Tuesday, 29 November 2016

Transparency in land ownership: consultation on controlling interests in land

Corrour Lodge

The Land Register and the Register of Sasines tell you who the legal owner of a piece of land is but don't tell you if there's someone else behind the scenes who pulls that owner's strings. Thus, you don't know from looking at the Registers who controls a company which is the legal owner of land. And even when the legal owner appears to be a person, you don't know that he's not just a nominee for someone else who actually calls the shots.

When I used to be a rural property lawyer, I never found this to be an issue in practice: everybody knows that the owner of Killilan Estate, Smech Properties Ltd, incorporated in Guernsey is the Sheikh Maktoum of Dubai and everybody knows that The Corrour Trust is Lisbet Rausing. These are not secrets and even beyond these high-profile cases, I was always surprised how, in practice, everybody seemed to just know who owned what, often leaving us lawyers, who were supposed to know about that sort of thing, bringing up the rear. Be that as it may, Part 3 of the Land Reform (Scotland) Act 2016, gave the Scottish Government power (indeed, obliged it) to make regulations about public disclosure of persons with "controlling interests" in (or over) landowners. The Scotgov is currently consulting about the detail of how to implement this. The consultation is here and runs until 5 December so there's not much time left!      

This is my response to the consultation (If you get bored, there's a picture right at the end which sums it up):-

Chapter 1: Transparency of land ownership and controlling interests in Scotland

1. Do you have any comments about making information about persons with controlling interests in owners and tenants of land available?

The way the questions are ordered didn't allow me to express my views in a very logical order so I'll use this box to summarise them:-

1. The Register of Controlling Interests should be integrated with the Land Register such that disclosure of a controlling interest (or confirmation that there isn't one) is simply part of the information contained in the Land Register, sitting next to the name of the legal owner.

2. Registration in the LR will be the trigger for disclosure of controlling interests. It's not realistic to expect people to be aware of and comply with a duty to disclose information outside the context of a trigger event like registration in the LR when there will be a form to fill in which can focus attention on the matter by asking the right questions and parties are likely to be being advised by knowledgeable professional advisors.

3. As for changes of controlling interest between Land Registrable transactions, again it's not realistic to expect people to remember to do this so the Keeper should be under a duty to write out to legal owners periodically asking them to confirm the information held about controlling interest is still correct. This, I gather, is what happens under the Person of Significant Control regime with UK companies.

4. Integrating registration of controlling interests (CI) with the Land Register will have the benefit that the register of CI is map based. A register concerned with land which is not map based is, for all practical purposes, useless.

5. As for the objection that registration of CI would be delayed by the completion of the Land Register, controlling interest and legal title are two sides of the same coin. It's illogical in principle and unhelpful in practice to progress one and not the other. If there's a concern about timescales, accelerate completion of the Land Register.

6. Finally, the thing that would do most to enhance transparency would be to make searching the Land Register (including information about controlling interests) FREE!

Chapter 2: Defining a controlling interest and who is a person with a controlling interest in a land owner or tenant

2. In your view, taking in to consideration the contents of this chapter and the associated annex C, what are the key considerations that Scottish Ministersshould take in to account in defining a "controlling interest" or "persons with controlling interests in land owners and tenants" for the purposes of these regulations?

Landowners which are UK companies, LLPs or Societates Europaeae are already covered by the Person of Significant Control regime in Pt 21A of the Companies Act 2006 so should be exempt from the proposed register in order to avoid double reporting.

For other bodies, in the interests of consistency and simplicity (avoiding a multiplicity of different disclosure regimes), use the same definitions in the Money Laundering Regulations 2007 except that, for trusts, it is control rather than benefit which is important for present purposes. Therefore the default rule should be that it's the trustees rather than the beneficiaries who are to be disclosed unless a beneficiary has power to dismiss or appoint trustees or de facto exercises control over the trustees (which would likely be the case in the situation of trustees holding property for a partnership).

For foreign corporates (if they are in any different position from other bodies governed by the ML Regs), it would seem most sensible to await the outcome of the Government's discussions on this as referred to in para. 16, page 8 of the consultation.

Public sector bodies and charities should be exempt so as not to burden them with excessive regulation.

It's really important to harmonise with other regimes, not to duplicate them and not to have differences in Scotland from rUK because this acts as a disincentive to doing business in Scotland.

Chapter 3: Scope
3. In your opinion, should the regulations apply to all types and uses of land?


4. Do you think that particular categories of land should be exempt?


5. If YES, please give details.


6. In your view, for the purposes of these regulations, should "land" have the same meaning used for Land Registration purposes (outlined above)?


7. In your opinion, should the regulations also apply where the proprietor of land that is not recorded in the Register of Sasines or registered in the Land Register because either: (I) The property was acquired prior to the Register of Sasines commencing in 1617; or (II) they have acquired a personal right to property but have not yet registered the deed in their favour in the Land Register?


Please give details.:

There are many situations where people acquire personal rights to property (situation II. above) in which it is not realistic to assume they will remember (or even be aware of the requirement) to register a change of controlling interests. For example, following a death with a low value estate where solicitors are not involved or changes in a partnership. Therefore, registration in the Land Register (whether in situation I. or II. above or for any other reason, typically a sale) should be the
trigger for disclosure of controlling interest. The parties to the transaction can have their attention drawn to the issue of control by a question added to the application form for the LR and they will usually be being advised by lawyers where the LR is concerned. Indeed, for that reason, the Register of Controlling Interests should be simply a part of the Land Register (see Qs 11, 12 & 13 below).

8. In your opinion, should the regulations apply where a tenant in a high value lease that is not a long lease (a lease of 20 years or fewer) falls within the definition of persons with controlling interests in land owners and tenants?


Please give details.:

Because of difficulties in defining what is or is not a "high value lease". And because the only practical way to run the Register of Controlling Interests is for it to be a part of the Land Register and <20yr leases don't get registered in the LR.

9. In your opinion, are there instances where natural persons who own land have an undisclosed relationship with another person who has a controlling interest in land? For instance if the land in question is an asset of a partnership or trust, or part of a trust arrangement?


Please give details.:

You've answered your own question: when the land in question is an asset of a partnership or trust. It's very common to find family farms registered in the name of, for example, grandfather when he is actually holding as trustee for a family partnership from which he has long since retired and the controlling interest is now the current partners who are his grandchildren. (Note that the grandchildren are not trying to conceal anything: it's just that updating the property title to substitute themselves for their grandfather is not high on their list of priorities while he is still alive and can do their bidding by signing any necessary documents relating to the property.)

10. In light of the contents of this consultation, and this chapter in particular, can you foresee any ways in which the obligations under these regulationscould be avoided, and, if so, what could the Scottish Government do to combat this?


Please give details.:

As corporate disclosure requirements increase, it's conceivable that people who take title to land in the name of corporate vehicles for motives of secrecy (which I don't believe is nearly as common as made out in some quarters - it's almost invariably motivated by tax avoidance which, as the consultation notes is not within the competence of the Scottish Parliament) may move to taking title in name individuals as their nominee. That's a form of trusteeship but it emphasises that, to close loopholes, registration of controlling interests must apply to individuals as well as to corporates and trusts. That means it applies to every single owner in Scotland and therefore every single property.

Chapter 4: Where the information should be held and what information should be disclosed

11. In your opinion, should a new register of persons with controlling interests in land owners and tenants be created?


12. What would the advantages be?

None. The Register of Controlling Interests should be a part of the Land Register. See 13. below.

13. What would the disadvantages be?

Yet another register added to the increasingly long list of property registers! (Crofts, SSSIs, community interests, applications to buy abandoned land to name but a few) We should be moving in the direction of a "one stop shop" which is what I think the ScotLIS is supposed to be about.

Registration of controlling interests should be integrated with the Land Register such that the identity of controlling interests (or confirmation that there aren't any other than the legal owner) simply becomes part of the information disclosed on the LR sitting next to the name of the legal owner.

Registration in the LR (whether by a transaction with the land or by voluntary or Keeper induced registration) will be the trigger for the entry of controlling interest information. As regards properties which won't come on to the LR before 2024, it's hopelessly unrealistic to imagine that *every* unregistered landowner (because remember every landowner is potentially a trustee or nominee for a controlling interest) will even be aware of, never mind comply with, a duty to disclose a controlling interest or, as the case may be (more usually), confirm there isn't one. In practice, the Keeper would need to write out to people appearing to be the owners of property from the Sasine search sheets asking them about controlling interests.

