Good morning, ladies and gentlemen. I remind everyone to ensure that mobile phones are switched off. We have an apology from Stewart Maxwell MSP, who is unwell. We hope that he will soon be back and feeling better. Everybody else is present.
Good morning, gentlemen. In its written submission, the Faculty of Advocates expresses concern about the delegated powers associated with the bill, especially in and around section 78. Will you place on record the nature of those concerns?
Certainly. Quite simply, the proposed system of legislating through subordinate legislation, which has crept into the bill since the last consultation, is not the best way of doing this. It might be administratively convenient for Scottish ministers and others—it is certainly convenient for the commercial concerns that spend their time charging money to give advisers the up-to-date statutory position—but, in the faculty’s view, it is not a sensible way of dealing with what in effect is supposed to be a fixed and final position in property law. In previous efforts to bring property law up to date, there were schedules that set out notices and that sort of thing and, as our submission points out, no one heard any complaints about that. I can quite see that one might take the approach in the bill to deal with a moving target that might spawn changes every other month or so—social security and education legislation comes to mind—but it should not be that way with property law.
With respect, Mr Haddow, committee members will tell you that you misunderstand the situation in the Parliament. With regard to the amount of legislation that we have to get through, the converse is actually true. However, let us not dwell on that.
There is no doubt that affirmative resolution always gives more comfort than negative resolution, but it is still a poor second.
Is a Henry VIII power a poor second?
I will have to pass on that question as I do not know the significance of it.
It means that the instrument can go out for consultation before it comes back to the Parliament.
I am not at all sure that that would advance matters very far. I presume that there would be consultation at the stage of change, and we are not at that stage yet. We are at the stage of initial organisation.
That is pretty clear. I acknowledge your concerns, despite our little disagreement over what is actually a major issue. Nevertheless, that is by the by.
We have no particular concerns about section 78.
The same is true of the Law Society, which did not identify that issue, although that is not to say that the society would necessarily disagree with Mr Haddow’s point.
Okay—that is lawyerly speak that means that you have nothing to say at the moment but you reserve your right. I am obliged, gentlemen.
I think that Mr Reid was giving a somewhat political answer on that last point.
You seem to be focusing on me, Mr Brown—I will be political again and see whether I can body-swerve that question. My colleague Mr Swinton has a copy of a book entitled “Common Good Law” right in front of him.
Mr Swinton?
Thank you, Donald.
That is helpful, although I am not sure that it takes us all the way. You suggest that there is a case for the reform of common good law, or at least a review. Would it not perhaps be better to deal with this odd intersection with long leases arrangements under the heading of common good, against the background of the desire to avoid unintended consequences?
There is a policy issue. In the case of Magistrates of Kirkcaldy v Marks & Spencer Ltd, the former town chambers were said not to be inalienable and it was said that a new building could be created. There is a danger of sterilising land when an alternative arrangement might be made that is equally appropriate for the vicinity.
Will you explain that a little? I am not sure that I follow.
Local authorities would be treated differently from other landowners. You have to be clear. I do not think that a view was taken on the issue prior to the introduction of the bill, because it had not been raised.
My next question relates to section 31, which interrelates with section 53 of the Title Conditions (Scotland) Act 2003 and the issue of real burdens being imposed on related properties. I think that that has to do with third-party rights, which have been an important part of the law in the past. As I understand it, there were a lot of academic criticisms, based on policy grounds, of the provisions in the 2003 act, yet those provisions are replicated in the bill for the purposes of long leases. Were the academic criticisms of section 53 valid? Does the bill take the right approach to dealing with the issue by replicating the provisions in the 2003 act?
I am one of those who was opposed to section 53 of the 2003 act, which created rights of enforcement on third parties where none had previously existed. That said, section 53 is now on the statute book, and the idea in the bill is to create a scheme that is parallel to that. Although I was opposed to section 53 when it came in, there is no evidence from case law that it has adverse consequences, so perhaps the case for repealing it is not that strong. In any event, from a policy perspective, it is rather more important that there is a consistent scheme between the conversion of ultra-long leases and the conversion of titles from the feudal system.
