Report on Conversion of Long Leases (Scot Law Com No 204)
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SLC REPORT COVER.qxd 28/11/2006 12:21 Page 2 (SCOT LAW COM No204) Report on Conversion of Long Leases Online www.tso.co.uk/bookshop Mail,Telephone, Fax & E-mail TSO PO Box 29, Norwich, NR3 1GN Telephone orders / General enquiries: 0870 600 5522 Fax orders: 0870 600 5533 Order through the Parliamentary Hotline Lo-Call 0845 7 023474 E-mail [email protected] Textphone 0870 240 3701 TSO Shops 123 Kingsway, London,WC2B 6PQ 020 7242 6393 Fax 020 7242 6394 16 Arthur Street, Belfast BT1 4GD 028 9023 8451 Fax 028 9023 5401 71 Lothian Road, Edinburgh EH3 9AZ 0870 606 5566 Fax 0870 606 5588 The Parliamentary Bookshop 12 Bridge Street, Parliament Square London SW1A 2JX Telephone orders / General enquiries 020 7219 3890 Fax orders 020 7219 3866 Email [email protected] Internet bookshop.parliament.uk TSO@Blackwell and other Accredited Agents report £25.00 Report on Conversion of Long Leases Laid before the Scottish Parliament by the Scottish Ministers under section 3(2) of the Law Commissions Act 1965 December 2006 SCOT LAW COM No 204 SE/2006/238 EDINBURGH: The Stationery Office £25.00 This publication (excluding the Scottish Law Commission logo) may be re-used free of charge in any format or medium for research for non-commercial purposes, private study or for internal circulation within an organisation. This is subject to it being re-used accurately and not used in a misleading context. The material must be acknowledged as Crown copyright and the title of the publication specified. For any other use of this material please apply for a Click-Use Licence for core material from the Office of Public Sector Information (OPSI) website: www.opsi.gov.uk/click-use/index.htm. Telephone enquiries about Click-Use Licences should be made to OPSI, Tel: 01603 621000. ISBN: 0-10-888194-6 ii The Scottish Law Commission was set up by section 2 of the Law Commissions Act 19651 for the purpose of promoting the reform of the law of Scotland. The Commissioners are: The Honourable Lord Eassie, Chairman Professor George L Gretton Professor Gerard Maher, QC Professor Joseph M Thomson Mr Colin J Tyre, QC. The Chief Executive of the Commission is Mr Michael Lugton. Its offices are at 140 Causewayside, Edinburgh EH9 1PR. Tel: 0131 668 2131 Fax: 0131 662 4900 Email: [email protected] Or via our website at www.scotlawcom.gov.uk – select "Contact" NOTES 1. For those wishing further copies of this paper it may be downloaded from our website or purchased from TSO Scotland Bookshop. 2. If you have any difficulty in reading this document, please contact us and we will do our best to assist. You may wish to note that an accessible electronic version of this document is available on our website. 1 Amended by the Scotland Act 1998 (Consequential Modifications) (No 2) Order 1999 (SI 1999/1820). iii SCOTTISH LAW COMMISSION Item No 1 of our Seventh Programme of Law Reform Report on Conversion of Long Leases To: Ms Cathy Jamieson MSP, Minister for Justice We have the honour to submit to the Scottish Ministers our Report on Conversion of Long Leases. (Signed) RONALD D MACKAY, Chairman GEORGE L GRETTON GERARD MAHER JOSEPH M THOMSON COLIN TYRE Michael Lugton, Chief Executive 6 November 2006 v Contents Paragraph Page Part 1 Introduction Background 1.1 1 Empirical work 1.4 2 What is a long lease? 1.5 2 Earlier conversion schemes 1.8 4 Our recommendations in summary 1.10 5 Which Parliament? 1.12 5 Part 2 Qualifying leases The case for conversion 2.1 7 Qualifying duration 2.13 10 Initial term 2.13 10 Unexpired duration 2.16 11 Computation of duration 2.22 12 Renewals 2.23 12 Breaks 2.27 13 Leases for life 2.29 14 Recommendation 2.30 14 Lease as a registered real right 2.31 15 Exempt leases 2.32 15 Type of property 2.33 15 Minerals 2.34 16 Inalienable property 2.36 16 Nature of landlord 2.39 17 Date of lease 2.40 17 Rent 2.41 18 Existing conversion schemes 2.43 18 Recommendation 2.44 19 Leases and subleases 2.45 19 Part 3 Conversion Voluntary or compulsory? 