Another aspect of registration of controlling interests is that it's essential that it's map based or it's of absolutely no use at all if it's designed to help people find out who they need to talk to about, for example, trees by a road which are reducing sight lines as per the example given on page 9 of the consultation.

If the Keeper is going to write to owners appearing on Sasine search sheets and draw maps of their maps of their land, then she might as well be registering these properties in the Land Register while she's at it.

Registration of legal title and controlling interest are two sides of the same coin and it seems ludicrous and wasteful, not to mention confusing to the sort of lay person the process is trying to assist, to progress one and not the other at the same time. The two should be going hand in hand.

(You could turn this round another way and say that I wouldn't object in principle if the proposal were to abolish the Land Register and include information about legal title in a map based new Register of Controlling Interests!)

14. In your view, in addition to the names of "persons with controlling interests in land owners and tenants" should other information about them bedisclosed?


15 If YES, how would disclosure of that information fulfil the regulations' aim(s) (as per chapter 1 and your answer to question 1)?

The whole thing is surely pointless if you don't include contact information - at least an address!

16. If NO, why not?


17. In your view, should information about the nature and extent of a person‘s "controlling interest" be disclosed?


18. In your view, should the nature and extent of a person‘s "controlling interest" be disclosed on a public register?


Please give details.:

Not quite sure what the difference between Q.17 & 18 is but responding to both, "Yes" to nature but "No" to extent.

I suppose it could help people engaging with "controllers" to know if they are a director, majority shareholder, trustee etc. but I don't think they need to know the full chapter and verse about how many shares etc. they hold if that information doesn't otherwise require to be disclosed (e.g. under UK company law). As long as they make themselves known and available, "controllers" are still entitled to their confidentiality and privacy.

19. If YES, how would this information fulfil the purpose of the regulations' aim(s)?

See details under Q18 above.

20. If NO – why not? Please give details.

See details under Q18 above.

21. Thinking about the information which in your view should be disclosed, are you aware of any potential sensitivities relating to this?


Please give details::

Commercial sensitivity & confidentiality, ordinary "domestic" considerations of privacy.

22. If YES – in your view what are the advantages of keeping this information up to date?

Not sure how this question fits in to this sequence (YES to what?) but in general terms, if you are going to require disclosure of something, the information ought to be kept up to date.

23. If NO – why not? Please give details.

Not sure how this question fits in to this sequence (NO to what?)

24. In your view, are there instances in which the information about the nature and extent of a person‘s "controlling interest" is commercially sensitive and should not be revealed?


25. If YES, please explain why you think that this information should not be revealed?

Surely there must be a default presumption in favour of people being entitled to confidentiality and privacy of their affairs unless a public interest case to the contrary has been made. See answer to Q18.

26. If NO – why not? Please give details.


Chapter 5: The duty to provide the information

27 In your view, should a duty to provide information about persons with controlling interests in land owners and tenants apply to land owners and tenants with titles in the Land Register or Register of Sasines and:

Land owners and tenants where the property was acquired prior to the Register of Sasines commencing in 1617


Land owners or tenants who have acquired a personal right to property, but have not yet registered the deed in their favour in the Land Register


Tenants in a high value lease that is not a long lease (a lease of 20 years or fewer)


28. If you chose NO, why not?

For reasons already given in response to Qs 7 & 8.

29. If YES, in your view what are the advantages of this arrangement?


30. If YES, in your view what are the disadvantages of this arrangement?


31. In your view, should a duty to provide information apply to the "person with the controlling interest"?


32. If NO, why not?

Because the duty should be on the legal owner at the point of application for registration of his title (or another transaction) in the Land Register for the reasons already given in Qs 12 & 13 above.

33. If YES, in your view what are the advantages of this arrangement?


34. If YES, in your view what are the disadvantages of thisarrangement?


35. In your view or experience, are there parties who serve as intermediaries between registered proprietors and persons with a controlling interest in land?


36 If YES to Q35, in what scenarios do you think that there are parties who serve as intermediaries between registered proprietors and persons with a controlling interest in land?

Whenever anybody needs a professional advisor.

Note that "intermediaries" makes it sounds like the stuff of Panama Papers type conspiracy theories. The reality is much more humdrum and the "intermediaries" are simply the professional advisors of both the legal owner and the controller.

Consistently with this, I totally disagree from my experience as a lawyer acting for off-shore landowners with the statement in para. 2 on page 27 of the consultation:- "where there are complex ownership structures lying behind a legal owner, such as a chain of companies owned in offshore jurisdictions, it may not be possible for the registered proprietor to obtain information about persons with controlling interests". The legal owner *always* knows who its controller is and vice versa.

37. If YES, in what capacity are there parties who serve as intermediaries between registered proprietors and persons with a controlling interest in land?

Typically lawyers, land agents and accountants.

38. In your view should a duty to provide information apply to such intermediaries?


39. If NO, why not?

It is completely contrary to principle to make an agent liable for his principal.

40. If YES, in your view what are the advantages of this arrangement?


41. If YES, in your view what are the disadvantages of this arrangement?


42. In your view, should the duty to disclose information about any person with a controlling interest in a land owner or tenant apply either when a person is a person with a controlling interest in a land owner or tenant when the regulations come into force, or becomes a person with a controlling interest in a land owner or tenant when the regulations are in force?


43. If NO, why not?

I'm not sure I understand the question but the trigger for first disclosure should be the first registration in the Land Register after the regulations come in to force.

As for changes of controlling interest between transactions registrable in the Land Register, I don't believe it's realistic to expect partnerships and trusts to remember to notify these. Therefore, I would suggest the Keeper be obliged to write out to the legal owner and/or controlling interest of each registered property periodically to ask them to confirm there has been no change (or, as the case may be, for any new information about controlling interest to be disclosed). This I believe is how Companies House operates the new Confirmation Statement (including info about persons with significant control) scheme. Civil penalties or criminal offence (no strong views which) for failure to respond to such a request for information.

44. If YES, in your view what are the advantages of this arrangement?


45. In your view, should a civil penalty be imposed for failure to comply with any of the duties contained in the regulations?


Please give details:

See response to Q43 above.

46. In your view, should failure to comply with any of the duties contained in the regulations be a criminal offence?


Please give details:

See response to Q43 above.

47. In your view, should an application for land registration be rejected if the applicant fails to supply information about any "person with controlling interest"?


Please give details:

This follows from integrating disclosure of controlling interests with the Land Register in the manner I'm suggesting.

48. In your view, should an application for land registration be rejected if the applicant fails to certify that no such "person with controlling interest" exists?


Please give details:

This follows from integrating disclosure of controlling interests with the Land Register in the manner I'm suggesting.

49. In your view, taking in to consideration all of the sanctions and enforcement options set out in this chapter, what mechanisms would be most appropriate to enforce the duty to provide information? Please explain your answer.

The primary sanction will be that an applicant for registration in the Land Registration will be obliged to answer a question about any controlling interest behind the applicant (i.e. say who it is or confirm there isn't one) or else their application will be rejected. There is already a criminal offence of making false statements in connection with the LR (LR Act 2012, s112).

For "inter-transactional" changes of controlling interest, the only sanction can be a criminal offence (or civil penalty, don't mind which) for failure to respond to the Keeper's enquiries (see my answer to Q43).

50. In your view, are there instances in which there should be exemptions?


51. If NO, why not?

Can't think of any circs in which people should be excused compliance with the regulations (apart from the Procurator Fiscal/Lord Advocate's usual discretion not to prosecute when it's not in the public interest).

I've never encountered any circumstances in which people may be placing themselves at "serious risk of violence or intimidation" by coming out from behind a corporate legal vehicle. It's just not a syndrome I recognise at all.

52. If YES, in your view what is the justification for such exemptions?


Chapter 6: Assessing impact

53. Please tell us about any potential impacts, either positive or negative, that you consider that the proposals in this consultation may have in respect of equality issues. Please be as specific as possible.

None I can think of.

54. Please tell us about any potential costs and burdens that may arise as a result of the proposals within this consultation, and any increase or reduction in the burden of regulation for any sector. Please be as specific as possible.