Does anyone have a different view on that?
More to endorse what Mr Swinton has said than to give a different perspective, I simply add from the perspective of the coalface of practice that the reality of experience is that the practising profession and its clients are coping with section 53, notwithstanding the criticisms of it, which might or might not have merit.
Mr Haddow, do you have any comment to make with regard to the common good?
No, it would not be right of me to do so. The faculty has not considered the matter. As members of the committee, you have seen the issue arising from responses that you have received, but the faculty has not formed a view.
Good morning, gentlemen. I wish to pick up on the length of leases and the cut-off point. The SLC survey of long leases in 2000 revealed that the vast majority of long leases were either under 125 years or in excess of 999 years. There is a view that 125 years should therefore be the cut-off point.
When the Abolition of Feudal Tenure etc (Scotland) Bill was introduced in 1999, it contained 125 years as the appropriate maximum period. Representations were made on behalf of landlords by surveyors organisations that there were genuine commercial leases that extended for more than 125 years. The result of that evidence was the settling in the Abolition of Feudal Tenure etc (Scotland) Act 2000 on a period of 175 years.
There is a view in the Law Society that consistency is generally helpful. If we have a period of 175 years in one piece of legislation, it is helpful also to have a period of 175 years in another piece of legislation. As my colleague Mr Swinton said about section 53 of the 2003 act, it is helpful to have consistency across pieces of legislation. Such consistency helps our members in their practice of the law, and we therefore support keeping the period at 175 years.
There are many issues that can cause practising lawyers to lose sleep but, speaking for myself, the issue of 175 years versus 225 years is not one of them.
You are clearly consumed with indifference. [Laughter.]
Does the faculty have a view on the issue?
No. It is either a matter of practice or a matter of policy. Personally, I am impressed by the arguments that have been put up for keeping the maximum period at 175 years, as in the existing legislation.
It is not a matter that the faculty has considered as such, but consistency is important. Advice has been given on the basis of the period that is specified in existing legislation, and anomalies or difficulties could arise if a different period were adopted in the bill.
Thank you—the witnesses have made that point clearly.
There is a paragraph in the Law Society’s submission to the committee that addresses that point. I am beginning to sound like a broken record but, effectively, the Law Society is saying that it is not able to comment on the matter with any authority, because of the substantial research and care that would be required to address the issue. We have asked whether such cases are sufficiently the same as cases relating to feudal abolition for the approach to compensation legitimately to have the same basis, but we stand back from coming down one way or the other, as we consider that that is more for others to address than us.
Our view is that the bill is compliant with the convention. It serves a legitimate purpose: it simplifies property law and increases security of tenure for home owners, some of whom have precarious titles at the moment.
Does the Faculty of Advocates have a view on that point?
No, I do not think that we do. I look forward to possible fee earning on the basis of dealing with it in the future.
I am glad that we have finally got down to the real world. I take the witnesses to the real world of underground pipes and buried treasure—albeit fluid—because we are concerned about issues to do with section 1(4)(b) of the bill. It appears that, as it was not possible to set up a servitude for pipes before 2003, ultra-long leases have been granted for the burying of pipes. As I am sure the witnesses are aware, Professor Gretton suggested last week that trying to exclude such leases was probably inappropriate because they might not be legal in the first place, which suggests that we are in a mess. I hope that, in the next few minutes, you can sort it out for me. First, will you establish how much of a mess we might be in? Secondly, what should we do?
The Law Society’s two representatives here might hesitate to offer their own views as more authoritative than those of Professor Gretton. We made the point that there is a lack of definition of pipes and cables, which might be a drafting point that needs tidied up. However, I do not think that that is the thrust of your question as much as whether we are in a mess because there are a whole lot of leases for pipes and cables that are not true leases. Off the top of my head, my response would be that they might be and, if they are, it would be disappointing if the leases were all of a sudden turned into ownership when the purpose for the granting of those leases was different from the purpose of granting an ultra-long lease in the classic sense, which the bill is seeking to address. If the Parliament were to pass an act that sorted out whether purported leases of pipes and cables were actually leases, we would be out of the mess, but I do not imagine that that could be done overnight.
