PART 4: FROM LEASHOLD CONDITIONS TO REAL BURDENS
Introduction
4.1	Many ultra-long leases contain conditions which, in a conveyance, would be classified as real burdens.  Indeed the connection is made overt in the style books, which tend to import for leases the model clauses already given in the context of feus and other conveyances; and it is plain that in drafting conditions of title the Victorian conveyancer made little or no distinction between feus and ultra-long leases.  Ground leases from this period tend to conform to a standard pattern.  There is an obligation to build and maintain a house.  The land is to be fenced and the fences duly maintained.  And there are certain restrictions on use, most notably a prohibition of enumerated nuisances.  Often there is an irritancy clause, and sometimes a right of pre-emption.  Occasionally there is a clause of redemption.  Sometimes the special nature of the property requires additional terms.  In the case of tenement flats, for example, provisions are often added about common maintenance.  Doubtless particular provisions were sometimes inserted in order to negative an obligation which would otherwise have fallen on the landlord, most notably the obligation of repair.  A typical Victorian lease is reproduced in appendix D.
4.2	Conditions of this kind could survive the conversion of the lease into ownership only if they in turn were converted into real burdens.  A scheme for such conversion is considered below.  But first it is necessary to identify more precisely the conditions which should qualify for conversion.
Qualifying conditions
4.3	Introduction.  Not all conditions resemble real burdens.  Some – for example the obligation to pay rent, or a prohibition on assignation and subleasing – presuppose the relationship of landlord and tenant and have no place once that relation is at end.  Others are more akin to servitudes than real burdens and have already been provided for in part 3.  Others still are personal obligations affecting the original parties as a matter of contract but not enforceable in a question with successors of either the landlord or the tenant.  In this section we consider the criteria which might be used to distinguish conditions suitable for conversion from other types of condition.  The concern, it should be emphasised at the outset, is with eligibility for conversion.  The fact that a condition is eligible does not mean that it will in fact be converted.  Actual conversion depends on the scheme described later; and, with some exceptions, a requirement of that scheme is that the landlord owns neighbouring land which is capable of acting as a benefited property.
4.4	Enforceable against successors.  Clearly a condition should not be eligible for conversion unless it already binds successors.  A condition is enforceable by successive landlords against successive tenants only if it is inter naturalia of the lease, that is to say, if it belongs naturally in a lease of the type in question.  This test is, necessarily, rather imprecise; but few conditions in practice fail to make the grade.
4.5	Of the nature of a real burden.  The condition must also be a kind which is capable of being constituted as a real burden.  The relevant rules are conveniently re-stated in the opening provisions of the 2003 Act.  There must be both a benefited property and a burdened property.  There are certain requirements as to content – for example, that the condition is either an obligation to do something or to refrain from doing something, and that it is not contrary to public policy.  And, subject to some minor exceptions, the full terms of the condition must be set out in the lease or other constitutive deed.  The first of these rules (benefited and burdened property) is incorporated into the conversion scheme itself and can be put on one side for the moment.  The others may be accepted as formal requirements of a qualifying condition.
4.6	Some exclusions.  It is also helpful to define by exclusion.  Three are suggested. 
4.7	In older leases non-compliance with conditions is sometimes subject to a penalty.  The following is typical:
"… and both parties bind and oblige themselves and their foresaids to perform implement and fulfil their respective parts of the premises to each other under the penalty of Twenty pounds Stg to be paid by the party failing to perform to the party performing or willing to perform over and above performance …"
4.8	There may be a question as to whether a penalty can be a real burden at all, but in any event it seems undesirable to give new life to obligations to pay small sums of money.  Penalty clauses should, we think, be excluded.  A person seeking to enforce a real burden has other, and more effective, remedies.
4.9	Another remedy often contracted for is irritancy.  In the case of leases granted before 10 August 1914 and for a rent of not more than £150, any irritancy clause was made void by the Leasehold Casualties (Scotland) Act 2001.  Similarly, the 2003 Act invalidates existing irritancies in respect of real burdens and disallows the creation of new irritancies.  We have also proposed that it should not be competent for a qualifying or intermediate lease to be terminated by irritancy on or after the date of Royal Assent.  In those circumstances it is clear that an irritancy clause should not be eligible for conversion.
4.10	The final exclusion is for conditions inmixed with irritancy clauses.  For example:
"… And it is hereby expressly conditioned and declared that in case the said [name of tenant] or his foresaids … shall suffer the houses or other buildings erected or to be erected on the said piece of ground to become ruinous or untenantable or shall sell or allow to be sold any ale or spirituous liquors or keep or allow to be kept an Inn or Public House of any description upon the said piece of ground hereby let … then and in these or any of these cases this Lease shall in the option of the proprietor become extinct void and null and at an end …"
4.11	Provisions of this kind are quite common in leases from the Victorian period.  The effect is to create two categories of condition.  There are in the first place ordinary conditions which are enforceable by ordinary remedies.  And then there are lower-order conditions of the kind just quoted which are enforceable only by irritancy.  The difficulty with the latter is that irritancy has either already been abolished or, as just suggested, is not to survive the conversion of leases; and if the remedy falls so must the condition to which the remedy is attached.  It would, of course, be possible to make an exception in this case; but a condition which is marked out as unenforceable by normal methods does not seem sufficiently important to save.  
4.12	Pre-emptions.  Pre-emptions are capable of being constituted as real burdens and so will be eligible for conversion on the principles outlined above.  A pre-emption may strike at both assignations and subleases or alternatively at assignations only.  In either case the clause should be converted as it stands.  Thus a pre-emption affecting assignation will translate as a restriction on sale (by disposition), while a pre-emption which extends to subleases will apply to any leases to be granted by the former tenant.  A pre-emption which is confined to assignations is, as one of our consultees pointed out, easily evaded by the grant of a sublease.  That will remain true after conversion as before, save only that any lease will be limited to 175 years.  