3.1 21 Compulsion 3.1 21 Exemption 3.4 21 One day or many? 3.9 23 From lease to ownership 3.14 25 Introduction 3.14 25 Transfer from landlord to tenant 3.15 25 Conferral of ownership on tenant 3.19 27 vii Contents (cont'd) Paragraph Page Conversion of lease to ownership 3.20 27 Evaluation 3.22 27 Extinction of landlord's interest and of intermediate leases 3.23 28 Real rights and conditions of the lease 3.25 28 Real rights 3.25 28 Conditions of the lease 3.27 29 Recommendation 3.30 30 Reservations and pertinents 3.31 31 Servitudes 3.34 32 Leases without tenants 3.42 34 Part 4 From leasehold conditions to real burdens Introduction 4.1 35 Qualifying conditions 4.3 35 Introduction 4.3 35 Enforceable against successors 4.4 36 Of the nature of a real burden 4.5 36 Some exclusions 4.6 36 Pre-emptions 4.12 37 Implied terms 4.13 38 Inversion of possession 4.14 38 Recommendation 4.17 39 Constitutive deeds 4.18 39 Qualifying lease 4.19 39 Superior leases 4.20 39 Variations 4.25 41 Assignations and deeds of condition 4.26 41 Recommendation 4.27 41 Conversion in outline 4.28 41 Facility burdens 4.30 42 Further special cases 4.34 43 Service burdens 4.35 43 Manager burdens 4.36 44 Conservation burdens 4.37 44 Personal pre-emption burdens and personal redemption burdens 4.38 45 Economic development burdens 4.39 45 Health care burdens 4.40 45 Recommendation 4.41 45 Other conditions: the position of landlords 4.42 47 Conversion by nomination of benefited property 4.42 47 Conversion by agreement 4.48 50 viii Contents (cont'd) Paragraph Page Other conditions: the position of third parties 4.49 50 Introduction 4.49 50 Express rights 4.50 51 Implied rights: common schemes 4.52 51 Implied rights: partial assignations 4.53 52 Recommendation 4.55 53 Conditions reserving development value 4.56 53 Prior variation or extinction of conditions 4.57 54 One choice 4.58 54 Notices 4.60 55 Service 4.60 55 Separate notices and combined notices 4.62 56 Recommendation 4.63 56 Registration 4.64 56 Invalidity 4.66 57 Introduction 4.66 57 Applications to the Lands Tribunal 4.67 57 Application for rectification 4.69 57 Challenge to the burden itself 4.70 58 Conditions affecting the landlord or third party 4.71 58 Conditions enforceable contractually 4.74 59 Part 5 Minerals and sporting rights Introduction 5.1 61 Reservations of minerals 5.3 61 Sporting rights 5.7 62 Reservations of sporting rights 5.10 63 Preservation: in principle 5.13 64 Preservation: a scheme in outline 5.15 64 Content of preserved right 5.18 65 Freshwater fish 5.19 65 Game 5.20 65 Exclusivity 5.22 66 Recommendation 5.23 67 Part 6 Compensation Introduction 6.1 68 Compensatory payment 6.3 68 Basis of calculation 6.3 68 Non-monetary rents and royalty rents 6.9 71 ix Contents (cont'd) Paragraph Page Cumulo rent 6.11 71 Partially continuing leases 6.15 72 Recommendation 6.16 73 Compensation due only where claimed 6.17 74 Renewal premiums 6.22 75 Allocation of premiums 6.26 76 Additional payment: grounds 6.28 77 Introduction 6.28 77 Non-monetary rents 6.29 77 Rent review 6.30 77 Rent increase 6.31 78 Renewal premiums exceeding £100 6.32 78 Residual value of reversionary interest 6.33 78 Early termination 6.34 78 Right to development value 6.36 79 Recommendation 6.38 80 Additional payment: amount 6.39 80 Procedure 6.39 80 Matters to be taken into account 6.40 81 Valuation of reversionary interest 6.43 81 Capping of claim for development value 6.45 82 Date of valuation 6.46 83 Recommendation 6.47 83 Claims in excess of £500 6.48 84 Intermediate leases 6.52 85 Crystallisation of liability 6.56 86 Time scale 6.63 88 Enforcement 6.64 89 Payment by instalments 6.65 89 Service 6.70 91 Negative prescription 6.74 93 Unpaid rent 6.75 93 Leasehold casualties 6.76 93 Part 7 Notices of exemption Introduction 7.1 95 Exemption 7.2 95 Publicity 7.2 95 Tenant under the qualifying lease 7.3 95 Notice 7.4 95 Service 7.5 95 x Contents (cont'd) Paragraph Page Registration 7.6 96 Effect 7.7 96 Sublease of an exempt lease 7.8 96 Recommendation 7.9 96 Recall 7.10 97 Introduction 7.10 97 Notice of recall 7.11 97 Unexpired duration exceeding 100 years 7.12 97 Effect 7.13 98 Recommendation 7.15 98 Part 8 Miscellaneous topics Updating the Land Register 8.1 100 Notices: evaluation for registration 8.9 102 Unregistered leases 8.14 105 Stamp Duty Land Tax 8.19 106 Recommendation 8.25 108 Translation 8.27 108 Part 9 Residential ground leases Introduction 9.1 110 Protection of tenants 9.6 112 The case for protection 9.8 112 Loss of a home 9.8 112 Absence of alternative accommodation 9.10 113 Comparison with other leases 9.11 113 No compensation for improvements 9.12 113 The case against protection 9.13 114 Justified expectations 9.14 114 Previous opportunity 9.16 114 Cost to the tenant 9.17 115 Escalation of compensation for voluntary conversions 9.20 115 Results of consultation 9.21 116 Evaluation 9.25 117 Part 10 List of recommendations 118 Appendix A Draft Long Leases (Scotland) Bill 135 xi Contents (cont'd) Paragraph Page Appendix B List of those who submitted written comments on Discussion Paper No 112 250 Appendix C Survey of Long Leases 251 Appendix D Clauses extracted from a 999 year lease of land in Wishaw granted in 1901 267 xii Abbreviations 1954 Act Long Leases (Scotland) Act 1954 1967 Act Leasehold Reform Act 1967 2000 Act Abolition of Feudal Tenure etc.