Am I to understand that it is possible that farmers may wake up one morning and find that they no longer own strips a few metres across running the length of their land, because there happen to be pipes underneath?
The practice tends to be the grant not of the land itself but of the ground in which the pipe or cable sits, in the same way as airspace might be let for a satellite dish or air-conditioning equipment on the top of a tenement building. We are talking not about the strip of land—I think that this is right—but about the area that is occupied by the pipe, in the same way that minerals can be subject to a separate tenement.
So it is possible in Scottish law to have a lease of an area that happens to be 1m across and between 1m and 2m down, and that might be the kind of lease—
It is possible to have a lease with a small l. I think that Professor Gretton is saying that that may not constitute what is required legally to constitute a lease in Scots law. I think that my colleague said that we are not going to contradict that, but I can tell you that, as a matter of practice—the Law Society deals with the practice of law—it is not uncommon for such “leases” to be granted.
It is fair to say that, although they are granted, I have not come across any in my own experience that are ultra long, although they may well be out there.
I will explore the concept, as I have not met it before. Am I seriously to believe that, for example, in the case of major oil pipelines, which run the length of the country, the lease is for the bit underground and the farmer owns the ploughable bit above it?
Yes.
And there is no lease on the ploughable bit above it.
There would be a right of access to get to the pipe, but I think that it is right to say that the ownership of the land would be with the farmer.
Of course, that would always be true in the case of a lease, but Lionel Most means that the surface of the ground does not form part of what is leased and there is no denigration of that lease if the farmer grazes his cows and sheep on it, whereas, if the physical surface down to the pipe were all leased, the tenant would be entitled to fence off a tiny strip. That is not the case. These leases purport to be of the area constituting the pipe, which is buried 1m, 2m or 3m down.
I will give an example. In the case of a wind farm, there is the windmill and there are pipes and cables running to the national grid, but those invariably run underground. The farmer continues to operate and the lambs continue to run about the fields.
I can visualise one of those. You are telling me that that would be set up as a lease.
Yes.
Sorry, but I need to get to the bottom of this, if you will forgive me. It would be set up as a lease in such a way that the underground bit is leased and the tillable soil above remains with the farmer. Would that invariably be the case?
Yes—
Not necessarily invariably but very often.
A drafting point has been raised in respect of section 1(4)(b), in that it excludes leases that operate for the sole purpose of allowing access to the pipes and cables; it does not exclude leases of the pipes and cables themselves. That is the crucial point. Those leases need to be excluded so that they cannot be acquired. I concur with Mr Reid and Mr Most that, by analogy with leases of minerals, there is no difficulty in leasing an area below the surface of the ground that is then occupied by pipes. Professor Gretton’s point related to a lease requiring exclusive possession. In my view, an oil pipeline in which oil is flowing is exclusively possessed by the tenant—the oil company that uses it. There is no technical difficulty in having a lease of that pipeline.
Is there any difficulty in principle in converting a lease in that kind of situation into a servitude?
The problem with creating a servitude is that you need a benefited and a burdened property that must be, if not adjacent, very close together. That has always been the problem; it is one of the reasons why servitudes have never been created in the past. The proprietor of the pipeline does not own property around the field; it may own property in Grangemouth or Peterhead, but it does not own anything between there and the pipeline. It is not possible to have a servitude, because the benefited property is not sufficiently adjacent to the pipeline.
Does the law not understand that the benefited property may be 100 miles away because the pipe is 100 miles long?
I do not think that anyone has accepted that point; arrangements have always been made by way of lease, rather than by way of servitude. In any event, at the time when most of the leases were granted, there was a question as to whether fluids other than water could be the proper subject of servitudes, so arrangements were made by way of lease.
It sounds like an easy fix for all of us to agree to handle the issue by allowing the benefited property to be very remote and to adjust whatever provision replaces section 1(4)(b) to cover that. The worry is that dropping that pebble into the pool, as one quick fix to one paragraph of the bill, would create more ripples than can easily be anticipated.
We well understand that. Unintended consequences are the spectre that haunts every part of this building.
That was useful, as the issue of underground services was causing some concern. We now have some answers that will allow us to move on.
