Property: Title conditions – what’s in a name?

Are you a fan of Destiny Cyrus? Do you love her new song “Flowers”? How about David MacDonald: are you excited to see him back as Doctor Who?

Names are important. But if everyone used the name on their birth certificate, would you know who they are, or do you only know them as Miley Cyrus and David Tennant? Mistaken identity may not be a problem when you’re a famous star, and everyone knows who you are, but it can be a problem for lawyers when you need to describe someone or something. We rely on accuracy – and would it be accurate to call someone by anything other than their given name?

A recent decision of the Lands Tribunal for Scotland, Castle Street (Dumbarton) Developments Ltd v Lidl Great Britain Ltd LTS/TC/2021/0031 (9 November 2022) can help us answer that question. The decision involved a challenge to a title condition included in the sale of part of a supermarket by Lidl to a developer. The condition restricted the future use of the land and referred to several competitor companies by their brand names. The developer challenged the condition, arguing that it was invalid because (1) it referred to Lidl rather than to the property; and (2) it referred to brand names rather than corporate names, e.g. “Sainsbury’s” rather than “J Sainsbury plc”.

The Tribunal’s decision sets out a helpful summary of what happens if you fail to distinguish between a person and a property when creating title conditions, and you refer to brands rather than to corporate names.

Background

In 2021, the supermarket retailer Lidl, more formally known as Lidl Great Britain Ltd, sold part of its supermarket in Dumbarton to a developer, Castle Street (Dumbarton) Developments Ltd. The disposition in favour of Castle Street included a title condition to restrict the future use of the land sold. It said:

“So long as the granter of this Disposition (or another member of the same group of companies) is either a proprietor of or occupies the whole or part of the Retained Property, no part of the Conveyed Property shall be occupied by either (a) any of Aldi, Farmfoods, Iceland, Home Bargains, Tesco, Asda, Sainsbury and/or Morrisons or (b) any operator whose convenience (food) offer accounts for 30% or more of the sales areas of their property on the Conveyed Property.”

This is a common type of condition on terms that, on the face of it, are easy to understand. The land sold cannot be used by anyone who is intending to sell a significant amount of food (over 30% of any sales area), or by Aldi, Farmfoods, Iceland, Home Bargains, Tesco, Asda, Sainsbury or Morrisons. This condition applies for as long as the granter of the disposition – Lidl (or a group company) – owns or occupies its current site.

What was the challenge? 

Castle Street challenged the condition, arguing that it was invalid for two reasons:

• The condition referred to Lidl rather than to the property, as required by the Title Conditions (Scotland) Act 2003, and was invalid as the condition was not praedial.
• The condition referred to brand names rather than corporate names and was invalid because of the “four corners” rule.

Praedial conditions defined

For a title condition to be valid, it must be praedial: it must confer a benefit on the property, and not just the owner. This can be difficult to judge, but the Tribunal provided a helpful summary. It said: “[A praedial benefit] is (i) that a real burden must confer benefit on the owners, tenants or occupiers of the benefited property from time to time, (ii) that this is so whoever the owners, tenants or occupiers from time to time may be, and (iii) that the benefit must be such as enhances or at least protects the value of the property.”

So, key to confirming whether a title condition was praedial was whether the condition benefited not just the current owner but also all future owners.

In this case, the Tribunal believed the burden benefited Lidl more than it benefited all owners. The condition referred to Lidl by name as being able to enforce the condition. And if someone else bought the land, then, on the face of it, they would not be able to enforce it as the burden did not refer to them – only to Lidl. For anyone drafting a title condition, this is critical to how they should approach any drafting. Any title condition should be drafted to be clear that it benefits land and not just the current owner.

Four corners argument rejected

The four corners rule is a simple one. Anyone reading a title document should be able to find all information within the four corners of the page. You can’t refer to external documents, legislation, plans or anything else which is not in the title itself. Castle Street argued that this rule extended to the brand names of the competitor companies, and that the description that said the condition covered other companies in “the same group of companies” breached the four corners rule, as the only way to know whether a company was included was to check Companies House or other records to show shareholdings and ownership.

The Tribunal rejected Castle Street’s argument. It believed that the use of brand names was clear and that the alternative – referring to companies by name – could be easily circumvented by, for example, a company setting up a new subsidiary after the deed was granted. 

Nonetheless, despite the argument failing, it would be wise for lawyers when drafting use restrictions which use brand names to refer to companies “known as” or “trading as”, to make it clear that the use is intended to restrict the property being used for a brand rather than a specific company.

What does the decision mean?

Anyone drafting title conditions should be careful that they comply with the requirements of the Title Conditions (Scotland) Act 2003, and especially that any title conditions refer to a benefited property and not just to the owner.

Anyone drafting use restrictions should be aware of how they describe any business. And while the decision helpfully allows the use of brand names to describe those businesses, it would pay to make clear in your drafting that it is the brand you are referring to. What you don’t want is to find that your title condition is invalid and that your client is the one calling you names instead.