4.13	Implied terms.  So far only express conditions have been mentioned, and indeed the terms of a real burden must be set out expressly and in full in the constitutive deed.  But, unlike real burdens, leasehold conditions may also arise by implication.  We doubt whether a  condition which is merely implied should be eligible for conversion.  A term is implied only because it is intimately concerned with the relationship of landlord and tenant.  Once that relationship is at an end, the term too should cease.  Indeed its very content would usually serve to prevent conversion on the basis of rules already described.  A characteristic example of an implied term is considered in the next paragraph.
4.14	Inversion of possession.  Just as a lease is limited in time so it is also limited in purpose.  The permitted purpose may be expressed in the deed itself, but with older leases in particular this is more usually a matter of inference whether from the deed or from surrounding circumstances.  To depart from this purpose is to "invert the possession" and so to breach an implied term of the contract.  So for example if land is leased for residential use it would be inversion of possession to use the land (and house) for a factory or a shop. The justification for this rule seems never to have been properly articulated.  Presumably one reason is to protect the reversionary interest of the landlord by preventing alterations which might change the character of the property.  Another may be to ensure that rent levels match the tenant's use, leaving open the possibility of a higher rent for a different use.  Today these matters are invariably regulated by express terms and the doctrine of inversion of possession is largely moribund.  But even in its heyday, in the nineteenth century, it seems only to have been invoked for relatively short leases, thus emphasising its role as a protection for the landlord's reversionary interest.  Not all reported cases on this topic disclose the length of the lease under consideration, but a typical length would be 19 years, and the longest lease was granted for 58 years and had, at the time of the litigation, an unexpired duration of 26 years.  There may even be a question as to whether the doctrine of inversion of possession applies to ultra-long leases at all.  At any rate its function in that context is of diminished importance.
4.15	Earlier we suggested that implied conditions be disregarded on the basis that they arose from the relationship of landlord and tenant and had no role once that relationship was at an end.  There seems no reason for making an exception for the implied term against inversion of possession.  No exception is made in the 1954 Act scheme.  Admittedly there may be cases where the implied term protects the amenity of a landlord who happens also to be a close neighbour.  But such neighbourhood protection is then adventitious.  A landlord who wished to protect neighbouring property could have inserted a provision to that effect.  After conversion it should not be possible to rely on a provision which was implied for the benefit of landlords rather than neighbours.
4.16	Principle is reinforced by practicalities.  Under the scheme described below, a leasehold condition will normally be converted by registration of a notice in the Land Register or Register of Sasines.  The notice transcribes the words of the condition.  But an implied term must be articulated before it can be transcribed.  That requires the exercise of discretion by the landlord, and an evaluation of that discretion both by the tenant and by the Keeper.  It requires a consideration, not only of the terms of the lease, but of the circumstances surrounding its grant and the nature of the possession thereafter.  The potential for dispute is obvious.  Even if desirable, a conversion mechanism for the implied term would not, we think, be workable.
4.17	Recommendation.  We recommend that
1.	(a)	A condition affecting a qualifying lease should qualify for conversion into a real burden (as a "qualifying condition") if –
(i)	its terms are set out in full in the constitutive deed;
(ii)	it binds successive tenants; and
(iii)	it conforms to real burdens in respect of content.
(b)	But a condition should not qualify if –
(i)	it imposes a monetary penalty on the failure to comply with other conditions;
(ii)	it imposes an irritancy for such failure to comply; or
(iii)	it is stated to be enforceable only by irritancy.
(Draft Bill ss  9(1), (3)–(6), 10)
Constitutive deeds
4.18	As has been seen, a leasehold condition qualifies for conversion only if it is set out in full in a constitutive deed.  The next task is to consider which deeds can be considered as "constitutive" for the purposes of this rule.
4.19	Qualifying lease.  The deed most immediately affecting the tenant (and future owner) is the qualifying lease itself, ie the lease under which that person is the current tenant.  It seems hardly necessary to say that the terms of that lease should (subject to the criteria mentioned earlier) be qualifying conditions. 
4.20	Superior leases.  If the qualifying lease is itself a sublease, there will also be intermediate leases – "superior leases" in the terminology of this Report – to be taken into account.  The present law is not entirely settled as to whether conditions of a superior lease are binding on a subtenant (ie, for present purposes, the tenant under the qualifying lease). Hume's view was that a subtenant is liable for such conditions of a superior lease as impose restrictions on use.  This was because obligations of this kind
"can only be performed by the person who is in natural possession of the lands – obligations which the principal tenant by ceding the possession has disabled himself from performing, and which the subtenant by taking possession virtually undertakes, else he would contradict the lease."
4.21	Affirmative obligations, however, remain the responsibility of the principal tenant alone, there being no contractual nexus between head landlord and subtenant.  Hume's distinction between negative and affirmative obligations was repeated, apparently with approval, in Hunter's work on Landlord and Tenant, and Rankine also supported the idea of direct enforcement of negative obligations against the subtenant.  The matter, however, seems not to have been judicially determined.  In England the rule is the same although the reasoning is different.
4.22	An alternative basis of liability arises if the sublease repeats, or incorporates, the terms of the superior lease.  These terms are then part of the sublease and so binding on the subtenant.  For that reason they will remain binding even after the appointed day and the extinction of the superior lease.  No distinction is made between affirmative and negative provisions.
4.23	While the position is not free from doubt, therefore, it seems that a subtenant is usually liable in respect of the conditions contained in superior leases.  Accordingly such conditions should be eligible for conversion, or in other words superior leases should be treated as constitutive deeds.  If Hume is correct, an exception exists where a condition is both affirmative in character and is neither incorporated nor repeated in the sublease.  In that case the subtenant would not be liable for the condition.  On balance we think that this exception (if indeed it is an exception) should be disregarded for the purposes of conversion into real burdens.  Conditions like this will be comparatively rare.  If, as often, they are of the nature of facility burdens, it is plainly desirable that they should survive, for otherwise the facility may deteriorate and become unusable.  And in other cases the imposition of a new affirmative obligation will usually seem an acceptable price for the acquisition of ownership.  If it does not, the subtenant can opt out of conversion by registering a notice of exemption.  Finally, a rule which makes all conditions in superior leases potentially eligible for conversion is an exact match for the corresponding rule in the 2000 Act.
