Pre-emption rights - the right of a former owner to have first refusal when you sell a property - are common in the rural sector. Some estate titles have these rights over just about every cottage or farm they have ever sold, and it isn’t always easy to determine whether the pre-emption remains live.
The recent case of West Lothian Council v The Executors of George Clark provides useful commentary on the status of pre-emption rights, particularly those created before the land ownership system of feudal tenure was abolished in 2004.
The facts of the case
West Lothian Council (WLC) attempted to stop a sale at West Muir Farm, West Calder by The executors of George Clark's estate.
The late George Clark bought the farm from Lothian Regional Council (LRC) in 1986. LRC reserved a right of pre-emption when the title was transferred to Mr Clark by way of a feu disposition.
In 1994, LRC was abolished, and replaced by WLC.
In November 2004, feudal tenure was abolished in Scotland so that many of its associated rights, including pre-emptions and other title conditions, would be extinguished, unless a notice was registered to preserve the right. No such notice was registered by WLC.
Mr Clark died in 2011. In December 2015, the executors wrote to WLC, notifying them that they intended to sell part of the farm. The letter referred to an enclosed plan to describe the area intended for sale. A week later, the solicitor at WLC responded to the executors to advise them that the plan did not clearly show the area and asked for clarification. The executors then wrote back to WLC to advise that the pre-emption right had ended and they were not bound by its terms. WLC disputed this, arguing that the initial letter did not describe the land intended for sale adequately to allow a proper assessment of whether it wanted to buy it or not.
In 2016, WLC sought an interdict to prevent the sale of the farm until this point was resolved.
The legal questions for the court
The legal questions for the court to answer were:
- Did the pre-emption continue to exist following the change in law in 2004? and, if so,
- Was that right validly extinguished by the letter issued to WLC by the executors' solicitors?
The change of law – did the pre-emption right survive?
As part of the abolition of the feudal system of land ownership in 2004, an exception was made to allow former "feudal superiors" (such as WLC) to retain an existing feudal pre-emption right by converting it into a personal right. This was not automatic and WLC would have needed to register a notice to preserve this right.
As noted above, WLC did not do this. Can we readily assume that the pre-emption ended and the parties were no longer bound? It's not that simple.
The court concluded that WLC appeared to accept that the feudal pre-emption had ended. However, WLC's argument was that although it had fallen as a right in the title, it continued to exist as a contractual arrangement.
Did a contractual pre-emption right exist?
The court agreed that the feudal pre-emption right fell on 28 November 2004 in the absence of WLC preserving it by using the notice procedure.
However, although dispositions perform a very specific purpose – to transfer title to land upon registration – they are also a contract between the seller and purchaser; this was the point WLC argued. They also argued that, as statutory successors, they acquired the contractual rights previously held by LRC and that, on his death, Mr Clark's obligations under that contract passed to the executors.
The executors did not agree that the disposition created a contract between the parties and raised concerns that this could create a situation where a pre-emption right could hold dual status (as a right to be enforced in the title and as a separate personal right between seller and purchaser).
The court concluded that:
- a contractual right of pre-emption did exist;
- it remained enforceable between the original parties; and
- both WLC and the executors had stepped into the shoes of the original parties, so the right was still enforceable between them.
Did the executors serve a valid notice of intention to sell?
In the court's opinion, a contractual pre-emption existed between WLC and the executors. The question then is whether the actions of the parties were enough to have extinguished that right.
The executors did write to WLC, notifying the intention to sell. Although the terms of the letter did not explicitly ask WLC to make the executors an offer, it can reasonably be inferred that the intention was to establish whether WLC wanted to exercise the right. The pre-emption terms gave WLC 21 days to express their wish to action that right.
WLC's solicitor responded within a week, asking for clarification on the extent of the land intended for sale - but the 21-day period expired without any further correspondence. The executors argued that the pre-emption right ended on expiry of the 21-day period, without WLC confirming their intention to purchase.
The court concluded that the notice did not give WLC enough information to allow them to identify the extent of the farm intended for sale, and that it needed to know what was offered before deciding whether to buy it back or not. The court agreed that the area intended for sale was not clearly visible on the plan. Therefore, the offer was not validly made by the executors and the pre-emption had not been extinguished.
At the time of writing, it is understood that the executors intend to appeal the court's decision.
What does this mean for other rural properties?
Pre-emption notices in older title deeds may still be enforceable:
- as a valid title condition;
- as a personal right which has been converted from a feudal right; or
- as a contractual arrangement.
If you are looking to sell land that may be subject to a pre-emption, take early advice to establish:
- if the pre-emption continues to be enforceable;
- the basis on which it remains enforceable; and
- what is required of you to fulfil your obligations to the right holder.