Are supermarkets weaponising Title Conditions?
Image: Laura Lapsley, Senior Underwriter
Glasgow has been the recent battleground as retail food stores fight to corner the (super)market – their weapon of choice: title conditions.
The average customer may not imagine that the availability of their favourite bargains could either be prevented or enabled by one or two sentences in a title deed, but that is exactly what happened in two recent cases.
Castle Street (Dumbarton) Developments Limited (Applicant) against Lidl Great Britain Limited (Respondent)
In this case, the applicant’s land was subject to a Disposition by Lidl Great Britain Limited (the respondents) in favour of Castle Street (Dumbarton) Developments Limited (the applicants) registered in the Land Register on 7 July 2021 which contained the following restriction:
“So long as the granter of this Disposition (or another member of the same group of companies) is either a proprietor of or occupies the whole or part of the Retained Property, no part of the Conveyed Property shall be occupied by either (a) any of Aldi, Farmfoods, Iceland, Home Bargains, Tesco, Asda, Sainsbury and/or Morrisons or (b) any operator whose convenience (food) offer accounts for 30% or more of the sales areas of their property on the Conveyed Property.”
The purpose of this non-competition condition was to protect the interests of the Lidl Group of companies. This clear intention was ultimately it’s downfall as the condition was so tightly bound to the interests of Lidl that it was found to contravene the praedial rule (that a real burden should run with the land and benefit future owners – not simply confer a personal benefit on the granter at the time). The tribunal was therefore of the opinion that the burden was invalid.
BNP Paribas Depositary Services (Jersey) Ltd (Applicant) against Safeway Stores Ltd (Respondent)
The Applicant in this case owned a retail park in Anniesland which was subject to a title condition created by a Deed of Mutual Conditions registered in the Land Register on 19 November 1993 which restricted the retail sale of food and groceries.
In recent years, much of the retail park was unoccupied and the only tenants that could be attracted to the park were likely to fall foul of the title condition i.e. supermarkets.
Lidl had expressed interest in the site and so the Applicant requested a discharge of the title condition. This application was opposed by Safeway (now Morrisons) who argued that they would suffer financial loss/loss of trade as a result of the condition being discharged and Lidl opening a competing grocery store in the retail park.
The application for discharge of the burden was ultimately granted in this case with a strong argument being made that the condition was against the public interest (and arguably would not be permitted nowadays in terms of the Groceries Market Investigation (Controlled Land) Order 2010).
Although the applicant in this case was successful in obtaining a discharge of the burden, the Tribunal did order the payment of significant compensation to Morrisons (£1.8m) and the judgement provided a detailed consideration as to how they quantified the “substantial loss or disadvantage suffered”. The court considered a number of factors such as trading performance, the location of the store/population of the catchment area and how this compared to other similar store locations and footfall data from other stores following a competitor opening nearby.
Title Conditions and Title Indemnity Insurance
These recent cases demonstrate that developers/sellers need to be mindful of any restrictive title conditions burdening their property and think about how these may be a barrier to future use and development.
In these transactions title indemnity insurance remains a valuable option as it can often be a more efficient and cost-effective way to protect your client and provide comfort to lenders. Obtaining insurance allows a transaction/development to progress smoothly without having to deal with the uncertainty and timescales of a tribunal decision or the unpredictability of a benefitting proprietor’s response (assuming they can be identified/contacted).
The underwriters at Westcor International Glasgow’s office would be happy to discuss any enquiries you may have in this regard and provide guidance on the availability and benefits of insurance as well as what is covered in the event of a claim.