Parliament should take evidence from people qualified to speak about the practical impacts of the introduction of the Persons of Significant Control regime for UK Companies (e.g. Companies House staff, corporate lawyers or accountants).

55. Please tell us about any potential impacts, either positive or negative, upon the privacy of individuals that may arise as a result of any of the proposals contained in this consultation. Please be as specific as possible.

Parliament should take evidence from people qualified to speak about the practical impacts of the introduction of the Persons of Significant Control regime for UK Companies (e.g. Companies House staff, corporate lawyers or accountants).

56. Please tell us about any potential impacts, either positive or negative, that you consider that any of the proposals in this consultation may have on the environment. Please be as specific as possible.

None I can think of.

Friday, 30 September 2016

Resumption from crofting: Glen Spean Estate v MacLachlan

Glen Spean: Gorge Park below the plantation centre left
In Glen Spean Estate v MacLachlan the Scottish Land Court has issued another of its periodic pleas to the Scottish Government to legislate to clarify the law, this time on the subject of resumption from crofting.

Resumption is the process whereby the landlord of a tenanted croft can take back vacant possession in order to put the land so resumed to an alternative use. Resumption is seldom of entire crofts, more usually relatively small parts of them comprising a development site. It's also possible to resume land from crofters' common grazings, indeed this is more common than resumption from in-bye. Resumption is subject to the landlord paying the affected crofting tenant(s) half of the open market value of the land resumed with vacant possession. (In the case of common grazings, this is shared among the crofters who share the grazing.)[1]

Resumption must be authorised by the Land Court who, in terms of Section 20(1) of the Crofters (Scotland) Act 1993, must be satisfied that the landlord desires to resume the land for "some reasonable purpose having relation to the good of the croft or of the estate or to the public interest or the interests of the crofting community in the locality of the croft"

Glen Spean Estate v MacLachlan involved the common grazing of Galmore, just east of Roy Bridge in Glen Spean. Specifically, the landlord, Glen Spean Estate (a partnership between a Mr Smith and a Mr Bruce), had obtained planning permission to build a house on a detached portion of the grazings known as The Gorge Park extending to 1.94ha (4.8 acres) between the A86 and the railway to Fort William (go for a virtual drive-by here - left hand side of the road). The estate had sold it to a Mr & Mrs Dignan for £45,000 and now sought resumption in order to be able to convey it to the Dignans with vacant possession. In the meantime, however, one of the crofters sharing the Galmore Grazings, Mrs MacLachlan, had obtained an apportionment of the Gorge Park, that is an order by the Crofting Commission carving it out of the common grazings and adding it to her individual croft, No 5 Achluarach (1.95ha). As she too had plans to build a house and crofting infrastructure on the Gorge Park (there being none on the rest of her existing croft), she objected to its resumption by the landlord.

Resumption has been around ever since crofting began in 1886. But despite its longevity, the Land Court noted two separate strands of judicial authority on the subject. According to one, following the Inner House case of Whyte v Stewart (1914 SC 675), if the landlord can establish a reasonable purpose having relation to the good of the estate (or the public interest), he is entitled to his resumption even if that would be disastrous for the affected croft (or local crofting community).[2] But according to another, more recent strand of authority reflecting the Land Court's actual practice in recent decades, a balancing exercise has to be carried out between the respective effects of the resumption on the estate, croft, public interest and local crofting community: thus, a resumption undeniably for the good of the estate (or the public interest) might still be refused if it were judged to be outweighed by the adverse effect on the croft (or the crofting community). The latter approach was exemplified by the case of Portman Trustees v Macrae (1971 SLT (Land Ct) 6) in which the landlords sought resumption to sell as house plots of an area at Dornie in Wester Ross which the crofting tenant had obtained planning permission to develop as a site for holiday chalets and static caravans: refusing the resumption, the Land Court expressed matters neatly thus: "Standing the [tenant's] plans for the development of this part of her croft we are not satisfied that the landlord's purpose - though reasonable in itself - is reasonable in the circumstances."

In the Glen Spean case, the Land Court speculated that s.20(1AA)(b) of the 1993 Act (added by s.42 of the Crofting Reform (Scotland) Act 2010):-

(1AA) In determining whether it [i.e. the Land Court] is satisfied as mentioned in subsection (1) above [i.e. that the landlord desires to resume the land for some reasonable purpose having relation to the good of the croft or of the estate or to the public interest or the interests of the local crofting community]  (and, in particular, whether the reasonable purpose mentioned there relates to the public interest) the Land Court—

(b) where the purpose is, or is connected with, the development of the croft in respect of which planning permission subsists, may take into account the effect such development would have on the croft, the estate and the crofting community in the locality of the croft, ... .

... might be giving statutory effect to the second of the two judicial strands on resumption (the balancing exercise) but they didn't put it any more strongly than that it was "arguable".[3]

Anyway, it is the potentially irreconcilable conflict between these two strands - the first carrying the authority of the Inner House but the second more representative of contemporary practice and arguably since bolstered by s.20(1AA)(b) - which the Land Court in the Glen Spean Estate case recommended to the attention of the Scottish Government for resolution by legislation.[4] It's not one of the issues identified by the "Crofting Law Sump"[5] so the crofting legislation to do list just got longer.

Back in Glen Spean, meanwhile, as it turned out, the Land Court was able to decide the case consistently with both strands of authority. This was because it decided that selling the Gorge Park to Mr & Mrs Dignan for them to build a house on was not a reasonable purpose having regard to any of the good of the croft, the estate, the public interest or the local crofting community: the landlord having failed at every hurdle, there were none left standing to be balanced. It was too much of a stretch to argue that the tenant's £22.5k share of the value of the land resumed represented a good deal for the croft when it would be losing half its area. The landlords did not lead any evidence that they intended to use their half of the proceeds of sale of the Gorge Park to fund any capital improvements and therefore the case on good of the estate failed (one thing that's incontrovertible in resumption law is that the good of the landlord's pocket is not the same as the good of his estate). And a case on the public interest and the local crofting community - that the Dignans being able to build a house on the Gorge Park would establish a new family in the area - foundered for the reason that they already owned a house they lived in nearby.[6]

The Land Court was equally sceptical about the tenant, Mrs Maclachlan's, plans for the Gorge Park. That didn't affect the outcome because the onus was on the landlord to make the case for resumption, not upon her to keep it in her tenancy. But the Court did remark that, if the estate had succeeded in putting forward a "colourable case" for the resumption, the outcome might have been different given the weaknesses in her case - which does, of course, suggest that, if they had been put to it, the Land Court would have followed the second strand of resumption authority, the balancing approach.[7] 

Finally, the Land Court touched on new s.20(1AA)(a) added to the 1993 Act by s.42 of the 2010 Act:-

(1AA) In determining whether it [i.e. the Land Court] is satisfied as mentioned in subsection (1) above [i.e. that the landlord desires to resume the land for some reasonable purpose having relation to the good of ... etc.] (and, in particular, whether the reasonable purpose mentioned there relates to the public interest) the Land Court—

(a) may take into account the effect that purpose (whether alone or in conjunction with other considerations) would have on the matters mentioned in subsection (1AC) below;

(1AC)The matters mentioned in subsection (1AA)(a) above are—

(a) the sustainability of—

(i) crofting in the locality of the croft or such other area in which crofting is carried on as appears to the Land Court to be relevant;

(ii) the crofting community in that locality or the communities in such an area;

(iii) the landscape of that locality or such an area;

(iv) the environment of that locality or such an area;

(b) the social and cultural benefits associated with crofting.

