A local authority's action for recovery of possession of a flat based on the tenant's rent arrears has been dismissed by a sheriff because of an agreement reached with the tenant that he could remain in the property on payment of an agreed sum.

Sheriff Kathrine Mackie at Edinburgh Sheriff Court held that the agreement between Edinburgh City Council and Martin Smith constituted a further contractual tenancy, despite the council's argument that they had simply been giving the tenant an opportunity to comply with his obligations before seeking decree.

The council initially let the flat to Mr Smith under a short Scottish secure tenancy agreement in 2010, for a period of six months, and thereafter on a month to month basis. In December 2014 it served notice requiring him to remove by 11 February 2015. It subsequently raised the action seeking recovery of possession and decree for payment of £809.25 in rent arrears.

When the case called in October 2015 the sheriff was advised that an agreement had been reached with Mr Smith under which he would remain in occupation of the property on payment of an agreed sum. The council did not seek decree but moved to adjourn the case to a later date. The sheriff invited the pursuers’ agent to address the court more fully on the nature of the agreement between the parties.

Counsel argued that at common law a landlord might waive the effect of service of a notice to quit as bringing the lease to an end. Under the Housing (Scotland) Act 2001 the tenancy continued until the court granted an order for recovery of possession. The requirements for creatng a new tenancy had not been met.

Ruling against the council, Sheriff Mackie said: "It is difficult to conceive of any other interpretation of the agreement reached between the parties than that a tenancy has been created. While the pursuers’ counsel was at pains to stress that the defender’s continued occupation of the subjects was conditional upon his payment of the sum agreed, that might be said to be the case in any lease. A landlord generally has grounds to recover possession of the subjects if the tenant accrues arrears of rent."

The condition for granting an order for recovery, that no further contractual tenancy was in existence, had therefore not been met. "It is not for the court to determine what type of tenancy has been entered into but simply to ascertain if a further contractual tenancy is in existence at the time that an application is made for an order for repossession", the sheriff stated.

She added that since the council had chosen to proceed under s 36 of the Act, the "sword of Damocles" that it wished to hold over the tenant could only continue for the six months within which it could enforce any decree.

Click here to view the judgment.