Scottish 'fixtures' case will clarify renewables developers' rights, says expert

Under the Scottish property law of accession, anything that becomes affixed to land belongs to the owner of that land. However, in commercial leases, tenants have a right to remove 'trade fixtures' from the land even though these effectively become the property of the landlord for the duration of the lease. The Court of Session has now ruled that this principle covered the removal by a non-commercial tenant of a chalet built by his predecessor on the land.

Property law expert Ross McDowall of Pinsent Masons, the law firm behind Out-Law.com, said that what was interesting about the case was that the judge, Lord Philip, also implied that the tenant could retain ownership of the materials used to construct the chalet throughout the duration of the lease.

"As it wasn't a trade fixture, it was not clear whether the tenant had the right to remove the structure when the lease ended, so that clarification is helpful," he said.

"In renewable energy leases, particularly for solar panels and wind turbines, it's common for the lease to say that the tenant continues to own the panels or turbines during the lease. This has never sat comfortably with the law of accession, where something that becomes affixed to the land belongs to the owner of that land,"

"In saying that the parties could effectively circumvent the law of accession, this case is helpful for renewables developers as it gives greater weight to the agreement, set out in a typical renewables lease, that the plant is to remain the property of the tenant," he said.

The owners of the Ballimore Farm Estate in Otter Ferry, Argyll, were pursuing Colin Gilchrist, the son of a former tenant, who wished to dismantle and remove a chalet constructed at 25 Ballimore Estate. The lease was granted in 1969 and had actually ended in March 2000, with the parties "in dispute in relation to the ownership of the chalet" ever since.

Both the landlord, Baroness Miranda van Lynden, and Gilchrist agreed that the chalet had acceded to the land following the usual rules of accession. However, Gilchrist argued that he still had the right to remove it. The chalet was capable of being dismantled into "component parts", with "the inference being that it was capable of being removed without destruction", according to the judge.

Lord Philip said that the chalet was "capable of being endowed with the attributes of" a trade fixture, and was "not intended to be permanent". He said that the way that it should be treated after the lease ended depended on the terms of the lease itself.

Tenants under the lease were required to build a number of houses for sale to third parties, and were required to remove them when the lease was terminated "in order to return the subjects to the proprietor in the condition in which they were received". A distinction was therefore drawn in the lease between a sub-tenant, such as Gilchrist's, rights to the house, and his rights to the land, which he did not receive any ownership rights to.

"[The lease] provided that the sub-tenant was to build his own house and … that it was to remain his property," the judge said.

"[The landlord] argued that the latter provision was impossible of fulfilment, but in my opinion it reflects what the head landlord intended when he provided in [the lease] for the sale of houses to third parties. He intended that the sub-tenant should receive a right of property in his building. In so doing … the landlord abandoned any right of property in the building," he said.

"But he also stipulated for the removal of the buildings at the end of the head lease. Since he had abandoned any right of property in the building, he had no right to prevent [Gilchrist], as sub tenant and owner, removing it. That is consistent with [the sub-lease] which provided for the house built by the sub-tenant to remain his property, and … which obliged the sub-tenant at the end of the sub-lease, to dispose of the chalet in one of three ways at his option, one of which was to remove it as his own expense," he said.

The judge concluded that the arrangement was "designed to circumvent the accession of the chalet to the estate beyond the termination of the head lease and the sub-lease".