The Court said it had thought it would require to embark on a "thoroughgoing analysis" of what these recent additions to s.20 actually meant in practice. But - disappointingly, because I think that would have been the first judicial analysis of them (also relevant to decrofting) - the Court eventually decided that resumption (or not) of the Gorge Park would have no effect on any of the matters referred to in subs.(1AC). One can't help wondering if that's not likely to be the case in all but a few exceptional resumptions (e.g. an entire township or grazing for a super quarry or similar)[8] 

[1] Strictly speaking it's half of the difference between the OMV with VP and the "crofting value", that is 15 x the crofting rental value of the land but the latter value is usually negligible.  
[2] In terms of the original Crofters Holdings (Scotland) Act 1886 (s.2), resumption had to be for a reasonable purpose having relation to just the croft or the estate. Reference to the public interest was added by the Crofters (Scotland) Act 1955 (s.12) and the local crofting community by the Crofting Reform (Scotland) Act 2007 ((s.22(1)(a)). Stewart v Whyte actually involved resumption from a statutory small tenancy (SST) rather than a croft under the discrete statutory code applicable to them (s.32 of the Small Landholders (Scotland) Act 1911). But the wording of the SST legislation on resumption (s.32(15) of the 1911 Act) and the policy background was identical to that for crofts.
[3] Para. [33] of the judgement.
[4] Para. [34]
[5] A project by the Crofting Law Group to identify current problems in crofting law for potential legislative remedy: see the final report here
[6] Paras. [60] to [64] of the judgement.
[7] Para. [64] 
[8] The Court also noted that s.20(1AA)(a) says that the LC "may" take into account the matters referred to in subs.(1AC) - i.e. it's permissive not mandatory. The Court in Glen Spean interpreted this to mean that it could - as in fact it did - find as a matter of fact that the resumption had no effect on the (1AC) matters but I would have thought it also means that the Court could find as a matter of fact that the resumption would have a massive effect on the (1AC) matters but nevertheless ignore that: unless s.20(1AA)(a) is an example of when "may" in a statute actually means "shall". I'm no expert on that point but, coincidentally, s.20(1) of the 1993 Act ("The Land Court may, on the application of the landlord and on being satisfied that he desires to resume the croft, or part thereof, for some reasonable purpose ... authorise the resumption thereof ... ") is such an example: Whyte v Stewart, cit. sup., per Lord Dundas at 682 and Lord Salvesen at 685. Interpreting "may" as "shall" in that context underpins the first of the two strands of authority on resumption (because otherwise the second strand could be justified as saying that the LC only exercises the discretion conferred on it by the word "may" when satisfied with the result of the balancing exercise).     

Saturday, 3 September 2016

Coates Crescent: servitudes granted by implication


ASA International Ltd v Kashmiri Properties (Ireland) Ltd ([2016] CSIH 70) is a decision of the Inner House of the Court of Session (Scottish equivalent of the Court of Appeal) illustrating circumstances in which a servitude (Scottish equivalent of a wayleave) of access was held not to have been created by implied grant.

The parties were the owners of two neighbouring properties in Edinburgh's New Town, 6 and 7 Coates Crescent (above): originally town houses, they had long since been converted to offices.  At the back of No 7 was a car park opening on to William Street South East Lane while the rear frontage of No 6 to the lane was occupied by a garage. You can see the site in Google Streetview here with No 7's car park nearer the camera and No 6's garage beyond.

Nos. 6 & 7 were in the same ownership from 1989 until October 1996 when No 6 (and a car park belonging to it behind No 9 Coates Crescent, also accessed off the lane) was sold off, the vendor retaining No 7. (Note in this regard what appear to be mistakes at various points in the judgement (e.g. para. [6]) in which the dates of the break off disposition (deed of conveyance) of No 6 are given as being in 1994 when 1996 must be intended (e.g. last line of para. [7]).)

The case concerned pedestrian access from No 6 to the lane at the rear. The evidence showed that, both before and after the separation of ownership of No 6 from No 7, occupants of No 6 going out to William Street or to its carpark behind No 9 found it more convenient to go through a gate in the party wall between Nos 6 & 7 (behind the car in the Google Streetview linked to above) and walk out to the lane through No 7's car park rather than through No 6's garage. The same went for occupants of No 6 when parking in the garage: due to restricted space, they found it easier after having parked their cars in it to go out on to the lane, round the outside of the garage through No 7's car park and into No 6 through the gate.

For reasons not disclosed, the owners of No 7 sought to prevent the occupants of No 6 walking through their (No 7's) car park. The owners of No 6 applied to the sheriff (Scottish equivalent of the County Court judge) for a declarator (court order declaring legal rights) that they had a servitude (wayleave) right of access through the car park which its owners could not prevent. However, as the break off disposition of No 6 did not contain an express servitude, and the two properties had not yet been in separate ownership for long enough to admit a servitude constituted by prescriptive possession (use "without a by-your-leave" for 20 years), the owners of No 6 were left with no option but to contend that a servitude of access through No 7's car park had been granted by implication when ownership of the two properties was separated.

The sheriff rejected the claim, whereupon the owners of No 6 appealed to the Inner House. The court focussed on the classic statement of servitudes granted by implication by Lord Chancellor Campbell in the 1861 House of Lords case Ewart v Cochrane:

[W]hen two properties are possessed by the same owner, and there has been a severance made of one part from the other, anything which was used, and was necessary for the comfortable enjoyment of that part of the property which is granted, shall be considered to follow from the grant ... . When I say necessary, I do not mean so essentially necessary that the property could have no value without it; but necessary for its convenient and comfortable enjoyment, as it existed at the time of the grant.

The court noted that Lord Campbell's test for a servitude granted by implication involved two elements, both of which had to be present: (i) the access claimed had to have been in use before the properties were separated; and (ii) it had to be necessary for convenient and comfortable enjoyment of the putative dominant tenement (i.e. the property accessed). At Coates Crescent, element (i) was present so the case boiled down to whether No 6's continued access through No 7's car park was, in the words of Lord Campbell, "not ... so essentially necessary that the property could have no value without it; but necessary for its convenient and comfortable enjoyment ..." (The court pointed out that judicial dicta suggesting that any access which existed before severance was continued by implication - i.e. that only element (i) was necessary but not (ii) - were being read out of context.)

Having regard to the fact that the occupants of No 6 could get out to the lane by going through its own garage, less convenient though this appears to have been than bypassing it through No 7's car park, and that it wasn't too much of a hardship to get to No 6's car park behind No 9 or William Street by walking an extra 150 yards or so out the front door of No 6 and round by surrounding streets (Walker Street or Stafford Street), the Inner House had little difficulty in deciding that a servitude of access through No 7's car park was not implied.

Each case turns on its own facts and it can be hard to predict the result of application of broad principles to particular circumstances. But having said that, the decision is not surprising: if I'd been asked for my opinion, I'd have told No 6 I thought their claim a complete no-hoper. One wonders what imperative drove them into the expense of litigating to the Inner House.

 I'd summarise by saying that the fact that an access would be "handy" (or, to use a word beloved of estate agents, "useful") is not enough for a servitude by implied grant.

Get used to going this way ...

Monday, 28 March 2016

1695 and all that - dividing the commons

Prompted, no doubt, by Scottish Green Party MSP Patrick Harvie’s proposed amendment to the Land Reform Bill to repeal the Division of Commonties Act 1695, the Scottish Government (SG) announced on 27 January that it would be referring “the issue of Common Land” for review by the new Scottish Land Commission being set up by the bill. This review would also cover common good land owned by local authorities. At the same time, the SG also said it was asking the Scottish Law Commission to “review the Division of Commonties Act 1695 with a view to its repeal.”

There’s a lot of confusion about common land in Scottish law and in this note I’m going to try and bust some of the myths.

Common good, common grazings and commonties
First, “common land” is not a term of art in Scottish law so what is it that the Land Commission is going to be reviewing?

As the SG announcement hints, there’s a sub-set of it called “common good”. This isn’t “common” land in the sense of belonging to everybody (or nobody). It belongs to local authorities in exactly the same way as schools, libraries etc. do except that, in administering common good, the LA must “have regard to the interests of” the inhabitants of the former (pre-1975) burgh the CG used to belong to.[1] And in the case of what’s misleadingly known as “inalienable” common good, the LA needs the permission of the courts to sell it or change its use.[2] I’ve written about common good before (here) and am not going to say anymore about it in this article.

Then there are crofters’ common grazings (areas of land over which neighbouring crofters have the right to graze their stock in common). I doubt they’ll be included in the review because they’re already heavily regulated and anyway fall under the remit of the Crofting Commission.[3] So, apart from local authority owned common good, the focus of the Land Commission’s review can only be commonties. These are what the Division of Commonties Act 1695 applies to.

