On 4 September 2024, John Swinney announced the Programme for Government for the new Scottish Parliamentary year. Among the 14 Bills which the Scottish Government intends to introduce over the course of the year are two with particular impact on the real estate sector. 

Delivering net zero: Heat in Buildings Bill

Among the themes of Swinney's speech was the net zero agenda, with confirmation that a Heat in Buildings Bill (the Bill) will be brought forward this session. We are promised a Bill which will set a deliverable and affordable direction of travel for homes and businesses, with certainty for industry and supply chains. 

A consultation on the proposed Bill closed on 8 March 2024, with an analysis report awaited. Among the proposals is a prohibition on use of direct emissions heating systems in domestic and non-domestic settings after 2045. All homes and commercial premises will need to adopt zero direct emissions clean heating systems such as heat pumps or electric heating by this date. A minimum energy efficiency standard (MEES) will be introduced initially for the private rented sector (currently to be met by the end of 2028) and then for owner-occupied properties (currently to be met by the end of 2033). 

There will be no prohibition on sale of properties which do not meet the MEES by the backstop date, but private sector properties will not be allowed to be leased to a new tenant. Due to the complexity of commercial premises, there is no current plan to apply the MEES to the sector. 

The consultation also proposed using the Bill and secondary legislation to introduce a legal obligation on purchasers to adopt a clean heating system within a grace period following completion. Views were sought on the length of this grace period for both housing and commercial premises, with between two and five years suggested.

Both a consultation analysis and a draft Bill are awaited. However, it is clear that there is a settled intention to move forward with a version of these proposals, though the final form remains to be seen. 

Modernising the law of commercial leases: Leases (Automatic Continuation etc.) Bill 

This year will see the Scottish Government take forward the Scottish Law Commission's proposals for improvement and simplification of the law governing commercial leasing. This is a highly technical Bill which aims to reform the rules on "tacit relocation" by which leases in Scotland continue if no proper notice is served prior to the expiry date. At present, if notice is not served, a lease of one or more years will continue on the same terms for another year (if the original term is less than one year, then the lease will continue for that period). 

The Bill proposes that the term "tacit relocation" be replaced with the clearer term "automatic continuation" and the term "ish" with "termination date". The common law will be replaced by a statutory code, new statutory notice periods will be introduced and the law will be clarified to confirm that while automatic continuation will apply as a default, parties may contract out of this. 

If automatic continuation is permitted under the terms of a lease then, as is the current common law position, the lease will continue on the same terms as originally agreed. Should the original term be greater than one year, the period of continuation will be one year, or such shorter term (of not less than three months) as agreed within the lease. For leases of between 28 days and one year, the lease will continue for the original term or such shorter term (of not less than 28 days) as is agreed within the lease and, for leases of less than 28 days, the lease will continue for the original term. For further details on the proposals, see the SLC's notes on the draft Bill.

We appreciate the contribution of Paige Alexander in drafting this article.