Wriggle room?

Solicitors are regularly approached by clients hoping to resile from missives, common arguments ranging from solicitors acting without authority to non-fatal irregularities in NHBC registration.

The recent Outer House decision Snowie v Museum Hall LLP [2010] CSOH 107 follows this trend, this time founding on a deed of conditions.

The Snowies, having concluded missives to buy flats within the Museum Hall development, attempted to resile on the basis that certain title conditions breached clause 8 of the missives: “the conditions contained in any Deed of Conditions relating to the Development… shall contain no unduly onerous or unusual conditions... The Deed of Conditions shall contain no prohibition to the right to lease the Subjects provided it is not to more than one family unit”.

The offending conditions were “No trade, business or profession may be carried out in the apartment (including the sale, making or manufacture of any beer, wine or liquors)”; and “Each apartment must be used as a private house only, and may not be used, even in an ancillary capacity, for any trade, business or profession.”

Before the court the Snowies argued:

1. the conditions were very widely drawn; prohibiting e.g. professionals from working from home, and leasing, in clear breach of clause 8;

2. the conditions were repugnant with ownership and therefore must be “unduly onerous and unusual”;

3. the conditions gave rise to the risk of litigation, causing “undue worry and expense”.

Construction of the conditions

It cannot be doubted that, on a very literal interpretation, the conditions pose a severe restriction. However, as title conditions are a restraint on property they are strictly construed (see, e.g. Chalmers Property Investment Co Ltd v Robson 2008 SLT 1069, HL).

Whilst “strict construction” was not referred to as such, Lord Glennie first considered that it was “just arguable”, taking “the widest possible interpretation”, that the conditions would prohibit letting, and even occasional working from home. However, he did not accept that construction. Instead, he referred to Wimpey Homes (Holdings) v Macari, Sheriff J F Wheatley QC, 1985, unreported, which, in considering similar conditions to those in hand, found that taking stock and cash home was not “in any real sense connected with the defender’s business”.

Lord Glennie agreed, finding that the title conditions must be given a “sensible construction having regard to the nature of the scheme or development to which they relate and the purpose for which they must be taken to have been included… the purpose of restrictions of this sort is to prevent the residential amenity of the development being spoiled”.

As regards “unusual”, the court found that the wording used was in fact a standard and commonly used style, found in Greens Practice Styles. This was, perhaps, the nail in that particular coffin.

Repugnancy with ownership

Even if the court had adopted the literal construction noted above, would that render the conditions repugnant with ownership? And even if it did, where would that take the Snowies?

The concept of “repugnancy with ownership” is a difficult one. Whilst Snowie referred to Earl of Zetland v Hislop (1881) 8R 675 and Moir’s Trustees v McEwan (1880) 7R 1141, the phrase has only recently appeared in statutory form in the Title Conditions (Scotland) Act 2003, s 3(6): “A real burden must not be contrary to public policy as for example an unreasonable restraint of trade and must not be repugnant with ownership (nor must it be illegal)”; and s 76(2): “Nothing in subsection (1) above permits the creation of a servitude that is repugnant with ownership.”

What is “repugnant” has been the subject of recent judicial discussion, not least in Moncrieff v Jamieson 2008 SC(HL) 1 and Holms v Ashford Estates Ltd 2009 SLT 389. Holms concerned a parking space (space 42) which could not be accessed if a vehicle was parked in space 43, over which space 42 had a right of access. The court held that the burdened proprietor’s ownership rights in space 43 were overridden by such a right of access: if land is sold for a particular purpose, but subject to a servitude which makes such purpose difficult or impossible, the rights of the benefited proprietor prevail.

In considering “repugnancy” the court found that “it is not evident that the existence of a servitude right of access over [space 43] prevents the use of that area for all purposes…. On any view, even given the existence of a servitude right of vehicular access over car parking space 43, [the proprietors thereof] retain possession and control of that area of ground”.

In Snowie, Lord Glennie was not persuaded that a restriction on carrying on a trade, business or profession – even in the broader sense promulgated by the Snowies – would be “repugnant”; however a prohibition on letting would be.

However in light of Holms, would a prohibition on letting “prevent the use of [the flat] for all purposes”? Would the Snowies not “retain possession and control” of their property? Neither Holms, nor indeed the relevant sections of the 2003 Act, were referred to in Snowie; but Earl of Zetland and Moir’s Trustees were. Whilst in Moir’s Trustees Lord Young expressly states that a prohibition of letting must be “bad from repugnancy”, his remarks in both cases are of limited value: in Sheltered Housing Management v Bon Accord Bonding Co 2010 SLT 62 the court commented that his dicta stood alone, and continued:

“So far as we can tell the notion of repugnancy with ownership appears to have evolved in the English law of easements. It presents difficulties, as is illustrated in the review of English authority conducted by Lord Scott and Lord Neuberger in Moncrieff v Jamieson. The concept may be reflective of the particular features of the English law of easements. But, be that as it may, the legislature has chosen to deploy the phrase in s 3(6) and s 76(2) of the 2003 Act.”

Repugnancy should therefore be treated with caution. However, in Snowie, is it even relevant? If title conditions are indeed repugnant, they are unenforceable. Where would that take the Snowies?

The risk of litigation

Snowie does not sit comfortably with McLennan v Warner & Co, 1996 SLT 1349. McLennan concerned a blocked up right of access which, whilst seemingly extinguished by acquiescence, had not been expressly discharged. In Snowie the court found that the seller could not be taken to guarantee against actions by “meddlesome neighbours”, whereas in McLennan, purchasers of residential property “could not be required on any test of reasonableness either to accept entry to the subjects while an issue of this kind remained outstanding or to await the resolution of the issue by the court before proceeding to complete a transaction”.

Would the scenarios envisaged by the Snowies ever found successful enforcement actions in any event? Section 8 of the Title Conditions (Scotland) Act 2003, which requires both title and interest to enforce a real burden, provides: “(3) A person has such interest if – (a) 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”.

In light of s 8, Barker v Lewis 2008 SLT (Sh Ct) 17 considered a condition “[that each property] shall be used and occupied by the proprietors as a domestic dwellinghouse with relative offices only and for use by one family and no other purpose whatsoever”. The pursuers sought interdict against the defender running a B&B business from her house to which was attributed a number of incidents “of concern”.

Whilst title, and breach of the condition, were unquestionable, interest was not. “Interest” depended on “material detriment”, the sheriff principal holding: “the question being whether… the detriment, viewed objectively, is of sufficient significance or import to persuade the court that it is proper to allow the benefited proprietor to enforce the burden”. The incidents “of concern” did not constitute “material detriment” and the pursuer accordingly lacked interest.

If the running of a B&B did not constitute “material detriment to the value or enjoyment of the… benefited property”, how would such detriment be established by a neighbour bringing work home, or indeed by letting?

Cautionary tale

Snowie should serve as a word of warning to those seeking to argue breach of missives (or indeed those seeking to enforce a deed of conditions). It is a reminder that title conditions should be treated with care; they are subject to strict construction and their actual enforcement value is dependent on a number of factors outwith the deed, such as interest to enforce and repugnancy. They may not be the basis for resiling which, at first glance, they can appear to be.

• Gillian Craig is a senior associate at MacRoberts LLP