Dunbar Common, East Lothian as seen on 1878 OS 1 inch map

Commonties were areas of land – often, though by no means invariably, upland and quite extensive (sometimes thousands of acres) – which were not cultivated but used in common by local farmers, principally as summer grazing for their livestock but also as a source of fuel (peat) and resources such as wood and stone for building. Note that, although “commonty” is the legal term of art, the areas of land concerned were usually called “commons”, e.g. Dunbar Common (above). Anyway, it’s often said that commonties were held in common by the ordinary folk of a locality and that the 1695 Act was passed to enable them to be expropriated and divided up between neighbouring landowners; and that such commonties as remain undivided (only very small areas now) remain the common property of the general public in their locality.

This is not true. Historically, commonties were owned jointly by neighbouring landowners. The term of art for the owners sharing a commonty is “commoner” but as that word is apt to provoke confusion with expressions such as “common folk” etc., I’m going to call them co-owners. They owned their commonty as adjuncts to their estates rather as the owners of flats in a tenement own the back green in common. What the 1695 Act did was create a procedure whereby any co-owner could apply for a commonty to be physically divided such that, after the division, each would have exclusive ownership of a discrete portion of it. Continuing the tenement analogy, imagine if there were a procedure whereby the back green could be divided such that each flat owner had his own exclusive portion as opposed to a share of the whole.

Thus, the 1695 Act did not transfer ownership of commonties to landowners: landowners already owned commonties and the Act merely rearranged their rights in them. If you’ll excuse the somewhat artless graphic below, the upper image below shows three estates, A, B & C, sharing a commonty which they surround. After the division, the lower image shows how each estate has its own part of the former commonty.

Don’t take my word for it.           
So – at the risk of labouring the point – commonties were common only in the sense of being shared in common by neighbouring landowners: they were not owned by (or for the benefit of) the general public.[4] But because this appears to be controversial in some quarters, I had been going to illustrate the point by quotations from the institutional writers.[5] Except I couldn’t find any. At least I’m not alone in this as the opinion of the Lord Justice-Clerk (Alness) in what I believe to be the last case in which anybody attempted to invoke the Division of Commonties Act 1695, Macandrew v Crerar in 1929[6] shows:-

"It is difficult to find, in the institutional writers or in the early cases, a clear and comprehensive definition of commonty. Probably its features were familiar then, though they are archaic now." [7] 

Lord Anderson, however, was a bit more explicit:-

"The text-writers distinguish the three cognate rights of common property, common interest, and commonty (Bell's Prin., sections 1071—97; Bell's Dict., sub vocibus; Rankine, Land-Ownership (4th ed.), pp. 585-609). These authorities and the others to which we were referred at the debate seem to establish that a commonty is a piece of ground belonging to one or more proprietors which is merely an accessory—an accessory both as regards title (“cum communio,” “with commonty,” etc.) and user— to a neighbouring estate or estates held in severalty."

Servitude commonties
At this point, I can put off no longer muddying the waters so clearly elucidated in the foregoing with a complication: there also existed a different type of commonty. In what I’m going to call a “servitude commonty” (to distinguish it from a “co-ownership commonty” belonging to multiple co-owners as described in the preceding paragraphs), the land belonged to one landowner but other neighbouring landowners had servitudes (Scottish equivalent of easements) of grazing and/or cutting peat on it. And just to make life even more complicated, it was possible (indeed very common) to have “hybrid commonties”, that is co-ownership commonties which were also subject to servitudes of grazing/peat cutting held by third parties.

A pure servitude commonty could not be divided under the 1695 Act. In a hybrid commonty, the holder of a servitude couldn't institute a process of division but if one of the co-owners did, the servitude holders would be awarded a share of exclusive ownership of the commonty in lieu of their servitude.[8]

From hereon in, I’m going to use the word “heritor” to apply to a landowner having the use of a commonty whether he be a co-owner of it or a third party holding a servitude over it.

Extract from the form of words for a Summons of Division of Commonty from Beveridge's "A Practical Treatise on the Forms of Process" 1826

Where did the expropriation myth come from?
It was the heritors’ tenants who used commonties on a day to day basis. And only their tenants – not anybody else’s tenants or other members of the public. Thus, when a person ceased to be a tenant of a particular heritor, his right to use that heritor’s commonty ceased: henceforth he would have to use the commonty attached to the estate of his new landlord.

Anyway, note that no tenant was deprived of anything by division of a commonty. Go back up to the diagram above and let’s imagine that each of the three estates, A, B & C, had four tenants, that the commonty was 1,200 acres and that, after the division, each estate’s part was 400 acres. The ratio of acres of commonty per tenant before the division was 100 (1,200/12) and the ratio of acres of former commonty per tenant after the division was also 100 (400/4). So where does the popular idea that common folk were dispossessed by division of commonties come from?

Well, if you look at the 1695 Act, you see it narrates it was passed “for preventing the discords that arise about commonties”. No doubt some discords were settled in the early years but the Act really came in to its own about a hundred years later in a totally different socio-economic context: the Agricultural Revolution of the late 18th/early 19th century.

The less well known flip side of the Industrial Revolution, this was the transformation of agriculture from subsistence (growing your own food) to commercial (growing food to sell to the new urban population not able to grow its own because it was working in factories). Revolutions seldom lend themselves to description in a couple of sentences but three themes of the agricultural one were, firstly, enclosure of land into the regular shaped fields and parks we associate with the today’s farming landscape: division of commonties fitted into that trend perfectly. Secondly, expansion of the land under cultivation involved commonties coming under the plough for the first time. So the 1695 Act passed for one purpose in a previous era (preventing discords) turned out to be of more use for an entirely different purpose in a later era (furthering the Agricultural Revolution).

The third theme of the Agricultural Revolution relevant here was that improved agriculture involved far fewer tenants as farms came to be worked by single tenants (as today) rather than communities of joint tenants as previously. In a process known in the north and west as “the Highland Clearances” but which affected the rest of the country just as much, many lost their foothold on the land and became landless labourers for the surviving tenants or emigrated to the cities or abroad. Thus, at the same time as commonties were being divided, people were being dispossessed. But the former did not cause the latter any more than any other feature of the Agricultural Revolution, whether Small’s improved plough or steam threshing machines.

Glenearnhill - a new farm established on a division of Forgandenny Commonty and since abandoned

Legacy commonties: peat mosses, bleaching greens and limestone quarries
Practically all commonties had been divided by the third quarter of the 19th century. In the words of Professor Rankine (quoted with approval by Lords Ormidale and Hunter in Macandrew): “the process of division instituted at the end of the seventeenth century has gone so far as to leave few traces of commonable land in any part of the country.” [9]

Such patches of commonty as remain today are almost invariably areas deliberately left undivided during processes of division for particular purposes. The most common was as a moss (area for cutting peat for fuel: the 1695 Act specifically refers to this) but other examples are occasionally found such as ground left in commonty for use as a bleaching green (an area where laundry was spread out on the ground, not just to dry but – in the days before chemical detergents – to be bleached white by the action of the sun) or a quarry [10]. It’s worth reminding ourselves again that the only people entitled to use these legacy commonties (as I’m going to call them although it’s not a term of art) were the heritors who shared them and their tenants, not anybody else or the public at large. Anyway, what is their legal status today considering that bleaching and (outside the west highlands and islands where there never have been commonties) cutting peat has long since ceased to be practiced?

First principles suggest that rights held in a legacy commonty by servitude holders will have prescribed (been extinguished) after 20 years non-use while the rights of the co-owners will remain unimpaired due to the fact that, in contrast to a right of servitude, the right of ownership never prescribes.[11] In the case of a pure servitude commonty, the owner’s rights will have re-surfaced, unimpaired by the servitudes which are now prescribed. And in the case of a co-ownership or hybrid commonty, it ought to be possible for one of the co-owners now to tidy up the loose end of the unused legacy commonty by raising a new process of division. But does the case law bear this out?
The Red Moss of Balerno
I don’t pretend to have read every single case on commonties and within the limits of a not very scientific enquiry, I’ve only been able to find two concerning legacy commonties.

