Real burdens revived

The Millhouse bed & breakfast, with its striking octagonal kitchen and its picturesque location a few miles outside St Andrews, is an unlikely spot for one of the most famous and far-reaching conveyancing cases of recent years. In many ways, this humble house has become the property equivalent of Mrs Donoghue’s snail.

But, along the coast and across the Forth Road Bridge, another property – a detached house in a modern estate in Musselburgh – deserves a second look as we debate whether there is a point to real burdens.

Barker v Lewis revisited

Before Barker v Lewis 2007 SLT (Sh Ct) 48; affd 2008 SLT (Sh Ct) 17, if you were asked whether a neighbouring proprietor had “interest” to enforce a real burden, you would probably generally have answered “yes”. After Barker v Lewis, you would probably answer “I doubt it”. What changed?

As is now well known, three neighbours sought an interdict against the owner of a bed & breakfast which was in breach of a community burden requiring each property to “be used and occupied by the proprietors as a domestic dwellinghouse with relative offices only and for use by one family only and no other purpose whatsoever”.

On appeal, the sheriff principal (confirming the sheriff’s original decision) held that interdict should not be granted unless the neighbours could show they had both “title” (which they did) and “interest” (which they did not), in terms of s 8(3) of the Title Conditions (Scotland) Act 2003 (“TCSA”).

Why did the neighbours not have “interest”? They had failed to show that by the breach of the real burden there would be “material detriment to the value or enjoyment of [their] ownership of, or right in, [their] benefited property”, in terms of s 8(3).

The question which the sheriff and sheriff principal had to decide was whether the bed & breakfast owner’s action caused material detriment. Material detriment was considered to be equivalent to a “substantial” or “significant” loss of enjoyment or value. The effect of the actions of the owner fell short of these standards.

Problematic effects

Professor Kenneth Reid commented on the sheriff’s initial decision that the effect of this linguistic hurdle was to “raise the bar too high” for establishing interest to enforce (“Interest to enforce real burdens: how material is ‘material’?”, ELR 2007 [440]); while Professor Robert Rennie, in relation to the appeal decision, said “the most that can actually be said now is interest to enforce will not readily be inferred and that it is by no means certain that in every case even an adjoining proprietor will have such an interest” (“Barker v Lewis on appeal”, 2008 SLT (News) 77).

This left property lawyers in a difficult position when advising clients on:

• the enforceability of real burdens;
• the possibility of successfully applying to the Lands Tribunal of Scotland (“LTS”) for a variation or discharge of real burdens and title conditions; and
• how to frame real burdens in such a way as to be enforceable – and whether to go to the trouble of trying.

As Ken Swinton commented: “Conveyancers will, of course, continue to be cautious and treat every burden as potentially enforceable, but it is clear on the basis of Barker v Lewis that in a far wider range of cases than might have commonly been envisaged, neighbouring proprietors may not be able to prove material detriment and therefore may have no interest to enforce” (“Enforcing real burdens – Barker v Lewis” 2008 SLG 67).

And there matters rested, or so we thought.

Smith v Lawrence: multiple occupancy?

In the LTS case of Smith v Lawrence LTS/TC/2008/18; 2009 GWD 6-104 (www.lands-tribunal-scotland.org.uk/decisions/LTS.TC.2008.18.html), a developer who ran a house letting business sought to vary a real burden. This stated that a semi-detached house in a modern housing estate near Queen Margaret University campus in Musselburgh, must only be used as a home for one family, thus preventing it from being used as a house in multiple occupation for students. Surprisingly perhaps, in light of Barker v Lewis, the LTS decided that the application to vary the burden would not be granted, i.e. the inference is that the burden was enforceable. This is not the result that the decision in Barker might have led you to expect.

It is worth noting that Smith v Lawrence was decided at roughly the same time as the Barker appeal but, for whatever reason, it made no reference even to the initial Barker decision, nor does there appear to have been discussion about “interest”. The summary in the opinion states: “There was no dispute that each of the respondents, as neighbouring owners, was entitled to the benefit of the title condition”. This suggests that title (and interest) to enforce were taken as read, although the opinion does include comments which make it clear that amenity (of the benefited property) should be considered. See para 32: “If the protection of that amenity is a legitimate interest of the house owners – as it clearly is – the arrival of the university reinforces the reasonableness of retaining the title condition”; and para 42: “While the public interest in the provision of accommodation is a factor, the interest in maintaining residential amenity at this estate is also a community interest and is entirely legitimate.”

The overall tone of these comments, however, is that it is so obviously the case that amenity should be considered, that it need hardly be stated.

Instead, the decision focused substantially on the fact that the purpose of the burden was clear and still achievable; that it contributed “substantially to achieving the purpose of preserving residential amenity”; and that “the condition is of substantial benefit to the benefited proprietors” (see TCSA, s 100(b) and (f)).

Uncomfortable bedfellows?

Although Smith was an LTS decision under the process in ss 90, 98 and 100 TCSA, and not a sheriff court interdict decision arising from s 8(3) TCSA, it is not unreasonable to infer from the Tribunal’s comments on interest to enforce and the apparent lack of any argument on the point, that if the applicant, Smith, had gone ahead with breaching the condition by letting the property to more than one family, the neighbours, Lawrence and others, would have been able to show interest to enforce by virtue of material detriment to value and/or enjoyment. (But cf commentary in Reid and Gretton, Conveyancing (2008), 96.)

And, in fact the recent decision of Kettlewell v Turning Point Scotland 2011 SLT (Sh Ct) 143 did tilt the balance back slightly from the extreme Barker position. In Kettlewell, the pursuers, having been found to have “interest” due to potential material detriment (which focused more on value than enjoyment), were granted interdict but, as always in title conditions cases, the facts and circumstances of both Barker and Kettlewell were critical to the outcome.

So should Smith be disregarded as being too glib and the sheriff court cases given more weight, involving as they did enforcement of title conditions rather than “only” interpretation and retention of a title condition? Does either take precedence over the other – sheriff court decisions, one of a sheriff principal, in interdict actions based on s 8(3), as against an LTS decision on an application under s 90?

We would argue not.

The nature of the two types of action means it is not possible to compare directly a sheriff court interdict action with an application under s 90 to the LTS, and of course the two bodies are constituted differently and serve different purposes. However, if the appeal route from each is considered, they lie at roughly the same level in the larger scheme of Scottish court process. Possibly all that can be said is that due to LTS procedure, LTS decisions sit somewhere between a decision of the Outer House and the Inner House of the Court of Session (Agnew of Lochnaw, Variation and Discharge of Land Obligations, para 2-17).

But in any event there must be a connection between interest to enforce under s 8, and the LTS powers and procedure under ss 90, 98 and 100. Section 90(1)(a)(ii) explicitly makes this connection clear by stating that for a real burden or a rule of a development management scheme, the Tribunal can determine any question as to its enforceability.

While it is certainly difficult to discern principle in LTS cases, because context and facts are so critical, that does not mean that the two sets of provisions are mutually exclusive.

What next?

The landscape is not as bleak (or as straightforward?) as many thought it was after Barker v Lewis. Just as the Kettlewell decision provides important guidance on the relationship of “material detriment” and “value” in s 8, so Smith v Lawrence provides a reminder that real burdens do have a purpose to serve and will be disregarded at the burdened proprietor’s peril.