From the Law Society’s point of view, it is helpful to the profession and important that there is consistency. A subset of that is that there should be as few exemptions as possible. There is provision in the bill for the situation of commercial leases in which there is a profit share in the form of a rent that is not mentioned. Section 49 provides for compensation for extras, if you like. Section 63 gives the tenant the right to an exemption, if they cannot afford to pay such compensation. A tenant who has an ultra-long lease, which may have been formed for reasons of tax planning or funding, has a choice, so we took the view that there was no problem. It is a policy issue more than a legal issue. Commercial tenants are educated and knowledgeable parties; they can take a view and take the steps that the legislation allows them to take.
We have nothing to add to that; we endorse Mr Most’s views.
We have had a submission from Brodies that suggests that, under the bill, some commercial leases that have been granted comparatively recently will be eligible for conversion. We intend to take further evidence from Brodies, but some issues do seem to arise. Mr Most, do you share Brodies’ concerns?
I see Brodies’ point. The example that comes to my mind is the Clydebank shopping centre, the lease for which I think was granted in 1978 for 200 years. I think that there is also an income-sharing arrangement under the lease whereby a proportion of the occupational rents from the traders goes to the council and the investor, or the mid-landlord, manages the shopping centre, collects the rents and so on. In that example, a British Virgin Islands landlord has invested in a Scottish property, is collecting the rents and is paying his superior landlord a proportion every quarter. They have a choice. We take Brodies’ point that it would be very expensive to convert the lease because there are millions of pounds of rental income to consider and to gross that up might mean £10 million or £20 million to buy the lease out and pay the compensation. However, they have a choice: they can send a notice under section 62. As we see it, the bill provides for that. It is consistent with the thrust of the rest of the legislation, but they can opt out of conversion if they want to.
Mr Swinton, do you concur?
Yes.
I have noted what Brodies said. It might be a drafting point, but I am not clear in my mind whether paragraphs 4.3 and 4.4 of its submission, which talk about the cut-off of £100, are not on a slightly different issue and whether there is a risk of not taking into account the turnover rent at the time of deciding on the cut-off point. I am not sure that that is what is intended. However, that is very much an instant response, as I saw the submission for the first time on Friday.
The City of Edinburgh Council’s written submission shows concern about the impact of the bill on commercial leases in situations in which the annual rent is £100 or under but the tenant has paid a substantial premium or lump sum on entry into the lease. What is your view of that, Mr Most?
I am sorry; I have not seen that submission, so I am answering on the hoof. The City of Edinburgh Council is concerned about a substantial premium being lodged up front with a small ground rent.
Yes.
That is consistent with a purchase. A purchase price has been paid. If it was an ultra-long lease and otherwise fell within the confines of the legislation, the tenant would in effect be buying in the heritable interest. The tenant has already paid the money up front, presumably in 1972 or whenever it was. They paid market value at the time, so it seems to me that the tenant has paid the price and is capitalising the rent. I do not see that as an issue.
I agree with that. That is exactly what the bill is designed to achieve, and it would be contrary to the bill’s policy to exclude that. If the tenant makes a single payment and then pays a nominal 1p rent if asked, that is a purchase in all but name and it should fall within the terms of the bill.
Mr Haddow, do you adopt those arguments?
Agreed.
Thank you. I had some difficulty in understanding the view that the City of Edinburgh Council was taking in this respect.
Sections 68 and 69 cover Blairgowrie leases. Section 69 makes special provision for a renewable lease such as a Blairgowrie lease where it has not been renewed but should have been renewed. Does the Law Society consider that to be unfair to landlords and fair to tenants? Where do you sit on that?
I will duck the question by saying that Mr Most might have something to say.
I do not have much to say, which is quite unusual for me. There will be several areas such as the Blairgowrie lease—we mentioned another one—that are caught between a rock and a hard place, if you like. They are not within the legislation, but there is clearly an inequity. We suggested in our submission that there should be a place of last resort for a punter to go if they found themselves in the position where something was clearly inequitable and the legislation had treated them in a way that was not intended. They should have the right to go to the Lands Tribunal to try to remedy that. That would cover your point and the point that we made in our submission.