The first is Johnson v Johnston in 1831.[12] It concerned Balerno and Harlaw Common which had been divided in 1767 but with 45 acres called the Red Moss declared to “remain common, for the use and benefit of the forenamed several parties concerned [i.e. the heritors], as formerly, but decerned them not to break in or encroach on each other's haggs [i.e. peat banks]”. Despite that injunction, however, the tenants of some of the heritors had “dug peats in any part of the moss promiscuously, without regard to the haggs originally marked off for each heritor … every one digging, or pitting for peats, or other purposes, on any part of the said Red Moss, which he thinks proper to appropriate to himself,”. This looked like exactly the sort of “discord” the 1695 Act was passed to obviate so one of the heritors, Johnson of Muirbank, raised an action of division of the moss.

The Lord Ordinary (judge of first instance in the Court of Session) rejected the application. His reasoning was that you could only divide a commonty once: after one process of division, the 1695 Act was “exhausted” so far as that commonty was concerned. Muirbank appealed to the Inner House (appellate division of the Court of Session) where four judges adhered to the Lord Ordinary’s decision to refuse division of the moss. Three of them, however, reached this conclusion for a different reason, namely, that, as the Red Moss was still a peat moss in active use as such, there was no reason to interfere with the original decree of division decerning it to remain in commonty:  breach of the condition of the decree (no encroachment on others’ haggs) was not reason enough to overturn it completely. Crucially, however, two of these three judges agreed that, if and when the moss ceased to be used as such, a division would then become competent. The fourth judge, Lord Gillies, on the other hand, agreed entirely with the Lord Ordinary that no future division of the moss could ever be competent.[13]

The Red Moss of Balerno - you can make a virtual visit to a legacy commonty here
The Haugh of Inveresk
The second case on legacy commonties is Milne v Inveresk Parish Council [14]. Inveresk Haugh was a small hybrid commonty of 29.5 acres by the River Esk co-owned by eight heritors and also subject to servitudes of bleaching held by feuars [15] in the village of Inveresk. In 1824 it was divided between the co-owning heritors in terms of a decree which also confirmed an arrangement whereby, to satisfy the claims of the servitude holders, an area of 2,025 square yards at the foot of Windy Wynd was left in commonty for the purposes of a bleaching green “for the use … of the inhabitants of the village of Inveresk in all time coming”.

In 1899 Inveresk Parish Council [16] put up two park benches on the green. One of the eight co-owning heritors, Sir Archibald Milne, objected to this and raised an action to have the offending benches removed. Despite the fact that no bleaching had been carried out on the green for more than forty years, Sir Archibald did not fight the case on the basis that the servitudes had prescribed and that the green had therefore reverted to the co-owners as their unencumbered common property: rather, he accepted that the villagers’ bleaching rights still existed but argued that the setting up of park benches was not a necessary incident of them. The Lord Ordinary reluctantly agreed whereupon the Parish Council appealed to the Inner House. The three judges there took a different view and held the benches were a reasonable incident of the bleaching servitude and thus unobjectionable – in the words of Lord Trayner: “I fancy people get tired washing sometimes, and may sit down …” 

That was enough for the decision of the case but of more interest here were some of the judges’ obiter dicta (remarks not essential to the decision and therefore not legally binding). Lord Trayner tentatively suggested that, after the division, the co-owning heritors no longer owned the bleaching green as legacy commonty. But the other two judges expressly dissented from that and not even Lord Trayner went so far as to suggest it was owned instead by the inhabitants of Inveresk. Of more significance, however, was Lord Moncreiff’s remark:-

"... the ground in question was absolutely dedicated to the public."

He can’t have meant the public generally but rather the inhabitants of Inveresk. Lord Young was careful to make the distinction, adding:-

"This washing and bleaching-green is irrevocably dedicated to the use of the inhabitants of Inveresk in all time coming, and that dedication will remain in force although the green may not have been used as a washing and bleaching-green for some time; the inhabitants are entitled to resume the use if they please."

A bleaching green in Ireland - picture from National Library of Ireland

Conclusions from the cases
What conclusions can we draw from these two cases about legacy commonties? 

The Balerno case appears to be authority, albeit obiter of a majority, that a legacy co-ownership commonty can be divided under the 1695 Act once the use for which it was reserved from the original division has ceased. But is the Inveresk case authority, albeit also obiter of a majority, for the proposition that, after division, the rights of servitude holders in legacy commonties are no longer servitudes vulnerable to negative prescription (extinction through 20 years’ non-use) but rather are elevated to some alternative, innominate and apparently imprescriptable right?

I don’t think so. The possibility of the inhabitants’ rights having been servitudes which had prescribed wasn’t argued in court [17] and the case proceeded on the concession that these rights, whatever they were, remained intact so the court wasn’t making a ruling on their status.[18] I think the most that can be said for the Inveresk case is that it implicitly recognised that the original decree of division of the commonty, which didn’t mention servitudes of bleaching specifically but rather use as a bleaching green in all time coming, may not have been apt to create an imprescriptable real right but was nevertheless res judicata between the parties involved and would remain so until someone explicitly asked a court: “Does it literally mean all time coming or only for as long as not lost by negative prescription?”.[19] In other words, the Inveresk case is a decision on its own peculiar facts rather than establishing a general principle.

So a reasonable conclusion from these two cases is that, subject to looking carefully at the wording of the decree of division in order to avoid being trapped by a plea of res judicata, there’s nothing in them to cause one to depart from what first principles would suggest, namely, that the rights of servitude holders in legacy commonties will prescribe (be extinguished) after 20 years’ non-use and co-owners can pursue a division after the use for which the land was retained in commonty has ceased. And the converse seems to be that division of a legacy commonty is precluded so long as any communal use continues.

Finding the owners of legacy commonties
There’s a purely practical problem with most legacy commonties in the 21st century given they’re mostly abandoned: identifying the co-owners.

Back when they were still in use as mosses (or bleaching greens or whatever), identifying the co-owners of a legacy commonty was, in principle, easy: ownership was established by possession. Thus, if only the tenants of the estates of A, B & C had cut peats in a moss during the last 40 years, then the owners of these estates were the co-owners.[20] But without possession (i.e. use) as a pointer, identifying the co-owners is more difficult. Title deeds are unlikely to be of any help because they seldom name commonties associated with estates. Indeed, in my almost 20 years experience as a rural property lawyer, I can only ever remember seeing one commonty named in present day title deeds: by coincidence it was the Red Moss of Balerno!

Assuming there’s no clue in the deeds, then, one has to look for evidence of past ownership. Absent any more recent local historical knowledge, the most cogent evidence is likely to be the decree of division. Many are retained in the National Archives of Scotland and that will give you the co-owners at the point of division. From there, it should be relatively easy to find their title deeds in the Register of Sasines and trace the ownership down to the present day.

The principal difficulty that will inevitably be encountered in this exercise is that these owners’ estates will since have been divided up: which of the successor properties will carry the right(s) to the legacy commonty? First principles suggests the following guidelines: any property split off will carry a share of the commonty if it has a Latin clause in its deeds cum communis (“with commons”) or an English equivalent such as “with a share of the commonty [or moss or bleaching green or whatever the legacy commonty is] …” (whether or not named). Such clauses in deeds effecting sales off from larger properties after the third quarter of the 19th century (which is when the big estates began to be divided up in earnest) are, I would suggest, rare: I can’t remember ever having seen one in my time as a practising rural lawyer. And remember the possibility that a property which started off with a share in a commonty could lose it if possession is yielded to other properties.[21]
Any split-off without a reference to commonties in its deeds will not have any right to a legacy commonty unless the owners and/or tenants of the land sold off have possessed – i.e. actually used – the commonty for the prescriptive period.[22] The likelihood of that having happened can be judged from the date and nature of the split-off: it’s conceivable that a farm in East Lothian sold off from an estate in, say, 1880 may have acquired a title to a share of a legacy commonty consisting of a peat moss by prescriptive possession but it’s almost inconceivable in the case of land sold off for forestry in the 1940s or housing in the 1970s.

Note that, although I've made the exercise of tracing the present day owners of legacy commonties sound easy, I’ve never attempted it and I’m sure it’s not at all easy in practice! But the preceding paragraphs show the approach to be essayed. In other words, one shouldn’t immediately default to the assumption that a legacy commonty has fallen to the Crown as bona vacantia (abandoned or ownerless property) just because nobody locally can remember who owned or used it.

