Outer House judge rules tenant of pharmacy entitled to remove own fixtures at termination of lease

Outer House judge rules tenant of pharmacy entitled to remove own fixtures at termination of lease

A commercial judge in the Outer House of the Court of Session has ruled that the tenant of a pharmacy was not obliged to leave its fixtures and fittings behind upon return to the landlord at the end of the lease.

David Tanner, who previously operated pharmacies trading as David Tanner Ltd, argued that E Moss Ltd, part of the Boots group, had not been entitled to remove items from the subjects under the terms of the lease. The defender had left the premises as a shell at the conclusion of the lease in August 2018.

The case was heard by Lord Ericht. Thomson QC appeared for the pursuer and Massaro, advocate, for the defender.

Significant windfall

Prior to the commencement of the lease, companies within the Boots group, including the defender, took over chemists previously operated by the pursuer’s company. The company sold the premises to the pursuer, who then leased them to the defender. As part of this arrangement, in 2003 the parties entered a fifteen-year lease of a chemist’s shop in Hamilton ending on 31 August 2018.

The defender did not vacate the premises until 19 December 2018 and left the premises as a shell. The pursuer invited the court to conclude that on a proper construction of the lease, the defender had no right to remove its fit out from the subjects, or alternatively that such a right expired at the end of the lease on 31 August 2018.

Counsel for the defender submitted that the lease did not disapply the common law which entitled them to remove their moveables and trade fixtures. They argued that no landlord’s fixtures existed at the start of the lease as any fixtures had all been owned by David Tanner Ltd rather than the pursuer, who stood to obtain a significant windfall if he had a right to insist on a fitted out pharmacy provided to him.

It was conceded by the pursuer that what constituted a tenant’s fixture was a question of fact and enquiry might be necessary. However, if the tenant’s fittings were not removed during the term, they were irrevocably ceded to the landlord. On a proper construction of lease, it was entirely a matter for the pursuer whether any trade fixtures and fittings were to be removed or left, with the contractual language being more than adequate to disapply any common law rules.

Not excluded

In his opinion, Lord Ericht observed: “The defender accepts that it was wrong to reduce the premises to a shell. It accepts, for example, that it was wrong to remove items such as an air condition system, partition walls forming a 10 consultation room, a CCTV system, sinks and basins, water heaters, power installations, IT cabling and the amount due in damages in respect of such items is agreed in the Scott schedule.”

Addressing whether the tenant was entitled to remove moveables, he said: “Prior to the transaction, the premises and the moveable items within it were owned by the Company. The disposition of the premises by the Company to the pursuer carried with it any items which had acceded to the heritage and had therefore become heritable themselves. It would not carry within it any moveable items which had not acceded, and any such moveable items would remain as the property of the Company when the defender purchased the shares in the Company.”

Turning to the classification of the fixtures, Lord Ericht said: “The lease makes no specific provision as to whether or not the tenant is entitled to remove tenant’s fixtures. It provides only that the landlord may require the tenant to remove its fit-out. ‘Fit-out’ is not defined. I agree with senior counsel for the pursuer that it means tenant’s fixtures.”

He continued: “The Landlord’s option in clause 2(8) to require the tenant to 14 remove tenant’s fixtures is no more than a mechanism to enforce the common law by compelling the tenant to remove the tenant’s fixtures and reinstate the premises. If the option is not exercised that does not mean that the common law is excluded but merely that the landlord has chosen not to operate that mechanism.”

Lord Ericht concluded: “Tenant’s fixtures may be removed within a reasonable time of expiry of the lease. What is a reasonable time will depend on the circumstances, and there must be a point of time beyond which a right to remove tenant’s fixtures of recovery is lost because it must be presumed that that right has been given up. The pursuer does not aver an esto case that the removal was not within a reasonable time. I find that the defender was entitled to remove tenant’s fixtures between the expiry of the lease on 31 August 2018 and the cessation of occupation on 19 December 2018.”

The case was thereafter put out by order for discussion of the appropriate interlocutor to give effect to Lord Ericht’s decision.

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