Interpretation of Tenants’ Repairing Obligations Under Lease

Mapeley Acquisition Co (3) Limited (in Receivership) v. City of Edinburgh Council, 24 March 2015

Background

This is an Outer House case concerning the nature and extent of tenants’ obligations under a lease of office premises at Chesser House on Georgie Road in Edinburgh. Mapeley were the landlords and the City of Edinburgh Council, the tenants.

At the expiry of the lease Mapeley served a schedule of dilapidations on the Council and sought payment of just over £8m.The interpretation of the tenant’s repairing obligations under the lease were at the centre of the dispute. There were two issues of interpretation for the court:

  1. whether, in terms of the lease, the landlord was entitled to receive a sum equivalent to the cost of repairing the premises even if it had no intention of carrying out the required repairs; and
  2. whether, in terms of the lease, the tenant was obliged to replace the plant and equipment on the premises at the end of the lease whatever the condition of those items (i.e. even if not missing, broken, worn, damaged or destroyed.)

In essence, the Council argued that, in terms of the lease, (a) the landlord was not entitled to recover the costs of putting the property into the standard of repair contained in the lease where the landlord did not intend to undertake the work and (b) the tenant did not require to replace or renew items of plant and equipment where the items were not missing, broken, worn, damaged or destroyed.

Decision

Lord Doherty found that the precise wording contained in lease was capable of bearing both that interpretation and the interpretation argued for by the landlord (per 1. and 2. above). However, where such wording is capable of bearing more than one meaning, the court requires to adopt the interpretation which best accords with business common sense. As such Lord Doherty preferred the interpretation contended for by the Council noting that, to adopt Mapeley’s approach, would have involved a radical departure from the common law which would have resulted in excessive and disproportionate consequences and, as a result, would have required to have been clearly indicated in the lease (which it had not been in the lease in question).

The full judgement is available from Scottish Courts here.

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