Latin clauses and predations by the English brought to bear in Haining v Selkirk

Should the 1695 Act be repealed?
The Act is perceived in some quarters as a means whereby property that is in some sense public can be abstracted into private hands. But as I’ve attempted to show, it’s no such thing: it was originally only a means whereby rights in property which was already private were rearranged amongst its owners. And latterly, in relation to legacy commonties, the case law seems clear that the Act can’t be invoked while the use for which land was left in commonty continues. Once properly understood, therefore, it’s hard to see the public policy impetus for repeal.

Given that the last time anybody attempted to invoke the Act is believed to have been in 1929[23], it’s fair to say there’s no great demand for its services. But a situation highlighted a few years back by veteran land reform campaigner turned Scottish Green Party parliamentary hopeful Andy Wightman demonstrates how the 1695 Act could conceivably have a role to play in the 21st century.

Andy publicised the case of a 33 acre (13ha) legacy commonty in the middle of Scottish Power’s Black Law windfarm near Carluke - see here. It appeared SP had deliberately avoided planting turbines on the commonty because it was not known who owned it. But supposing it did have known co-owners (which is not impossible: after all at least one person knows he's a present day co-owner of the Red Moss of Balerno). And suppose a majority of the co-owners were in favour of siting a turbine on it with just one against? It’s a principle of Scottish law, equally applicable to commonties as to other species of jointly owned property, that majority rule doesn’t apply: any change in management requires the unanimous consent of all the owners. Special rules apply to property jointly owned by married couples but in the case of property belonging to, for example, siblings, the remedy in the event of dispute between co-owners is division and sale – that is that the property be physically divided between them or, if that’s not practicable (as in the case of a house, for example), that it be sold and the proceeds divided. In the case of a commonty, the remedy is division under the 1695 Act so one of the co-owners of the commonty in the windfarm in favour of a turbine on it could have pursued a division so as, in effect, to isolate the dissenter. 

And thus 17th century legislation facilitates a socially desirable 21st century green energy development.

Carluke Commonty among the turbines of King's Hill Windfarm

[1] Local Government (Scotland) Act 1973, s.222(2)
[2] Ibid, s.75 as amended by Land Reform (Scotland) Bill, cl.68.
[3] Crofters (Scotland) Act 1993, s.1(2)(a)(iv)
[4] The same is true, incidentally, of commons in England (where similar misunderstandings also prevail) except for the most famous common of all, Wimbledon, which is explicitly managed for public recreation under its own special legislation.
[5] 17th-19th century writers on Scottish law whose works are held to be authoritative statements of the law.
[6] 1929 SLT 540
[7] A similar sentiment was expressed by the sheriff-substitute who was upheld in the Inner House on appeal (“The institutional writers are rather vague in their definitions of commonty. This may be due to its nature being at the time they wrote more the subject of general knowledge than it is nowadays.”) and echoed by Lord Hunter (“Perhaps he [the sheriff-substitute] might have gone further and said that a definition was not attempted, as it was probably assumed that people were familiar with the nature of subjects that were described and understood as commonties.”)
[8] For authorities for the statements in this paragraph see Stewart v Feuars of Tillicoultry (1739) Mor. 2469 and Lord Wigton v Proprietors of the Muir of Biggar (1739) 5 Bro. Sup. 662.
[9] Rankine "Landownership" p.600. As well as by proceedings under the 1695 Act, commonties might be divided by arbitration or agreement amongst the heritors involved.
[10] As in Trustees of Bonshaw v Duke of Queensberry (1764) M 2481
[11] Prescription and Limitation (Scotland) Act 1973, s.8 & Sch. 3, para (a)
[12] (1831) 10S 70
[13] Though no longer worked, today the Red Moss is a Site of Special Scientific Interest and Scottish Wildlife Trust Reserve due to the importance of its peat resource - see here.
[14] (1900) 2F 283
[15] A feu is, in effect, a lease which exists in perpetuity and has its own terminology: landlord = superior; tenant = feuar; rent = feuduty. Despite the analogy with leases presented here to aid understanding, Scottish law treats a feuar as a proprietor (freeholder) rather than a tenant.
[16] Parish Councils were a tier of local government which was abolished in 1929.
[17] Apart from an oblique reference in the Parish Council’s arguments to the Inner House which I find hard to put in context: “Authorities [presumably referring to authorities being relied by Sir Archibald Milne] drawn from the law of servitudes acquired [note, not “extinguished”] by prescription had no place in a case like the present, where the solum was dedicated expressly to the uses of the community of Inveresk for the purposes specified.”
[18] Just as in Portobello Park Action Group v Edinburgh Council ([2012] CSIH 69) the court did not decide that Portobello Park where the Council wanted to build a new school is inalienable common good: the case proceeded on the assumption that it was because the Council (wrongly in the opinion of some including myself) conceded that it was. Courts do not second guess concessions made by the parties.
[19] Res judicata is Latin for “the thing is decided”, i.e. the matter having been decided in one litigation, it cannot be revisited in a subsequent litigation between the same parties (or between people in the same position, for example subsequent owners of the original parties’ properties). I claim no expertise on the limits of the plea of res judicata but the Haugh of Inveresk case reminds me strongly of the Forest of Birse cases. These concerned hunting rights in the Forest of Birse in Aberdeenshire (by coincidence, a servitude commonty). The Forest belonged to the Earl of Aboyne but the owner of the neighbouring Ballogie Estate, Mr Innes, claimed to own the right of wildfowling over it. In Scottish law, hunting rights can’t be owned by anyone other than the owner of the ground over which they are exercised but in a litigation in 1808 Lord Aboyne was unwise enough to concede that Ballogie did own the wildfowling rights in the Forest and the case was eventually decided on that basis by the House of Lords in 1819. (1819 6 Pat App 444 - see here and scroll down to page 447. Regretting his father’s folly, the next owner of the Forest, the Marquis of Huntly, in 1855 raised a new case against the then owner of Ballogie, Mr Nicol. But the Inner House of the Court of Session sustained Nicol’s plea of res judicata due to the earlier proceedings and thus Huntly’s case was thrown out. ((1858) 20D 374) Undaunted, the next Marquis of Huntly tried again in 1896. This time, he realised that any attempt to deny the existence of Ballogie’s right to wildfowling in the Forest would once again be trumped by a plea of res judicata so he conceded its existence but tried to have it restricted instead. Ballogie entered a plea of res judicata all the same. As it turned out, Huntly failed in his attempt to have Ballogie’s right restricted but in the Inner House, Lord MacLaren, referring to the fact that a right of ownership of hunting over another person’s land doesn’t exist in Scottish law, remarked “I am at a loss to understand what species of right the Court [of Session] and the House of Lords [in the original 1819 case] intended to award to Mr Nicol’s predecessor.” He also remarked that res judicata doesn’t prevent a later court acting as “interpreters of the original decree”. ((1896) 23R 610 - see here). Now, relating all that to the Haugh of Inveresk, one can imagine a judge expressing himself to be at a loss to understand what species of right the original decree of division intended to award to the inhabitants of Inveresk but, acting as interpreter of the decree (which the plea of res judicata doesn’t preclude), going on to decide either that there was implicit in the expression “in all time coming” the additional words “so long as not lost by negative prescription (i.e. 20 years non-use)” or that that expression had to be taken at face value.
[20] Provided there was nothing in the title deeds of A, B & C inconsistent with them owning a share in the commonty such as, for example, the Latin phrase cum pascuis et pasturis which is held to be consistent only with a servitude of grazing a commonty rather than ownership of a share of it: Rankine sup. cit. 601-02; Haining v Selkirk, 1668 M 2459
[21] Thus, suppose property A with a share of a legacy commonty moss is split up into A1, A2 & A3, each with a clause cum communis (or English equivalent) in its deeds. Then suppose that, for whatever reason, the owner and tenants of A1 give up using the moss and their share is absorbed by the owners/tenants of A2 & A3. A1’s share of the moss will be lost after 40 years (after 1879, 20 years) as a result of A2 & A3’s adverse possession.
[22] 40 years until 1879, thereafter 20 years until 1976, since when 10 years.
[23] Macandrew v Crerar, 1929 SLT 540, in which an attempt by a Mr Macandrew to invoke the Act to divide land he owned a share of by Loch Tay failed because the land was held not to be a commonty.

Sunday, 17 January 2016

Land Reform Bill - "open assignation" of 1991 Act tenancies through the back door?