Okay. Do any other panel members have comments on section 69?
The issue here is one of policy rather than drafting. Do you provide a remedy for people who are subject to these fairly long but not ultra-long leases with an obligation on the part of the landlord to renew, which are leases of ground on which a substantial endurable property has been built? Is it appropriate to allow them to stay on in their property? It is a simple policy issue. If the policy is that these people require support—they are typically residential properties—the provisions in the bill seem appropriate. If, on the other hand, that is seen as unfair to landlords, the landlord has the right to seek extra payments because of the way that their right to bring that lease to a termination has been taken away by the operation of the legislation.
Mr Haddow and Mr Robertson, do you wish to add anything?
My view, which I think is probably shared by the others in the faculty who have considered this, is that it is a question of striking a balance. This chimes exactly with what Mr Swinton was saying. When I read the section, it seemed to me to strike a fair balance. The question of fairness is clearly a policy issue that the Parliament will have to decide for itself. It struck me that the section went a fair way down the road of striking a suitable balance.
The Law Society has commented that the provision in section 68 for disregarding a landlord’s right to terminate in calculating the duration of the lease is potentially unfair to landlords. Do you want to expand on that?
In our submission, we gave an example of a case where a lease was granted in 1800 for 999 years with a mutual break or a landlord break after 250 years. That would take it to 2050. A landlord of an institutional investing nature sitting on a lease of that kind in 2011 is rubbing his hands in a manner of speaking and saying, “In 39 years, I’m going to be quids in, because I’ll be able to serve notice and have the tenant out of here. The outright ownership will revert to me as the landlord.” There is a case for looking at such a lease not as a 999-year lease but simply as a 250-year lease that has only that relatively shortish period still to run. The question that the Law Society is posing is whether it is equitable to deprive the landlord of that reversionary expectation or whether such cases should be considered to be special cases and excluded from the scope of the bill. What I am not clear about—perhaps some of my colleagues will be able to comment—is whether the additional payment provisions would come into play to compensate such a landlord more powerfully than would be the case merely on the basis of the rental multipliers. I am putting that to my colleagues because I realise that I did not research the point before coming along this morning. That possibility does not necessarily negate the point, however, which might be significant enough in itself to take such cases outwith the scope of the bill.
Colleagues, do you think that giving landlords the opportunity to preserve sporting rights as a separate tenement, as is provided for under section 7, is desirable in policy terms and workable in practice? I believe that the Faculty of Advocates has concerns about that, Mr Haddow.
It was certainly noted as a concern that it is a new creation in law, but it perhaps comes down more to a matter of practice. Do you have anything to add, Mr Robertson?
Likewise, I had noted it as a new creation, but I then noted that a similar system is already in operation under the 2000 act, so it is not a complete novelty. I am not aware that difficulties have arisen from that, at least as yet.
What do you make of Professor Roddy Paisley’s argument that it is not advisable to preserve sporting rights in a form that might permanently deprive the former tenant of his or her right to develop the land, without compensation?
I have not seen Professor Paisley’s comment, but that is something that had occurred to me in the background. I had not worked out whether it would have that effect in practice, so I am interested to hear that Professor Paisley has said that it would. It does seem an anomalous situation to get into.
Does anyone have anything to add in that regard?
The first question to ask is whether it is a hypothetical issue. We are not aware of any situation where there is a landed estate with a 999-year lease. It may or may not be the case that there are situations that fall within the provisions.
So far—
So far, so good.
Are there any other comments from the Law Society?
All I can say is that it can take quite a bit of time for such issues to work their way through from the initial legislation to an actual sense of workability or otherwise in practice. The fact that no major, serious case has come to light following the 2000 act does not necessarily mean that we have given the provisions a reasonable enough run to be sure of that. All that we have is our experience to date, which is not particularly adverse.
Much could be said on both sides, as Sir Roger de Coverley said.
Yes.
Thank you.
