Leasing in Scotland – Part 2
Following on from our previous article, we continue to consider various differences in commercial leasing north and south of the border.
Alienation (Assignation and Sub-lease)
In Scotland, once a tenant has assigned their lease, there is no continued liability on them. The new incoming tenant effectively falls into the shoes of the outgoing tenant and assumes all liability.
In England, the outgoing tenant can remain “on the hook” by way of the Authorised Guarantee Agreement. As a result the original tenant may remain liable to perform the incoming tenant’s obligations.
In the case of a Scottish sub-lease, there is no direct relationship between the head landlord and the sub-tenant and the sub-lease is very much dependent on the head lease continuing. If the head lease comes to an end, whether by the tenant breaching its obligations or otherwise, the sub-lease would automatically fall. In England however the sub-tenant is protected and may have the legal right to apply to the court for relief, allowing the sub-tenant to continue to occupy the premises even if the head lease comes to an end.
Removal as a Result of Default
Scotland – Irritancy
In the event of non-payment of rent or the breach of a non-monetary obligation of the lease, the landlord cannot immediately terminate the lease. Under the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, the landlord is required to give the tenant 14 days written notice of the threat of irritancy and give the tenant a chance to remedy the breach in the case of non-payment of rent. In the case of non-monetary breaches, the landlord is only permitted to terminate the lease if it is fair and reasonable to do so.
England – Forfeiture
In England, the process of removal is known as “Forfeiture” whereby it is more difficult to bring a lease to an end when the tenant is in breach of non-monetary obligations. In the event of breach by the tenant the tenant has the option to seek relief on the basis that they will in future comply with their lease obligations.
In the case of non-payment of rent, the lease dictates the timescales for forfeiture which is often 14 days from the date of non-payment.
Under Scots law there is a common law principal that the landlord will keep the property wind and watertight. Further, there is an implied warranty from the landlord that the property is fit for the purpose for which it is let. Most often, to protect the landlord’s position, the common law provisions are replaced (or “contracted out of”) and specific provisions are written into the lease to provide that a) the tenant accepts the property and that it is suitable for the purpose for which it is let and b) the tenant will be responsible for renewing and rebuilding the property, where necessary. Contracting out of the common law makes the repairing obligation more onerous on the tenant. Given this, if acting for the tenant, the repair clause of the lease needs to be carefully drafted to limit the tenant’s liability.
In England, the terms of the lease will determine the repairing obligation of the Tenant. In most cases, depending on the location of the property and the nature of the tenancy, a Tenant will covenant to keep the property “in repair”, “in good repair” or “substantial repair” as the case may be. The wording of the repair clause, as agreed with the landlord, will determine how onerous the tenant’s repairing obligation will be.
It is worth noting that to “keep” the property in repair also places an obligation on the tenant to “put” the property into repair throughout the lease. The effect of this is that the tenant may be called upon to put the property into repair on the first day of the lease. It is therefore imperative for the tenant to be confident that the property is in a sufficient state of repair and condition prior to taking on the lease.
For more information contact Shabnam Hanif.
This article is for general guidance only. We are not, under any circumstances, providing advice or accepting any liability for any party who may seek to rely on the terms of this article.