The following is the text of a letter I've sent to Steve Sadler, head of the Scottish Government's Land Reform and Tenancy Unit:-

11 January 2016

Dear Mr Sadler

Land Reform Bill Part 10 - Agricultural Holdings

I’m writing to draw attention to an aspect of Part 10 with potentially far reaching consequences but which I believe has slipped under the scrutiny radar during Stage 1.

As is inevitable with agricultural holdings law, the point is technical but the nub of it is that an unnoticed sub-paragraph at the end of the schedule to the bill - which purports to contain merely “minor and consequential modifications” - has the effect of introducing, almost by stealth, open assignation (i.e. transfer to anyone in the open market, not merely to a family member) of 1991 Act tenancies following a tenant’s death. And even the Scottish Government itself has conceded that open assignation is “too broad an approach”.

In more detail, look at paragraph 12(2)(b) of the schedule to the bill (page 108) [bill here]. This inserts the innocuous looking words “the lease of a 1991 Act tenancy or” into section 16(2A)(b) of the Succession (Scotland) Act 1964. I annexe an extract from that section with an explanation if you’re interested in following through the legals. But if not, the effect of adding these words is that the executor of a deceased 1991 Act tenant could transfer his lease to anyone, not just a relative, near or otherwise.

The Succession Act is not the whole story, however. One also has to consider the landlord’s options for objecting to a new tenant in a 1991 Act tenancy contained in the agricultural holdings legislation. Revised arrangements for these are contained in clause 89 of the Land Reform Bill introducing new sections 12A (for transferees who are near relatives) and 12B (for transferees who are not near relatives) into the 1991 Act. 12B is the relevant one in this context and here I believe there may have been a misunderstanding by the RACCE Committee as to its effect. Paragraph 505 of the Stage 1 Report [report here] says (last sentence):

“Where the legatee was not a near-relative, the Land Court would consider whether there was a reasonable ground for the landlord's objection.”

Strictly speaking, the reference to a legatee there should be a reference to a legatee or a person (referred to as an “acquirer”) to whom the tenant’s executor transfers the lease absent, as is usually the case, a valid legacy. But the point is the words I have underlined in the above quotation from the report: these do not reflect what 12B says. (The RACCE Committee members may have been misled by the second sentence of para. 381 of the Policy Memorandum [policy memo here] which, although under a heading which refers to succession, is actually talking about the different provisions for lifetime assignation.)

What 12B actually says is that, if a landlord objects to receiving a non-near relative acquirer as tenant, he (landlord) can serve a “counter notice” which is, in effect, a notice to quit (12B(2)(b)). The acquirer can appeal against this to the Land Court (12B(3)) and the Land Court must quash the counter notice (i.e. confirm the acquirer as tenant) if the acquirer can establish “any reasonable ground” for being accepted as tenant (12B(4)). Presumably “I am an established farmer with a proven track record, of good character and adequately resourced to take this farm on” would have to be regarded as a “reasonable ground” for being accepted as a tenant. The landlord would have the opportunity to attempt to rebut the acquirer’s case but if he cannot do so, there is no provision in 12B for the landlord to introduce his own separate ground of objection. That being so, the result is that there is no practical difference between transfer to a near relative (see 12A) and transfer to anyone else, including a total stranger. (Scottish Land & Estates called the landlord’s supposed enhanced ground of objection to a non-near relative acquirer “illusory”.)

If you are still with me (and I realise this is all highly technical), the practical end result is open assignation following the death of a 1991 Act tenant. I doubt that can have been the policy intention considering that, as recently as its letter of 4th December to the RACCE Committee with its proposals to flesh out clause 79 of the bill (conversion of 1991 Act tenancies to MLDTs), [letter here] the Scottish Government described open assignation as “too broad an approach” (para. 23) (Admittedly, the SG was talking there about open assignation during the tenant’s lifetime rather than after his death as I am here but there is no reason to distinguish the two situations: the AHLRG, indeed, recommended (para. 162) [AHLRG Report here] harmonising lifetime and death transfers.)

Case study

It’s late 2016 after the Land Reform Bill has been enacted and come into force and James, a tenant under a 1991 Act tenancy, is a widower in his late 70s.

Neither of James’ two children are farmers: one is an actor and the other is a thoracic surgeon and they are thus both ineligible to succeed him in the tenancy because they would be vulnerable to an objection by the landlord on the basis of their lack of farming experience. James has no other farming relatives within the class prescribed in clause 84 of the bill interested in taking an assignation of the lease. And, for whatever reason, it had not been possible to arrange an assignation to a new entrant or “progressor” under clause 79 (as proposed to be amended per the SG’s letter of 4/12/15) by the time James died, still in harness as tenant under the lease.

James’ executor will be entitled - indeed obliged - to attempt to sell the tenancy on the open market with a view to realising its value for distribution to James’ children as his heirs. The executor receives two offers, one from a new entrant and another much higher one from Agribiz PLC, an established farming company -  its impeccable reputation is the “reasonable ground” for it to become the new tenant under the procedure in s12B for transfers to parties who are not near relatives. James’ executor - whose legal duty is to maximise the value of the deceased’s estate rather than promote the interests of new entrants - is obliged to accept Agribiz’s offer. Faced with the loss of the farm forever (because a company never dies), the landlord is forced to outbid Agribiz and James’ executor eventually renounces the tenancy to the landlord in exchange for a substantial sum.

That result is a travesty of the policy intentions and an ECHR car crash - the landlord has been forced to pay to recover his property rights and the farm has not even gone to a new entrant!

I am a retired solicitor who used to specialise in rural and agricultural law and continue to retain a keen interest in the subject. You will no doubt wish to consult SG lawyers and you/they should not hesitate to contact me if you/they would like any clarification of my thought processes here. You are also welcome to share this with other SG or parliamentary officials, ministers and MSPs.

Yours sincerely

Neil King

cc. Alex Fergusson MSP


Extract from section 16 of the Succession (Scotland) Act 1964 - words in underlined bold inserted by para. 12(2)(b) of the schedule to the Land Reform Bill.

(2) … where … an interest [under a lease held by a deceased tenant] … is not the subject of a valid bequest by the deceased … and there is among the conditions of the lease (whether expressly or by implication) a condition prohibiting assignation of the interest, the [deceased tenant’s] executor shall be entitled, subject to subsection (2A) of this section, to transfer the interest.

(2A) Transfer by an executor pursuant to subsection (2) of this section-

(b) of an interest under any lease (other than the lease of a 1991 Act tenancy or the lease of a croft within the meaning of section 3(1) of the Crofters (Scotland) Act 1993 (c.44)) and which is not a transfer to one of the persons entitled to succeed to the deceased's intestate estate … in satisfaction of that person's entitlement … shall require the consent of the landlord.

A brief explanation of this is that a tenant’s interest under a lease containing a clause prohibiting assignation (which most leases do) cannot be bequeathed by a legacy in the tenant’s will, a legatee being functionally the same as an assignee during lifetime.  A deceased tenant’s interest under a non-assignable lease therefore falls to be dealt with as part of his intestate (not disposed of by will) estate. Before the law was changed by the Succession (Scotland) Act 1964, an interest under a lease, being heritable property, passed on intestacy to the deceased tenant’s “heir-at-law” (a single close, preferably male, relative identified by the rules of primogeniture). The 1964 Act changed that so that, henceforth, intestate heritable property would be distributed in the same way as intestate moveable property, that is shared equally between the deceased’s closest relatives of the same degree irrespective of sex. Leases being indivisible, however, a special case had to be made for them. Section 16(2) of the Succession Act therefore provided that the executor of a deceased tenant might transfer his interest in the lease irrespective of a prohibition on assignation. But that is subject to a proviso in sub-section (2A) that a transfer to anybody other than one of the intestate heirs requires the consent of the landlord. An exception is made for crofting leases (i.e. they may be transferred by a deceased crofter’s executor to a stranger without the landlord’s consent but that is only because transfers of crofting tenancies are at the discretion of the Crofting Commission under the crofting legislation rather than the landlord). Para. 12(2)(b) of the schedule to the LR Bill now adds 1991 Act tenancies as another exception with the consequence that the executor of a deceased tenant can transfer one to anybody without the landlord’s consent.