Fixing fixed equipment

We now have useful guidance from the courts dealing with fixed equipment under traditional Agricultural Holdings (Scotland) Act 1991 tenancies.

Renewal or replacement

Alston v Trustees of the Earl of Mansfield’s 1992 Trust SLC/87/12 looked at the landlord’s obligation to replace or renew buildings or fixed equipment made necessary by natural decay or fair wear and tear. The Land Court decided that, where the roof of a stone building was “done”, the landlord could choose whether to re-roof the existing building or provide an equivalent new building.

The case has clarified a conundrum on whether older buildings have to be replaced in traditional form, and will be of great significance where steadings consist of old-style buildings which may be listed.

Annulling post-lease agreements

A series of decisions between Telfer and Buccleuch Estates Ltd casts light on the meaning of “reasonable state of repair” in s 5(4B) of the Act. Telfer served notice on his landlord intending to annul his post-lease agreement from 22 October 2007. The landlord opposed on the ground that, at the date of the notice, the fixed equipment did not comply with s 5(4B). Following two preliminary hearings, the Land Court set out the criteria to be applied for annulment of a PLA:

• A PLA will be nullified only in so far as it makes the tenant responsible for statutory obligations of the landlord, provided the provisions caught can be separated without prejudice to the parties.
• The fixed equipment to be assessed at the date of the tenant’s notice is limited to that covered by the PLA.
• Failure to make a record does not preclude evidence on the condition of fixed equipment at the date of the lease, nor prevent the landlord from relying on a provision in the lease accepting that the fixed equipment was in tenantable condition at commencement. The court would need compelling evidence to establish that it was not actually in that condition four days later when the PLA was signed. However, the tenant could prove this in court.
• Under s 5(2), a tenant must maintain and repair an item of fixed equipment even if the damage is due to natural decay or fair wear and tear. The landlord’s obligation kicks in only when, due to such causes, it requires to be renewed or replaced.
• Equipment which has not been declared redundant does not stop being part of the fixed equipment simply because it is worn out and requires to be replaced.
• Section 5(4B) does not allow a PLA to be nullified when the fixed equipment was not in a reasonable state of repair on the relevant date, but the remedial work required was to be carried out by the landlord.
• The nature of work done on fixed equipment between the date of the PLA and the date of the tenant’s notice (and who paid for it) is irrelevant to the question of entitlement to nullify the PLA, which depends on an objective assessment of the state of particular items of equipment at the two dates.
• Whether the tenant is obliged to do work outstanding at the date of nullification, depends on the terms of the PLA. A tenant’s obligation that might have been enforced immediately before nullification will continue to be enforceable.
• Where any significant item is not in a reasonable state of repair, the fixed equipment as a whole is not in a reasonable state of repair.
• In broad terms, if an original item has been replaced by a radically different one, the comparison exercise between PLA and notice dates will not be needed.
• The onus of proof that fixed equipment is in no worse a state than at commencement of the tenancy lies with the tenant.
• The onus of showing that fixed equipment is not in a reasonable state of repair is on the landlord.

On appeal

The court having given its view on the practical application of these issues, Telfer appealed to the Court of Session, which ruled ([2013] CSIH 47, 31 May 2013):

1. The Land Court was correct to decide that, if any individual item of significance is not in a reasonable state of repair at the date when annulment is sought, the fixed equipment, as a whole, cannot be said to be in a reasonable state of repair.
2. The Land Court’s finding that no comparison need be made between a new and an old march fence, and accordingly the tenant was not entitled to nullify the PLA on 22 October 2007, should be quashed, and the comparison issue put back to the Land Court.

In brief the Court of Session takes the view that, if an item is not in a reasonable state of repair at the date of the tenant’s notice, the tenant is entitled to claim that it is in no worse a state than at commencement of the tenancy, even if it has been replaced.

The principles laid down by the Land Court are clearly of great importance. They also contain lessons on the tenant’s obligations to maintain ailing fixed equipment.