Lease structures - Scotland
Scotland has its own legal system and there are significant differences in the law relating to commercial leases from that in England and Wales.
A brief summary of these differences are as follows:-
Lease Terms
In Scotland there is no equivalent to the Landlord and Tenant Acts. There is little legislation or case law relating to leases in Scotland.
A Scottish lease will usually contain all terms. There are no terms implied or imported by statute although common law provisions may be imported if the lease is silent.
Registration
In Scotland, for a tenant to acquire a real right for more than 20 years, the lease must be registered in the Land Register.
Generally, leases will also be registered in the Books of Council and Session to allow landlords the protection described above.
Duration
The maximum duration for a commercial lease is 175 years and for a residential lease 20 years.
Quarter Days
The Scottish quarter days are 28 February, 28 May, 28 August and 28 November.
Privity of Contract
The Landlord and Tenant (Covenants) Act 1995 amended the law relating to privity of contract in England. This concept has never had application in Scotland unless the parties agree in the lease that the original tenant should remain liable to the landlord throughout the term of the lease after assignation (assignment).
Keep Open
These clauses are enforceable in Scotland in certain circumstances but not in England, but may have an impact on rent review.
Liability for Repairs
In Scotland under common law, a landlord is obliged to put the premises at commencement of the lease into a tenantable condition and to repair any defect which renders the premises less than wind and watertight. Usually this obligation is excluded in the lease, with tenants taking on a full repairing obligation.
Damage/Destruction of the Premises
In the event of damage or destruction the tenant in Scotland is entitled at common law to an abatement of rent (although these provisions are normally expressly provided for in the lease).
Also at common law if there is damage or destruction of the leased premises the lease can automatically come to an end unless the lease provides to the contrary.
In England damage or destruction will not necessarily bring a lease to an end.
Lease Termination
A Scottish lease ends at the stated period (subject to very limited continuation rights)
A landlord has no right to recover possession before the actual expiry unless the tenant has defaulted or a renunciation (surrender) of the lease is agreed.
Compensation and Termination
In Scotland a tenant is not entitled to compensation for improvements at the end of the lease.
Notice
Generally speaking the period of notice required to terminate leases in Scotland is 40 days prior to the termination date; this may, however be increased by agreement between the parties. Different rules apply depending on the length of the lease and the extent (and type) of the subjects let.
Tacit Relocation
The principle of tacit relocation will apply where a landlord or tenant has failed to give the appropriate notice to terminate the lease.
If no termination notice is served, the lease will continue under tacit relocation on the same terms including the rent then payable, for a period of one year if the original lease was for a term of one year or more. If the term was for less than one year, it will continue for an equivalent period. Tacit relocation will operate from year to year until the appropriate notice to terminate is served by either party.
Tenancy of Shops
Under the Tenancy of Shops (Scotland) Act 1949 a tenant of a shop may apply to the court for a short extension of the term of the lease where the lease has come to its natural expiry.
Lease Renewal
Apart from tacit relocation and the Tenancy of Shops Act (Scotland) Act 1949, there is no provision which entitles tenants to renew leases upon expiry.
Sub-leases/Under-leases
In England, if a tenant grants a sublease for the remainder of the term of its head lease it will be deemed to be an assignment of the lease to the subtenant. This is not so in Scotland. Thus it is permissible in Scotland to grant a sublease for the duration of the entire unexpired duration of the lease.
In Scotland if a head lease falls for any reason whatsoever, so does the sub-lease. There is nothing to allow a subtenant to step into a tenant’s place, as in England.
Variation of lease
In England, if parties to a lease agree to vary the premises or to extend the term, this can be deemed to be a surrender of the old lease and a re-grant. This could create difficulties if the old lease was entered into before The Landlord and Tenant (Covenants) Act 1995 came into effect. This legislation has no application in Scotland.
