Scottish ruling on repairing obligation reminds landlords importance of clear drafting

Earlier this month, the Inner House of the Court of Session handed down an important decision (11-page / 536KB PDF) which re-emphasised key points concerning the interpretation of repairing obligations in leases. Property litigation expert Brian Grierson of Pinsent Masons said that although the court did not say anything innovative or restate the law, the decision serves as a good reminder of key principles, namely the importance of clear drafting to reduce ambiguity.

The case concerns a repairing obligation in the lease between the trustees of the Roxburghe Second Discretionary Trust, who are the landlords, and the tenant of one of the farms on the estate. Parties disagreed as to who had responsibility under the lease for the repairing of fences along the tenanted property. The landlord had appealed a decision of the Scottish Land Court in favour of the tenant.

Clause 6 of the lease stated that the tenant had to pay half the costs of maintaining fences, gates and gate posts on the farm. The lease also stated that it was subject to the regulations and conditions for the let of farms on the Roxburghe Estates dated 21 August 1954. Regulation 8 of those regulations stated that a tenant is bound to maintain the fixed equipment on the estate, such as all the permanent fences, with fixed equipment being defined by reference to the Agricultural Holdings (Scotland) Act 1949.

At the heart of the dispute was whether the tenant was only required to pay the landlord half of the cost to repair the fences, or whether he had an obligation to carry out the works and then seek payment from the landlord of half the cost. The Land Court found that the only possible interpretation of the clause in question was that the tenant’s obligations were limited to paying to the landlord half of the cost: the tenant was not required to carry out the repairs.

The landlord then appealed the Land Court’s decision and the appellate court ruled in favour of the tenant, upholding the decision of the Land Court. In the judgment, Lord Carloway noted that both clause 6 and Regulation 8 were clear when looked at in isolation, but the issue was how they interrelated.

The court held that regulation 8 provides a general position, but that the parties intended to modify it by making specific provision regarding the fences in clause 6, as permitted by Regulation 36 of the same set of regulations. Regulation 36 states that “the tenant shall enter into a formal lease containing the above Conditions and any other Conditions agree on”.

Lord Carloway said: “The phraseology of clause 6, in imposing an obligation on [the tenant] to pay one half of the costs, presupposes that [the landlords] have already incurred a cost in relation to fence maintenance. That in turn must mean that it was intended that the maintenance would have been instructed, or carried out, by [the landlords]”.

Grierson said: “The court's decision in the Roxburghe case is a reminder to landlords and tenants of the value of professional advice on the allocation of responsibility and liability under leases. While matters such as the allocation of responsibility for the repair of fences at some future date may seem unimportant when there's a deal to be done, a departure from the statutory scheme has had quite significant financial consequences for this landlord.”

Property litigation expert Mitchell Abbott of Pinsent Masons added: “The case is a reminder of one of the key points that we always reiterate: the clear drafting of leases is key. The landlord and tenant appear to have been involved a significant number of disputes and while we do not know the specific circumstances of the position between the parties, clear drafting can assist to avoid disputes escalating in the manner demonstrated here and assist avoid the irrecoverable costs that any dispute involves.”