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  4. Reforms proposed to law on ending commercial leases

Reforms proposed to law on ending commercial leases

5th October 2022 | commercial property

The Scottish Law Commission has today publishes its Report on Aspects of Leases: Termination, recommending new rules for the ending of leases of commercial property in Scotland.

The proposed rules would replace the existing common law of tacit relocation, by which a lease continues automatically at the expiry of the lease period if appropriate notice has not been given (or the tenant remains without removal proceedings). Parties to a lease may be unaware that the law requires prior notice for it to come to an end on expiry. It is not clear whether the present law allows parties to contract out of the requirement to give notice. Nor does the present law supply clear and certain answers to questions relating to the form which such a notice must take or the effect of a sublease on tacit relocation and the need for notice.,

In place of tacit relocation, the Commission recommends a modern, statutory code of automatic continuation. This would set out clear rules on whether notice must be given, the necessary content and timing of notice, and the effect of automatic continuation of a lease. It also makes it clear that parties to a lease may agree that the lease will end on a specified date without the need for notice to be given.

Additionally, the Commission recommends a number of technical amendments to the requirements for the service of other documents which have the effect of bringing a lease to an end, including irritancy notices.

Recommendations are made on the form and content of notices to quit, the manner in which they may be communicated and the persons to whom they must be given. They include default periods for the giving of notice and default rules governing the effect of automatic continuation, including the period for which a lease will continue.

As respects irritancy, there are proposals that pre-irritancy warning notices be made capable of delivery by sheriff officer, and for protections for the interests of lenders relying on a lease as a heritable security.

A further new rule would be an implied term obliging a landlord to repay overpaid rent covering periods after the ending of a lease, addressing a difficulty highlighted for England & Wales in a Supreme Court decision.

The report also considers the possible repeal of the Tenancy of Shops (Scotland) Act 1949, and contrasting views received on the law on confusio (where the landlord's and tenant's interests are combined in the same person), but does not recommend any change to the law in those areas at this stage, for reasons given.

David Bartos, the lead commissioner for the project, commented: "The common law of tacit relocation is unclear and uncertain. Our new scheme of automatic continuation will bring clarity and certainty to both landlords and tenants and increase the attractiveness of investment in commercial property in Scotland."

Access the report here.

 

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