My question on residential ground leases is directed to the Law Society, but I would also be interested to hear other panel members’ comments. The Scottish Law Commission considered whether the bill should include a separate conversion scheme for the remaining residential ground leases that do not fall into the category of qualifying ultra-long leases for the purposes of the main conversion scheme, but it did not recommend including such a scheme in the bill, and the Government declined to include such a scheme following the commission’s recommendations and its own consultation. However, the Law Society explained that it had received representations to the effect that a landlord’s interest in a residential ground lease might become a target for title raiders. In giving evidence to the committee, Professor Gretton said that such leases would be unlikely to be a good target for title raiders, given that there would be no immediate opportunity to extract money from the tenant. Will the witnesses comment further on that? What representations on the matter has the Law Society received from its members?
Before the war, there was a tradition of granting long leases, sometimes of 100 years. Under a scheme in Garrowhill and another in Bothwell, leases were granted for 99 years. Most of them have now been bought in, but we suggest that an example of an anomalous case involves someone who paid the market value perhaps 50 years ago. We came across the case of an old lady who was in a home and wanted to sell her house or pass it on to her daughter. It was found that the lady had bought the house around 50 years ago and that it was granted under a 99-year lease. The original developer and builder, who was still in business, was approached, and there was no problem; he transferred the house in exchange for legal expenses. However, it occurred to us that, if that builder had sold all his existing heritable interests that were subject to residential long leases, there could have been a problem with people finding that they had paid the market value 40 or 50 years ago and now no longer had a title to their property. That was why we suggested that, if something was clearly inequitable and not in the spirit of the legislation, there should be an ultimate right to go to the Lands Tribunal to have a declarator.
Does anybody else want to comment on that matter?
Title raiders can have two mindsets. They might want to acquire an interest actively to pursue exploitation of it, or they can passively acquire an interest in the hope that, eventually, somebody will need their help to solve a problem. That is a delayed-action ransom attitude. It would possibly be true to say that a title raider might not reap instant rewards from seeking to get involved in what we are discussing, but our observation of title raiders is that some of them are quite capable of taking a longer view and of thinking 10 or 20 years ahead rather than merely a few months or a year ahead. If the issue is perceived to be serious enough to be worth being concerned about, it would be better to address it now rather than leave it to the mercy of those uncertainties.
We could look to the analogy of leasehold casualties issues. A company whose name I cannot remember bought up leasehold casualties from British Coal in the early 1980s. I do not think that the people who bought them up intended to exploit them in the way that they eventually did; rather, they bought them with a view to getting an income from the ground rents in the first instance but, when they realised that they could make a killing on the casualties, they did so.
Does anyone else have a comment?
We restricted our comments to the bill and did not consider that separate matter.
If the bill was not amended to take account of the Law Society’s concerns, what other course of action would individuals or families be able to take?
The matter would simply be addressed as it is at present. The risk is already there, and well-advised people in such a situation should approach their solicitors. If anything to address the issue does not find its way into the bill, that does not preclude it being of sufficient concern to merit separate treatment. However, if the bill is grappling with the area generally, it might be an opportunity to add something that addresses the issue rather than simply to leave it. If it is simply left, it might not be addressed because of the heavy demands on parliamentary time.
So the bill would make the situation no worse, but you regard it as an opportunity to tidy up something that your members have experienced on the ground.
Only in the sense that the lingering cases will become highlighted as not being protected by the legislation, so the exposure of people in the situations that we have described might arise. However, that is speculation.
There being no other questions for the panel, I thank you very much indeed for your attendance this morning, gentlemen. It has been a useful session. The underground services issue was explained to us with particular clarity, which is useful to say the least.
Our second panel of witnesses consists of, from the Scottish Property Federation, David Melhuish, director, and Alan Cook, chair of the commercial committee; and Richard Blake, legal adviser to the Scottish Rural Property and Business Association. We are very grateful for your attendance, gentlemen.
Good morning, gentlemen. On the duration of ultra-long leases, I am sure that you are aware that the SLC survey in 2000 found that most long leases were under 125 years or over 999 years, with not too many in-between. When Professor Gretton spoke to us last week, he suggested that 225 years might be a better cut-off point; others have argued for 125 years. I am aware that a cut-off point of 175 years would tie in with the Abolition of Feudal Tenure etc (Scotland) Act 2000. Do you feel that 175 years is the right place to be?