4.24	One qualification is needed.  An interposed lease, it is thought, affects only its grantee and not the tenants lower down the leasehold chain.  For otherwise a tenant would be vulnerable to the imposition of new, and potentially onerous, obligations if the landlord chose to interpose a lease.  If, therefore, superior leases are to be constitutive deeds, interposed leases should be excluded.  
4.25	Variations.  A lease may be varied by means of a registered deed of variation.  Where this has been done in relation to a qualifying or a superior lease, the deed of variation should likewise have the status of a constitutive deed and its terms be eligible for conversion to real burdens.
4.26	Assignations and deeds of condition.  Assignations of leases, deeds of conditions and other deeds granted in association with assignations, may also contain conditions binding on successors and so should be included in the list of constitutive deeds.
4.27	Recommendation.  We recommend that
2.	The following deeds should be constitutive deeds for the purposes of recommendation 14 –
(i)	the qualifying lease;
(ii)	any superior lease;
(iii)	any deed varying such a lease; and
(iv)	an assignation of such a lease or a deed of conditions or other deed granted in association with such an assignation.
(Draft Bill s 9(2))
Conversion in outline
4.28	Self-evidently, any scheme for the conversion of leasehold conditions into real burdens should follow closely the equivalent scheme introduced by part 4 of the 2000 Act in respect of feudal burdens.  A version of the 2000 Act scheme, with necessary modifications, was set out in summary form in our discussion paper and was generally approved by consultees.  In the next section of the report we provide further details of how such a scheme might work in the context of ultra-long leases. 
4.29	It may be helpful to begin with a summary.  Qualifying leasehold conditions concerned with the management and maintenance of (generally common) facilities are to survive the appointed day without the need for special action on the part of anyone. Such conditions will become facility burdens, enforceable by the owners of those properties to which the facility in question is of benefit.  There will also be special treatment for a  number of other conditions – namely service burdens, manager burdens, conservation burdens, personal pre-emption and personal redemption burdens, economic development burdens, and health care burdens.  Conditions not falling into any of these special categories will survive the appointed day only if a notice of conversion is registered by the landlord (or a neighbour, if such a person has enforcement rights) before the appointed day; and a notice can be registered only if the landlord (or other enforcer) owns land which is sufficiently close to act as a benefited property in the condition.  Special rules are proposed for common schemes, and for the small number of cases in which express enforcement rights are conferred on neighbours.
Facility burdens
4.30	It is proposed that on the appointed day all conditions involving facilities should become facility burdens. The justification for preserving such conditions automatically is familiar from earlier reform exercises.  Facility burdens are essential if the facility in question – the roof of a tenement, for example, or a shared recreational area – is to be properly maintained and regulated in the future.   
4.31	A facility burden is a type of real burden.  It is both possible and desirable, to replicate the provisions of the Title Conditions (Scotland) Act 2003 on this topic.  Thus a leasehold condition qualifies for conversion to a facility burden if it regulates the maintenance, management, reinstatement or use of a facility.  Almost always the facility will be common to two or more properties.  Familiar examples include the roof and other shared parts of a tenement, and a private road or sewerage system.  This means that the obligation to maintain a boundary fence, found almost standardly in Victorian ground leases, would be eligible for conversion under this rule.  There is one exclusion, for obligations (typically in relation to roads and sewerage) which have since been taken over by a local or other public authority.  Obligations of this kind are spent and should not be carried forward into the new system.
4.32	One effect of conversion will be to clarify the position as to enforcement.  The burdened property will of course be the land which, immediately before the appointed day, was subject to the qualifying lease; and all properties to which the facility is (and is intended to be) of benefit will be the benefited properties.  In practice both the burden and the benefit may often be shared.  A typical example would be a tenement in which the flats are leased on 999-year leases, with each lease containing identical obligations to maintain the common parts.  On conversion the maintenance obligations would become facility burdens in respect of which each flat would be both a benefited and a burdened property.  Usually the facility itself will be part of a benefited property, but in cases where this is not so the facility too should be a benefited property in order that the owner can procure its maintenance.
4.33	We recommend that
3.	(a)	A qualifying condition which regulates the maintenance, management, reinstatement or use of a facility should become a facility burden on the appointed day.
(b)	The burdened property should be the land the lease of which was subject to the condition.
(c)	The benefited property should be –
(i)	any land to which the facility is (and is intended to be) of benefit; and
(ii)	insofar as not covered by (i), the facility itself.
(d)	A condition should not become a facility burden if it constitutes an obligation to maintain or reinstate which has been assumed by a local or other public authority.
(Draft Bill s 23(1), (3), s 27)  
Further special cases
4.34	For consistency with the 2000 Act and the 2003 Act special provision is needed for seven other types of condition.  None is at all common in practice save possibly for rights of pre-emption.
4.35	Service burdens.  A service burden is a real burden which binds the owner of one piece of land to provide services from that land to some other land.  An example would be an obligation to supply water or electricity.  Occasionally a qualifying leasehold condition might be to the same effect.  If so, it should become a service burden on the appointed day.  The benefited property would be the land to which the service is provided and the burdened property the land which was subject to the qualifying lease.
4.36	Manager burdens.  A manager burden is a real burden which confers a power of management over a group of related properties.  A typical example would be a power reserved to a developer to act as (or appoint the) manager during the early years of a development.  There is no benefited property as such, the burden being held by the person with management powers.  Manager burdens have a short life.  They expire  five  years after registration of the constitutive deed, and cease to be enforceable earlier if the holder has parted with all of the units in question.  It is thought that few qualifying conditions in a lease could be characterised as potential manager burdens and that fewer still will be less than five years old and so within the period for validity.  Nonetheless any leasehold conditions which fulfil these criteria should become manager burdens on the appointed day.  They will expire five years after registration of the qualifying lease or other constitutive deed.  
