Rent moves: two crucial hoops

In The Cawdor Farming No 1 Partnership v The Cawdor Maintenance Trust (SLC 151/16), Land Court, 21 May 2018, the court considered two principal issues regarding the competency of an application by a tenant for a reduction in rent.

On 24 November 2015 the landlords’ agent had served a variation of rent notice on the tenant in terms of s 13 of the Agricultural Holdings (Scotland) Act 1991, stating: “your landlords will have determined by the Scottish Land Court the rent to be paid for the… holding from and after the term of Martinmas 2016 being the next issuing term at which they could terminate the tenancy by notice to quit given at this date”.

On 28 November 2016, the Land Court received an application at the instance of the tenant for an order “determining the question of what rent should be payable in respect of the holding… as from the next day after 28 November 2016”, and seeking a reduction in rent.

Nature of the notice

Under s 13(1) of the 1991 Act, before an application can be made to the Land Court to determine the rent, one party must serve a notice on the other. In this case, the landlords served the notice but it was the tenant who made the application. The landlords argued this was incompetent.

The court had little difficulty finding in favour of the landlords on this point, based on what was “tolerably clear” from both the grammar and wording of s 13. Having considered the original and amended versions of s 13, the court expressly agreed with the decision of the full court in Morrison-Low v Paterson’s Executors 2005 SLT (Land Ct) 2, where the preliminary notice was considered to be “intimation of an intention”. Other notices relied on by the tenant in argument – notice of intention to quit, notice to quit, notice of dissolution of partnership, notice of resignation or dismissal – were distinguished as operating “to terminate the contractual relationship between the parties”, as opposed to a s 13 notice which “is served in the context of an ongoing contractual relationship” (Cawdor, para 16).

It also considered the inequity that would be occasioned if a party who had chosen not to serve a notice was able to rely on the other party’s notice following a change in economic conditions. Given that the notice has to be served not less than one year and no more than two years before the review date, it was quite understandable that a party serving might decide to take it no further: much could happen over such a period, not least that the parties might mutually agree a new rent thereby rendering further application unnecessary. 

The landlords’ notice was not a “trigger” setting in motion the statutory procedure for rent review of which either party could then take advantage.

What is the "next day"?

In light of that ruling, consideration of the second competency point was not required, but as the court had heard full submissions, it dealt with it also.

The tenant’s application sought a determination of the rent payable from the day after 28 November 2016. But the landlords’ notice and the lease made reference to 28 November 2016 itself. The landlords argued that the tenant’s application was one day too late; the tenant argued it was in time. The case is worth reading for this point alone, as the tenant had fundamentally misunderstood what “next day” means in the context of a s 13(1) notice.

Section 13(1) specifies that a court-determined rent takes effect “as from the next day after the date of the notice on which the tenancy could have been terminated by notice to quit (or notice of intention to quit) given on that date”. The court’s view was that “next day” means the next day occurring – after the date of the notice – on which the tenancy could have been terminated. The notice was dated 24 November 2015; the “next day” thereafter on which the tenancy could have been terminated was 28 November 2016, so any determination of rent would have been payable starting on 28 November 2016.

The “next day” is not the day after the date on which the tenancy could have been terminated. That day was 29 November 2016.

Prospective changes to s 13

There are prospective changes to the 1991 Act in sched 1A (inserted by s 101 of the Land Reform (Scotland) Act 2016) relating to rent review. When these are fully in force (it is not known when that will be), a party who has served a rent review notice may not withdraw it without the consent of the other party and either party will be able then to refer the determination to the Land Court. At that time, the first competency point will no longer arise. But, for now, it remains relevant.