I believe that 175 years is a fair place to be, in the interest of ensuring consistency across the legislative scheme overall. When the 2000 act was passed, it was felt that 175 years was an appropriate cut-off point and that it was inappropriate for new leases to be granted for a longer period. Given that that view was taken, I see no reason why it should be revisited now, particularly when the evidence is that very few leases would be affected by changing the cut-off point from 175 to 225 years. I support consistency.
If the purpose of the bill is to continue the process of property law reform and to tidy up some of the feudal issues that have been around for more than 10 years, keeping a period of 175 years would add to consistency.
Thanks very much.
Good morning, gentlemen. I would like to continue the discussion about pipes and underground leases that we had with the first panel. Am I right in thinking that you were all here and that you heard it? The witnesses are nodding—that is good, because I really do not want to repeat it. Given that we have had the benefit of that, could you give us your feelings on where the debate has got to and where the right answer lies? Perhaps we could start with Mr Blake, whose organisation dealt with those issues in its submission.
We feel that there is an issue. I have taken on board all that has been said, and I read the evidence that Professor Gretton gave last week before I came to the meeting, so I am reasonably up to speed with the academic viewpoint. It was useful to have the Law Society’s more practical view on how underground pipes and cables are dealt with in practice, which is an issue for our members, although there was a lack of evidence that the Law Society could give.
I do but, presumably, fibre-optic cables or pipelines are put in the ground more or less in perpetuity. I know that things do not last forever, but it is almost inevitable that there would be a desire to replace them, if the planet were still spinning. I suppose that fibre optics might eventually be replaced by radio technology, but an oil pipe is an oil pipe.
Yes, but with changes in technology—as well as in the value of pipelines and the land—the landlord might be able to renegotiate the terms of the lease. With a servitude, that is it.
I am with you on that. It is probably not for us to interfere with commercial interests.
The question is what it says in the lease. Does the company have the right to construct only one or more than one pipeline? If the lease allows for only one pipeline, the company will have to start renegotiating. It is a question of contract. I know that the same argument has been raised with regard to certain power suppliers, which might have had the right to put in one power cable but not to come back and dig up the ground for a parallel cable. That is a slight red herring but, as I say, it is a matter of contract.
Do the other gentlemen have any perspective on this discussion, or are you content with the legislation in front of us?
I have no particular comment to make. If I remember correctly, it was not among the SLC’s proposals and we therefore did not consult on it with our members.
I would add, however, that Richard Blake has identified a key issue and we support the SRPBA’s view in its evidence to the committee. It will be a matter of getting the drafting correct and we hope that, with the benefit of those comments and the Law Society’s views this morning, that will happen. However, it was not an issue that we raised with the Government initially.
I am not sure that we have reached a final position on this, but we have certainly managed to get the issues out in evidence, which is, after all, what we are trying to do.
The issue is the same. Actually, I was about to make a supplementary comment that I think will cover roads and underground pipes. I am not sure that the policy behind the bill is that any long leases granted by landowners through the middle of a farm should suddenly convert to outright ownership. The SLC might well have missed that practical point.
Am I right in thinking that the crucial phrase is “non-exclusive”? After all, if it were exclusive, that is what it would be.
That is correct.
Do you have a view on the SLC’s apparent position that, instead of having exemptions for long leases in which the annual rent is more than £100, there should be no special treatment of commercial leases?
Our response on that in the original consultation was fairly robust, because some of our members were extremely concerned about relatively recent commercial leases of land in the country. One particular championship golf course comes to mind, which is in the middle of an estate in Fife and was let on a long-lease turnover rent with the tenant having the right to renew after a certain period. Under the draft bill that was consulted on—not the current bill—that would have been caught and would have been automatically converted to outright ownership. The ownership of a bit of ground in the middle of the estate would then have ended up in a company in Los Angeles.