4.37	Conservation burdens.  Special provision was made in the 2000 Act for burdens concerned with conservation and which were enforceable by a conservation body or by Scottish Ministers.  Burdens falling into this category survived feudal abolition if a notice in the prescribed form was registered by the conservation body (or Scottish Ministers).  On the day of feudal abolition the burdens became conservation burdens, a new category of real burden.  Like manager burdens there is no benefited property, so that a conservation burden is held directly by the conservation body or by Scottish Ministers.  Further provisions about conservation burdens, including rules as to transmission and extinction, are contained in the 2003 Act.  The 2000 Act scheme can readily be adapted for long leases.  If a qualifying condition which promotes conservation is enforceable by a conservation body or Scottish Ministers, it should be converted into a conservation burden on the appointed day provided that a notice in the prescribed form is duly registered in the Land Register or Register of Sasines.  A person, other than a conservation body (or Scottish Ministers), who is entitled to enforce such a qualifying condition should be able to nominate a conservation body or Scottish Ministers to hold the burden in their place by registering a notice. Definitions and other points of detail can be taken from the 2000 Act.  Since leasehold conditions are generally enforceable by landlords alone, the principal mechanism is likely to be available mainly or exclusively for leases in which the landlord is a conservation body or Scottish Ministers. 
4.38	Personal pre-emption burdens and personal redemption burdens.  Following the scheme of the 2000 Act, it should be possible to convert a qualifying condition which confers a right of pre-emption or redemption into a personal pre-emption burden or a personal redemption burden.  There is no benefited property as such; instead, the burden is held directly by the person entitled to enforce it.  Conversion should occur on the appointed day provided that a notice in the prescribed form is duly registered in the Land Register or Register of Sasines.
4.39	Economic development burdens.  An economic development burden is a type of personal real burden which has the purpose of promoting economic development.  It may be held only by Scottish Ministers or by a local authority. Again, following the 2000 Act, it should be possible to convert a qualifying condition which meets the criteria into an economic development burden.  Conversion should occur on the appointed day provided that a notice in the prescribed form is duly registered.  Once more there is no benefited property so the burden is held directly by the local authority or Scottish Ministers. 
4.40	Health care burdens.  A health care burden is a personal real burden which is held by Scottish Ministers and has the purpose of promoting the provision of facilities for health care.  Again, following the 2000 Act, it should be possible to convert a qualifying condition which meets the criteria into a health care burden by registering a notice.  The burden is then held directly by Scottish Ministers.
4.41	Recommendation.  We recommend that
4.	(a)	A qualifying condition which relates to the provision of services to other land should become a service burden on the appointed day.
(b)	A qualifying condition which confers on a person power to act as, or to appoint, the manager of related properties should become a manager burden on the appointed day.
(c)	A qualifying condition which –
(i)	has the purpose of preserving or protecting the architectural, historical or other special characteristics of land, and
(ii)	is enforceable by a conservation body or by Scottish Ministers
should become a conservation burden on the appointed day, but only if there has been registered before that day a notice identifying the condition and the body entitled to enforce it.
(d)	A qualifying condition which –
(i)	has the purpose of preserving or protecting the architectural, historical or other special characteristics of land, and
(ii)	is enforceable by a person other than a conservation body or Scottish Ministers
should become a conservation burden on the appointed day, but only if there has been registered before that day a notice identifying the condition and nominating (with the prior consent of the nominee) a conservation body or Scottish Ministers to have title to enforce the conservation burden.  
(e)	A qualifying condition which comprises a right of pre-emption or a right of redemption should become a personal pre-emption burden or, as the case may be, a personal redemption burden on the appointed day but only if there has been registered before that day a notice identifying the condition.
(f)	A qualifying condition which –
(i)	has the effect of promoting economic development, and
(ii)	is enforceable by Scottish Ministers or by a local authority
should become an economic development burden on the appointed day, but only if there has been registered before that day a notice identifying the condition
(g)	A qualifying condition which – 
(i)	has the purpose of promoting the provision of facilities for health care, and
(ii)	is enforceable by Scottish Ministers 
should become a health care burden on the appointed day, but only if there has been registered before that day a notice identifying the condition.
(h)	In each case the burdened property should be the land the lease of which was subject to the condition.
(i)	In the case of a service burden the benefited property should be any land to which the services are provided.
(j)	A manager burden should be held by the person on whom power is conferred. 
(k)	A conservation burden should be held by the conservation body or, as the case may be, Scottish Ministers.
(l)	A personal pre-emption burden or a personal redemption burden should be held by the person previously entitled to enforce the qualifying condition.
(m)	An economic development burden should be held by the local authority, or as the case may be, Scottish Ministers.
(n)	A health care burden should be held by Scottish Ministers. 
(Draft Bill ss 18, 19, 20, 21, 22, 23(2), 24)
Other conditions: the position of landlords
4.42	Conversion by nomination of benefited property. With the dissolution of the relationship of landlord and tenant there is a corresponding dissolution of the network of rights and obligations by which the parties were formerly connected.  On the appointed day, therefore, the (former) landlord will lose the right to enforce the conditions of the lease.  Nonetheless there is room for an exception.  A landlord who owns other land in the vicinity should be able to reallot the conditions to that other land, at least in certain circumstances.  The conditions would then become real burdens in which the burdened property was the land formerly subject to the lease and the benefited property the land owned, and nominated, by the landlord.  The facility would be available not merely to the immediate landlord under the qualifying lease but to any landlord under a superior lease who had a right to enforce the condition in question.  And it could be used for any qualifying condition, including one of the special conditions mentioned above; for a landlord will not necessarily benefit from the conversion process previously described.  The requirement that the neighbouring land be "owned" would not be met if that ownership was itself subject to a qualifying lease and so liable to be extinguished on the appointed day.  As with the 2000 Act scheme pro indiviso ownership would not be sufficient.  A completed title is not required.
4.43	The equivalent procedure in the 2000 Act suggests a model on the following lines.  The landlord draws up a notice in a prescribed form.  This narrates the landlord's title, identifies the potential benefited and burdened properties, and sets out the terms of the condition.  The notice is served on the tenant, sworn or affirmed before a notary public, and registered in the Land Register or Register of Sasines before the appointed day.  On that day the condition becomes a real burden.
