Landlord Leads Notice Battle To Supreme Court

This Supreme Court has ruled on a dispute about notice for (1) reinstatement and (2) repairs in a lease of commercial premises in Cumbernauld. This is a key decision for the commercial property sector because the repairing obligation in the lease was in standard terms and a minute of agreement containing consent to works sat alongside the lease.

The Outer House in Edinburgh decided that oral communication by Batley (the landlord) to its sub-tenant (the Council) in a sub-lease requiring re-instatement of the sub-let premises was permitted and allowed the parties to make out their claims.

However, this was overturned on appeal to an Extra Division of the Inner House of the Court of Session. The appeal judges ruled that, in the absence of written notice by the landlord before expiry of the sub-lease, the sub-tenant was not obliged to reinstate the sub-let premises. The landlord appealed to the Supreme Court.

The sub-lease ran to February 2009 and dealt with part of premises which were let under a head lease. As with most sub-leases the repairing obligation for the premises rests with the party actually occupying the premises - in this case the Council.

Under a minute of agreement signed up in 1998, the landlord allowed the Council to make alternations to the premises, subject to conditions. One of those was that the Council : "By expiration and sooner determination of the period of the sub-lease...if so required by the mid-landlord...[had to] dismantle and remove the Works and to reinstate and make good the Premises and to restore it to its appearance at the date of entry of the Sub-lease...".

Just before expiry of the sub-lease, the landlord's surveyors had telephoned a contact in the Council indicating that it wanted the alterations taken out and the tenant to restore the premises to their original condition.

The surveyor had then prepared a written schedule of dilapidations setting out the work needed to restore the premises, but that was only received by the Council after the sub-lease ended. The Council refused to carry out the work, claiming that a clause in the head lease, incorporated in the sub-lease, provided that all notices were to be in writing and, it claimed, this requirement was incorporated into the minute of agreement, so that only a written notice was effective.

The Supreme Court ruled that the obligation on a tenant to repair and maintain premises in order to keep them in a tenantable condition at all times during the...