I endorse the comments that have been made. It is important to recognise that, in commercial property, leases are sometimes more a mechanism for a joint-venture type arrangement between parties. I am not familiar with the specifics of the golf course example, but there has clearly been a commercial negotiation and agreement between landlord and tenant as a result of which it has been agreed that the landlord will share, on an on-going basis, in the value that is generated from the land. They have not simply sold out for an up-front, lump sum payment thereafter to accept 1p per annum with no active interest in the value of the land.
That brings us to the comment by Brodies that certain valuable commercial leases will be eligible for conversion under the bill because part of their rent is variable and would, therefore, be disregarded under section 1(5) for the purpose of calculating the annual rent. Do you share the concern of Brodies in that regard?
That is a fair point. It is entirely conceivable that there could be a low level of fixed rent payable but a more significant level of variable rent based on turnover, profit or some other measure. That is a conceivable example of an agreement that the landlord will retain an on-going interest in the value of the land.
In your view, there should be an exemption in that situation as well, or it should be defined differently.
That is right. The question is whether the £100 flat annual rent is an appropriate measure. There is a lot to be said for taking a more rounded view.
Do you have anything to add, Mr Blake?
We have no comments.
Finally, the City of Edinburgh Council raised an issue about situations in which the annual rent is £100 or under but the tenants have paid a substantial premium on entering into the leases. On the face of it, that seems okay. Do you share—or even understand—the reservations that the City of Edinburgh Council has expressed about that?
I agree with the previous comments. In my view, that is exactly the sort of situation that the bill is designed to address. An initial payment has been made, which at the time would have been viewed as being akin to a purchase. Princes mall is not the only example of that out there; I am sure that there are plenty others. I have come across a couple of examples in my professional life of commercial property that is held under the type of long lease whereby an initial payment has been made and a very low rent is charged—the sort of nominal rent that fulfils the legal definition of a lease. It is appropriate that the bill should apply to those cases.
I have no comment to make. We have said that we support the policy behind the bill. The matter at issue fits with the policy behind the bill.
Section 69 makes provision for renewable leases—the so-called Blairgowrie lease, when it should have been renewed but was not. Is that provision unfair to landlords, or is it fair protection to tenants?
I have no comment. In saying that, I have an interest to declare: I live in Blairgowrie. [Laughter.]
Very good. Does any other panel member have a comment?
I am not aware that the SPF has a particular view on the matter.
We do not have a view on that. We decided that the bill does not change things, but we may not have fully considered the issue. In evidence last week, the Scottish Law Commission confirmed that this is not an initial issue in terms of the bill. In that sense, we think that the bill takes the right approach.
Good morning, gentlemen. Is giving landlords the opportunity to preserve sporting rights as a separate tenement, as the bill provides for under section 7, desirable in policy terms and workable in practice?
The first important point is that this is not a practical issue. I have canvassed members and professional members on the issue. The second point is that, if sporting rights are reserved from any lease as a matter of contract, the question arises whether it is equitable for the rights to be included in a conversion instead of being excluded. I support the current drafting of the bill on those grounds alone. I reiterate: in practical terms, I suspect that this will not be a terrific issue.
Does any other panel member have a view?
I tend to agree. There is no particular SPF view on the matter.
The SRPBA may have a view on residential ground leases, given that it represents major landowners. The bill does not give protection under residential ground leases that do not qualify for conversion under the main scheme relating to ultra-long leases. Is it desirable to give that protection to those tenants?
That has to be a policy decision. We have not looked at the matter as an organisation. I therefore have to defer giving a view on such a policy issue.
Fair enough. Does any other panel member have a view?
I have no particular view on the matter, which does not form part of the SLC view on the bill. I agreed with what the Law Society of Scotland said. Action is not precluded in the future should it be felt that this policy issue merits attention.
Do you have any other points to canvass with us this morning, gentlemen?
Our points have been dealt with.
I am happy. Thank you.
I have a point on residential ground leases and the concerns about title raiders and so on. A draft land registration bill may come forward early in the next session of the Parliament. We do not want that to preclude the passage of the bill that is before us. Perhaps the matter could be addressed at an early stage.
Committee members have no further questions. Thank you very much, gentlemen, for your attendance at committee and for offering your answers in such a succinct and clear manner. We are much obliged to you.
Previous
Attendance