4.44	There are certain restraints, both practical and formal.  To draw up and register a notice involves a degree of trouble and expense.  It is unlikely to be undertaken unless the landlord is confident both as to the value of the conditions and as to the likelihood of a sufficient interest to enforce.  Interest to enforce depends in turn on the nature of the conditions, on the type of breach that might be anticipated, and on the character and location of the land which is to be nominated as benefited property.  The landlord will also be mindful of the new rule introduced by the 2003 Act by which burdens imposed more than 100 years ago may (with some exceptions) be discharged by a simple notice served and registered by the burdened owner.  There may seem little point in converting a condition if it is subsequently extinguished on account of age.  
4.45	To these practical considerations the 2000 Act added a formal restraint.  Normally land was ineligible for nomination as the benefited property unless it contained a permanent building which was in use as a place of human habitation or resort and lay within 100 metres of the burdened property.  The distance measured interest to enforce.  It admitted those cases where protection was most essential while excluding those other cases where the real interest of the landlord was likely to be income from minutes of waiver.  Inevitably the line was not always correctly drawn.  A fixed distance could take no account of locality, topography or type of condition.  For that reason the Lands Tribunal was empowered to waive the 100 metres rule if satisfied that there would otherwise be material detriment to the applicant as owner of the (potentially) benefited property.  The 2000 Act took for granted that applications might not be disposed of before the appointed day.  Hence the superior must register a notice before that day, and the burden survived feudal abolition for as long as the Lands Tribunal takes to consider the application.  These rather elaborate provisions are not needed in the present case.  The relatively small number of leases eligible for conversion means that applications to the Lands Tribunal should occur in small and manageable numbers.  If, as we recommend, applications require to be made within a fixed period – say a year – of royal assent, it will be possible to monitor their progress before the appointed day is set.  That will ensure that no applications are still outstanding on the appointed day.  It may be noted that the decision of the Tribunal is final and that there is no question of further proceedings in a superior court.
4.46	In two cases the 100-metres rule is so obviously inappropriate that it is disapplied even without an application to the Lands Tribunal.  One is for rights of pre-emption and redemption.  The other is where the prospective benefited property is one of the separate tenements, typically minerals or salmon fishings.  In the second case the difficulty is less the distance of 100 metres than the requirement of a building.  Minerals are reserved from leases by implication and hence will often be available to the landlord as a benefited property.  In order to prevent evasion of the 100-metres rule it is necessary to add a requirement that the condition in question was imposed for the benefit of the minerals (or other separate tenement).  A typical example might be a restriction on building designed to prevent subsidence.  Conditions of this kind should be distinguished from conditions which are integral to the mineral reservation itself and which will survive the appointed day on other grounds.
4.47	We recommend that
5.	(a)	A qualifying condition should become a real burden on the appointed day if, before that day, the landlord registers a notice in which other land belonging to him is nominated as the benefited property.
(b)	The burdened property should be the land the lease of which was subject to the condition, and the benefited property the land so nominated.
(c)	Normally land should not be eligible for nomination as the benefited property unless it contains a permanent building used as a place of human habitation and resort and lying within 100 metres of the burdened property.
(d)	But land not complying with paragraph (c) above should be eligible for nomination if –
(i)	the condition is a right of pre-emption or redemption;
(ii)	the land is a separate tenement (such as minerals or salmon fishings) and the condition was conceived for the benefit of that land; or
(iii)	paragraph (c) is waived by the Lands Tribunal on an application by the landlord.
(e)	An application to the Lands Tribunal should be made not later than one year after the relevant provision comes into force; and the Tribunal should grant the application only if satisfied that, in the event of the condition being extinguished, there would be material detriment to the applicant as owner of the nominated land. 
(Draft Bill ss 13,15, 16 and 17)
4.48	Conversion by agreement.  An alternative to a Lands Tribunal application is a voluntary agreement with the tenant.  Indeed an attempt to reach such an agreement should be a prerequisite for such an application, as under the 2000 Act.  Normally the agreement would be for certain conditions of the lease to survive and be enforceable as real burdens by the (former) landlord in his capacity as owner of neighbouring property.  This could not be put in place, as the law currently stands, until after the appointed day, for a tenant cannot burden property which is not yet his.  Some statutory assistance therefore is required.  Following the 2000 Act we recommend that
6.	(a)	A landlord should be able to serve on the tenant a notice inviting the tenant to enter into an agreement for the conversion of conditions into real burdens.
(b)	If an agreement is duly entered into and registered before the appointed day, on that day the conditions should become real burdens in respect of which –
(i)	the burdened property is the land the lease of which was subject to the conditions, and 
(ii)	the benefited property is the land nominated in the agreement, being land which at the time of the agreement was owned by the landlord.
(Draft Bill s 14)
Other conditions: the position of third parties
4.49	Introduction.  Usually leasehold conditions are a matter for the landlord alone.  More precisely, the rule is that the qualifying lease is enforceable by the immediate landlord while more remote landlords can enforce such terms of superior leases as are prestable against subtenants.  Only rarely do enforcement rights attach to third parties, such as neighbours holding under other ultra-long leases.  In this section we review the existing position of third parties and consider how such enforcement rights as currently exist might survive the appointed day.
4.50	Express rights.  An initial distinction is between rights expressly conferred by the lease or other deed and rights which arise by implication.  The former are rare.  Almost the only example commonly encountered is a condition such as the following:
"and it is further agreed and declared that the said [name of tenant] and his foresaids shall not be entitled to erect on said piece of ground or to convert the house erected or to be erected thereon into candlemakers or crackling houses tan works foundries powder houses breweries distilleries steam mill or slaughter houses or any building whatever that may be deemed a nuisance and hurtful to the neighbouring feuars and tenants nor to carry on in said subjects any nauseous chemical preparations noxious or noisy manufactures and it shall be competent to any of the neighbouring feuars and tenants as well as to the proprietor of the subjects hereby let for the time to maintain action for preventing and removing nuisances of every kind ... “
4.51	There is no reason why rights of this kind should fall with the lease.  Neighbours will continue to exist after the appointed day, and their interests will remain in need of protection.  Enforcement rights which are expressly conferred should, in our view, survive conversion of the lease and become real burdens in which the benefited property is the neighbouring land nominated in the deed.  This could happen automatically, without registration of a notice.  If the land is identified only by some general expression – "neighbouring" in the example quoted above – it will be for the courts to determine identity, as at the moment.
