Wednesday 14 March 2012

Eloquent confusion and the incomprehensible notice: what's a landlord to do?

We recently represented the successful appellants in the case of Scott v Muir and another . Sheriff Principal Stephen’s decision ought to be required reading for anyone who advises landlords or tenants or conducts commercial property litigation in Scotland.  It sets down for the first time the essential core terms of a valid pre-irritancy warning notice served in terms of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 s4(2).

The 1985 Act provides, at section 4,  that a landlord may not terminate (“irritate” in Scots law) a lease on the grounds of failure to pay money unless he has first served notice by recorded delivery on the tenant, calling on him to make payment within a period of not less than 14 days and warning that the lease may be irritated if payment is not made. The Act does not prescribe anything more by way of the content of the notice. 

Our clients are tenants of commercial premises in Edinburgh.  Their lease obliges them to pay rent of £30,000 a year, payable at £2,500 a month, in advance. The landlords claimed that the tenants were in arrears with their rent. The landlords’ solicitors, a large national firm, were instructed to serve notice on the clients by recorded delivery. Their notice said:

“(i)                 WE HEREBY REQUIRE, you, as the tenants, to make payment to our clients, per ourselves (quoting our reference at the top of this letter) of such rent and other monies totalling sterling £7,800 together with interest thereon as provided for in the said lease before [sic]; and
(ii)               WE HEREBY STATE, if you, as the tenants, do not comply with the requirements mentioned in paragraph (i) above, said lease MAY, without in any way prejudicing our clients' whole rights and remedies, BE TERMINATED on 11 March 2010.”

In assessing the validity of the notice, the Sheriff Principal noted that the 1985 Act implemented the recommendations of the ScottishLaw Commission (Report 75 on Irritancies in Leases) . The SLC stated:

 “Our object in devising such a notice, or ultimatum, procedure was to ensure that, where the possibility of remedy existed, the irritancy clause in the lease would act as a compulsitor for the taking of remedial action and not as a means whereby a landlord could take immediate advantage of the breach so as to procure an opportunistic termination of the tenancy.”1

The Sheriff Principal found, then, that the mischief at which the Act was aimed was “protection of the tenant from the harsh consequences of irritancy” and that “The statutory notice construed against the background to the legislation.” Analysing the notice here, she found that it failed to specify of what the £7,800 was comprised (and earlier correspondence about that was described as “eloquent of confusion”), failed to require the tenant to make payment within any specified period and failed to give the specification needed to allow a calculation of the interest claimed. She held that:

 “[Giving such detail]… would hardly be an onerous obligation on the landlord. The notices should be looked at in the context of the legal function of the statutory requirement and that is to ensure where the possibility of remedy exists that the giving of notice acts as a compulsitor for the taking of that remedial action. The time limit prescribed by the statute is designed to be reasonably short but to give sufficient opportunity for the defect to be remedied. It would not appear to give sufficient time, however, for detailed discussion or discovery as to the periods of default and it appears to me therefore that for the notice to be effective it should specify the periods from which the rent arrears arise.”

In summary, the notice was simply “incomprehensible to the tenants” and would mislead any “reasonable recipient”.

So what features characterise a comprehensible notice? It’s pretty obvious really: specification, accuracy, detail and clarity. Don’t lump the sums demanded into one global figure. State separately each sum that is outstanding. Say how much each figure is and what it is for (rent, or insurance premiums or whatever). Say when it fell due and, if interest has to be paid, say from when it accrues and at what rate.2 State clearly the date by which payment must be made. Ensure that the terms of the notice and the procedure adopted comply with the terms of the 1985 Act and, of course, any specific provisions in the lease.

We'll be happy to review and comment on any style notices or advise in any particular case. We can't always promise eloquence but we can help you avoid costly confusion.

1 For the prior discussion paper see
2 Other commentators have suggested specifying an actual figure for interest but we don’t think that is right. It’s not what the Sheriff Principal decided. She said (emphasis added) that “it is imperative that the tenant on whom the notice is served knows how to calculate the interest. To calculate the interest the tenant requires to know the date from which interest should be calculated and therefore requires to know the month of arrears and also requires to know the prescribed rate.” Indeed, an actual figure for interest will be out of date if calculated to the date of the notice or potentially incorrect if calculated to any other date. The actual figure due by way of interest can only be known if you know when payment is to be made.

1 comment:

  1. A true David v Goliath case, well done Halliday Campbell!!