is classed as non-residential, the landlord will have to show that his conduct is fair and reasonable within s 5 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. [Back] Note 59 The abolition of irritancy by s 5 of the Leasehold Casualties (Scotland) Act 2001 is restricted to leases granted before 10 August 1914 for an annual rent not exceeding £150. Where irritancy is still available the lease will require to have terminated by the date of Royal Assent (s 61 of the bill discussed at para 3.29 above). [Back]