4.52	Implied rights: common schemes.  In feus it was common for enforcement rights to arise by implication.  In a series of cases, of which Hislop v MacRitchie's Trs was the most important, it was held that where neighbouring owners hold land subject to broadly the same conditions and imposed by the same superior, the conditions may, in certain circumstances, amount to a "common scheme" which is mutually enforceable among the owners. In the absence of authority it is unclear whether comparable rules apply in the case of leasehold conditions and the matter cannot be regarded as completely closed.  Whatever the current position, it seems necessary to follow the regime provided by section 53 of the 2003 Act as to do otherwise would be anomalous and potentially confusing.  We suggest therefore that where qualifying conditions are imposed under a common scheme on a group of related properties, such conditions should become real burdens on the appointed day in which each property would be both a burdened and benefited property.  A typical example of a group of related properties would be flats in the same tenement.  The real burdens created would be classified as community burdens.  
4.53	Implied rights: partial assignations.  There is another situation where, in the law of real burdens, enforcement rights may arise by implication.  This is where land is disponed (as opposed to feued) and burdens are imposed in the disposition.  If other land was retained by the granter, the retained land is usually, by implication, the benefited property in the burden.  The directly equivalent situation, for leasehold property, is the partial assignation.  Doubts as to whether real conditions could be imposed in assignations were removed, with retrospective effect, by legislation in 1985 but enforcement remains problematic.  An example explains why.   Suppose that A holds 3 hectares on a 999-year lease.  He assigns the lease to B in respect of 2 of those hectares.  The assignation contains a number of conditions designed to protect the amenity of the remaining hectare retained by A.  Who can enforce the conditions?  The relevant legislative provision says merely that, on registration, the conditions
"shall be as effectual against any singular successor of the assignee in the subjects assigned as if such assignee had been a grantee of the lease and it had been duly recorded or, as the case may be, the grantee's interest had been so registered."
4.54	The meaning of this provision is difficult to grasp.  A possible reading is that conditions in an assignation are deemed to be conditions of the lease itself, and hence enforceable by the landlord against the assignee, now his tenant.  But it seems improbable that it was intended to give enforcement rights to the landlord in relation to conditions generally imposed for the benefit of the cedent (or perhaps of co-assignees).  A more natural reading of the provision, therefore, is that it does no more than ensure that the assignee, and successors, are to be bound.  This, however, leaves open the question of title to enforce.  One view would be that, on analogy with the rule for dispositions mentioned earlier, a condition imposed in a partial assignation is by implication enforceable by the cedent as tenant of the retained land.  Another view would be that enforcement rights arise only if expressly created in the assignation; otherwise the condition is merely contractual in effect.  This second view seems so contrary to the evident intention behind the 1985 Act that it should probably be discarded.  But if the first view is to prevail it seems necessary to make express legislative provision on the subject.  The rule suggests itself.  If qualifying conditions are imposed in, or in association with, a partial assignation, they should be treated as enforceable by the cedent and his successors as tenants of the land which is retained.  This means that the procedure for conversion by notice, described earlier, would be available.  For the tenant of the retained land would, by statute, have title to enforce the conditions, and his tenancy under an ultra-long lease would qualify as "ownership" for the purposes of nominating other land as a benefited property.  If a notice were duly registered, the conditions would, on the appointed day, become real burdens in which the burdened property was the land subject to the partial assignation and the benefited property the land retained by the cedent.
4.55	Recommendation.  Our various proposals in relation to third party rights may be drawn together in the form of a recommendation that
7.	(a)	A qualifying condition expressed as being enforceable by the owner or tenant of other land should, on the appointed day, become a real burden in respect of which –
(i)	the burdened property is the land the lease of which was subject to the condition, and
(ii)	the benefited property is the other land.
(b)	Qualifying conditions imposed under a common scheme on a group of related properties should, on the appointed day, become real burdens in respect of which each property is both a benefited and a burdened property.
(c)	Where, before the appointed day –
(i)	a lease was assigned in part, and 
(ii)	a qualifying condition was imposed in, or in association with, the assignation
the cedent and his successors as tenants of the retained land should have title to enforce the condition and accordingly should be able to convert the condition into a real burden by a notice in accordance with recommendations 17 and 18 or by an agreement under recommendation 19.
(Draft Bill ss 12(3), 25, 26)
Conditions reserving development value
4.56	One other aspect of the 2000 Act scheme may be mentioned.  Section 33 provided that where land was feued subject to a real burden enforceable by a superior which reserved for the superior the benefit of any development value of the land, and either there was no consideration, or the consideration was significantly lower than it would have been had there been no such burden, then the superior could reserve the right, under certain circumstances, to claim compensation following feudal abolition..  In our discussion paper we questioned whether ultra-long leases were ever used to reserve development value in this way, and expressed reluctance to reproduce the, rather complex, provisions of the 2000 Act on this subject unless they were clearly necessary.  Only four consultees offered views on this subject.  A working party of the Law Society of Scotland observed that, in its experience, development value burdens have not been a common feature of ultra-long leases entered into in the last 20 years or so but that the subject of compensation merited further consideration. Two consultees thought that compensation ought to be provided.  One consultee considered that the former landlord should have the right to oppose future development but, if it proceeded, the development value should be shared equally.  We accept the view that compensation should be payable; but the probable scale of the problem argues for a less ornate solution than that provided under the 2000 Act.  The details are considered later, in part 6.
Prior variation or extinction of conditions
4.57	A condition will be converted only in the form in which it exists on the appointed day.  If it has been varied – whether by judicial process, by voluntary deed, or by acquiescence – the terms of the real burden will reflect that variation.  And if the condition has been extinguished, there is nothing that can be the subject of conversion.  It will be borne in mind that variation or even extinction may occur as a result of events furth of the register.
One choice
4.58	A condition may be converted under more than one head.  A maintenance obligation in a tenement, for example, would qualify for conversion both as a facility burden and under the special rules for common schemes.  Or a condition which was subject to express enforcement rights in favour of a third party might also be converted by the landlord by registration of a notice nominating neighbouring property.  Double conversion of this kind is unobjectionable.  Its effect is merely to enlarge the class of those entitled to enforce the burden.  What is less acceptable, however, is that the same person should be able to acquire enforcement rights under separate heads of conversion.  A landlord should not be able to convert the same condition into both a neighbour burden, by nomination of neighbouring property, and into a conservation burden.  That is to strengthen his position beyond its present level.  Nor should he be able to register an agreement reached with the tenant on enforceability and at the same time register a notice which further extends his enforcement rights.  Instead a choice must be made.  The landlord is free to register an ordinary notice of conversion, or a special notice for conservation burdens, or an agreement reached with the tenant.  But he can only register one such document.  The choice, however, would not necessarily be final.  A different option could be pursued later provided that the notice or agreement first registered is formally discharged.  But this must be done before the appointed day.  After that day it is too late to register notices or agreements.
4.59	We recommend that
8.	Where a notice or agreement has been registered under recommendations 17, 18 or 19 it should not be possible to register another notice or agreement in relation to the same condition unless the earlier notice or agreement has been discharged and the discharge registered.
(Draft Bill s 30(1) and (2))
Notices
4.60	Service.  A notice for conversion of conditions into real burdens is of less immediate importance, from the tenant's point of view, than a claim for compensation.  A notice does not require the tenant to do anything.  It preserves existing rights.  The tenant is no worse off than before.  A notice could be challenged but in general a challenge later is as good as a challenge now.  The existence of the notice appears from a public register and will come to light, at latest, when the proprietor sells.  Nonetheless we think that, wherever possible, the tenant should be informed of the notice.  Accordingly, we propose a general duty on the landlord (or third party enforcer) to send a copy of the notice.  The notice should be accompanied by an explanatory note in a prescribed form.  This explains the background to the notice and its implications for the recipient.  The notice should be sent by post.  In the normal case we imagine that it will be sent to the tenanted property.  If the name of the tenant is unknown it will be sufficient to address the envelope to the "tenant".  Occasionally service may turn out to be impracticable, generally because the tenant has abandoned the property and disappeared.  In that case service is excused but the circumstances must be explained in the notice.
4.61	Slightly different considerations apply in respect of the notice which precedes an agreement with the tenant.  By itself such a notice achieves nothing.  It is merely a preliminary stage on the path to an agreement.  The notice is not registered, only the agreement.  This suggests that, following the 2000 Act, the rules of service might be less formal and extend to delivery as well as posting.  If service fails it will be because the tenant is nowhere in evidence.  There will then  be no question of an agreement and, the landlord having done his best, the proper course of action will be an application to the Lands Tribunal to waive the 100 metres rule.
4.62	Separate notices and combined notices.  Following the 2000 Act, a separate notice is needed for each property.  So if the same person is landlord of six different properties each held under an ultra-long lease a separate notice must be prepared for each property. The rule is the same if the properties, or some of them, were originally part of a single lease which came to be divided by partial assignation or sublease.  There is no objection, however, to using the same notice for different conditions which affect the same property.
4.63	Recommendation.  We recommend that
9.	(a)	Except where it is not reasonably practicable to do so, a copy of the notice (and explanatory note) should be sent by post to the tenant before registration.
(b)	A separate notice should be used for each property.
(Draft Bill ss 30(3), (4) and 62)
Registration
4.64	As usual with the creation of real burdens, the notice or agreement should be registered against both the burdened property and the benefited property.  The former is the property affected by the qualifying lease and the latter the property nominated by the landlord or third party enforcer.  With conservation burdens and the other personal burdens there is no benefited property and therefore no requirement of dual registration.  So far as the burdened property is concerned, only the title sheet (or search sheet) for the tenant's interest will list the conditions and so registration should in the ordinary course of events be against that interest.  But registration against the landlord's interest ought to be available as an alternative.  Since the Keeper will have to examine both interests in making up a title sheet, it is thought that registration against the landlord's interest would not cause difficulties in practice.  Sometimes the benefited property too will be subject to a (different) qualifying lease, in which case there should likewise be an option of registration against either interest. 
4.65	We recommend that
10.	(a)	A notice or agreement should be registered against both the burdened property and (except where there is no such property) the benefited property.
(b)	If property is subject to a qualifying lease, registration may be against either the interest of the tenant or the interest of the owner.
(Draft Bill ss 13(6),(7), 14(7),(8), 18(4), 19(3), 20(3), 21(4), and 22(4))
Invalidity
4.66	Introduction.  Most notices will be valid.  But a notice might be invalid for a number of different reasons.  The landlord's building might be 101 metres from the tenant's property.  The landlord's title might be radically defective, whether to the property which is leased or to the neighbouring property nominated in the notice.  The landlord might be incapax, or might fail to sign properly.  Doubtless there are other possibilities.  Naturally mistakes in a notice will sometimes be uncovered during the registration process.  But the Keeper cannot be expected to check everything, and later we list a number of matters that he should not be required to consider.  If an invalid notice is accepted for registration, the mere fact of registration does not cure the invalidity.  It is true that a notice will not take effect on the appointed day unless it has been registered; but registration is only one of the conditions that must be satisfied.  If a notice is registered but invalid, the question then arises as to how it may be challenged.
4.67	Applications to the Lands Tribunal.  Notices sent under the 2000 Act can be challenged before the Lands Tribunal.  The same should be true of notices sent under the proposed new legislation.  We recommend, therefore, that
11.	(a)	The Lands Tribunal should be empowered to make an order discharging or restricting a notice on cause shown.

(b)	An extract of the order should be capable of registration, and on registration should take effect as respects third parties.
(Draft Bill s 64)
4.68	Under this recommendation an order would enter the Land Register by registration rather than by rectification, thus avoiding the protection against rectification given to proprietors in possession.
4.69	Application for rectification.  An obvious defect does not require to be declared by judicial process.  Instead, in Land Register cases, a direct application can be made to the Keeper for rectification of the Register.  The protection for proprietors in possession would not apply, under recommendations made later, and no indemnity would be due.  Thus the Keeper would be free to correct the error by making the appropriate amendment to the Register.
4.70	Challenge to the burden itself.  Notices have short lives.  On the appointed day the notices operate to convert leasehold conditions into real burdens.  Thereafter their task is done.  Thus after conversion another way of attacking a notice is to attack the burden itself, whether in the ordinary courts or in the Lands Tribunal.  The 2003 Act confers jurisdiction on the Lands Tribunal to determine the validity of burdens.  An application under this jurisdiction could challenge the burden on any ground and not merely on the ground that the notice was invalid.  Alternatively, an application could be made to the Tribunal under its jurisdiction for the variation and discharge of burdens.
Conditions affecting the landlord or third party 
4.71	Leasehold conditions may affect a landlord as well as a tenant.  In fact express obligations on the landlord are uncommon in ultra-long leases, but obligations may be implied – for example, a warranty of title, or that the subjects are reasonably fit for the purposes of the lease.  Not all obligations bind successors of the original landlord: in order to do so, the obligation must be classified as inter naturalia of the lease.  Once a lease has been converted, it seems clear that the obligations on the former landlord should fall.  Almost always, they are closely connected with the obligant's status as landlord and, once that status is lost, cease to be appropriate.  But even if that were not so, there would be the technical difficulty of identifying a property to which the obligations could attach.  In the case of feudal abolition the 2000 Act made clear that superiors' obligations were extinguished on the appointed day.  An equivalent rule for landlords was recommended earlier, in part 3.  Nonetheless two qualifications seem necessary.
4.72	It occasionally happens that an obligation on the landlord is the direct counterpart of an obligation on the tenant.  For example, the tenant may be bound to pay for maintenance which is then to be carried out by the landlord.  And indeed counter-obligations are not confined to landlords but may also affect third party enforcers.  In a case where the tenant's obligation is converted into a real burden, under the rules suggested earlier, then any counter-obligation should survive also and be binding on the former landlord or third party or (in the case of facility or service burdens or burdens affecting a group of related properties) on any replacement enforcer.  Consultees were in agreement with this proposal.  The notice – in those cases where a notice is required for conversion – would give details of the counter-obligation.  The counter-obligation could not be independently enforced, but enforcement of the real burden would be prevented for as long as the counter-obligation remained outstanding.  An equivalent rule is provided for in the 2000 Act.  A counter-obligation is extinguished on the extinction of the real burden to which it relates.  Our formal recommendation is that
12.	The enforcement of a qualifying condition (now a real burden) after the appointed day should be subject to compliance with any obligation which, before that day, was the direct counterpart of the condition. 
(Draft Bill s 28)
4.73	A second exception was mentioned earlier.  Any obligation in the nature of a servitude affecting other land belonging to the landlord would, on the appointed day, be converted into a servitude proper.  It would therefore survive the extinction of the lease. This principle has no direct equivalent in the 2000 Act scheme.
Conditions enforceable contractually
4.74	The 2000 Act makes an express saving for conditions of the feu insofar as they are enforceable contractually.  Conditions are enforceable contractually only in a question between the original parties (or their assignees).  This means that for as long as the original superior and vassal are in place, the conditions of the (former) feu will continue to be enforceable.  In practice this affects mainly former real burdens and so works for the benefit of the former superior rather than the former vassal.  Almost all consultees agreed that this principle should not be extended to leasehold conversion.  All or most conditions of a lease presuppose the continued existence of the relationship of landlord and tenant.  In the absence of such a relationship the conditions would be inappropriate where they were not actually oppressive.  That is as true of conditions affecting the landlord as of conditions affecting the tenant.  For example, it is difficult to see why a former landlord should continue to be bound to ensure that the subjects are reasonably fit for the purposes of the lease.  If there is no lease, there can be no purposes; and the former landlord has no further connection with the subjects.  The argument seems even stronger in relation to landlords – and tenants – of leases superior to the qualifying lease.  
4.75	A technical consideration reinforces the argument.  Suppose that, on the appointed day, the original parties to the lease were still in place.  A rule which preserved contractual liability would treat the two parties differently.  The (former) tenant would be relieved of liability as soon as he sold the property (of which he is now the owner); and no such liability would be acquired by the purchaser. But the (former) landlord would not be in this fortunate position.  His leasehold interest having been extinguished on the appointed day, there is nothing left to sell.  A rule which provided for continuing contractual liability would impose on the landlord an obligation from which there was no escape. 
4.76	It remains to consider the details of the proposed rule.  The essential distinction is between conditions which of their nature bind successors of either the landlord or tenant and conditions which do not.  Qualifying conditions are a characteristic, but non-exhaustive, example of the first category.  Other examples would include an implied obligation of maintenance binding on successive landlords, or the obligation of a tenant to pay rent.  While such conditions will usually be terms of the lease itself (whether express or implied) they may also be found in assignations and in deeds of conditions or other deeds granted in association with such assignations.  Except for obligations of warrandice, conditions of the second type – contractual obligations pure and simple – are uncommon in ultra-long leases.  They do not bind successors because, as a general rule, they are not inter naturalia of the lease.  
4.77	In our view conditions which are purely contractual in nature should be left undisturbed by the legislation.  Conditions of this kind are personal to the parties and not intrinsic to the relationship of landlord and tenant. There is no reason why they should not survive the dissolution of that relationship.  Conversely, conditions which bind successors should be swept away unless they can be saved under the provisions recommended in this and other parts of the report.  They should not have a second life as contractual obligations.  A parallel distinction is drawn in the 2003 Act.  Our recommendation therefore is that
13.	Notwithstanding recommendation 11, there should not be extinguished any rights or obligations that are binding only on the original parties.
(Draft Bill s 4(2))