Tenants of Scottish commercial premises are to benefit from an extended eviction notice period.

Last week, the Coronavirus Act 2020 brought into force a plethora of emergency arrangements across the UK to support businesses in light of the COVID-19 crisis. Notably for real estate, the Act granted commercial tenants a protection from termination of a lease by a landlord on grounds of non-payment of rent, until 30 June 2020. However, this protection extends only to England, Wales and Northern Ireland, and does not extend to Scotland. It has now been confirmed that the Scottish Government will be implementing its own protection for Scottish commercial tenants, under the Coronavirus (Scotland) Bill. 

Current law on irritancy in Scotland

The current law is that a landlord must give a tenant at least 14 days’ notice before being able to irritate (i.e. terminate) a commercial lease due to non-payment of rent or other sums due. If the tenant makes good its breach by paying the sums due in that 14-day period, the landlord can no longer irritate the lease. This is a statutory minimum period, so if the lease itself provides for a longer period to be given to the tenant, then it is the longer period that applies. 

Change to be introduced by Coronavirus (Scotland) Bill

The Coronavirus (Scotland) Bill proposes to change the statutory minimum notice period from 14 days to 14 weeks for the duration of the Bill. 

This applies irrespective of whether or not the tenant is already in breach by the time the Coronavirus (Scotland) Bill comes into force. It also applies even if a 14-day pre-irritancy notice has already been served by the time the Coronavirus (Scotland) Bill comes into force (as long as the 14-day period has not already expired). If a landlord has already served a pre-irritancy notice which is extant, they will need to start again and serve a new notice giving the required 14 weeks' notice (or any longer period required by the lease).

The Scottish Ministers reserve the right to alter the 14-week minimum period by regulations. This reflects the fact that, in a situation of national emergency, flexibility is needed for governments to be able to adapt a solution to fit the problem at any given time. 

Timescales

These are emergency provisions and it is intended that they will be in place for a temporary period only. It is anticipated that the Bill will come into force in the week beginning 6 April 2020. The initial duration of the Coronavirus (Scotland) Bill is until 30 September 2020. However, the Scottish Ministers cannot at this stage be certain of the length of time these measures will be necessary. They can therefore opt to extend the Bill until 31 March 2021, and then again until 30 September 2021, although everyone will hope this is not necessary.

Continuing obligation to pay rent

All that this change does is give a tenant the comfort of having a longer period to make a (late) payment before the lease can be irritated by the landlord. It is important to note that there are various things that the Bill does not do. It does not alter a tenant's obligation to pay the rent or other sums to the landlord on the date due under the lease. There is no statutory entitlement to reduce the rent due, to delay payment or to have a rent-free period. The Bill also does not change any other remedies that landlords may have for recovering arrears. Nor does it alter any rights of landlords to irritate on the grounds of non-monetary breach.

If it is necessary to reduce the rent or other sums due, or change the payment provisions, this can only be done by agreeing it with the landlord. Such agreements are being made in the market already, but it is important to remember that this is not automatic. If the parties agree short-term concessions for payment of rent and other sums, this should be documented appropriately to avoid any unintended consequences. The parties should also make sure any required consents are obtained, for example from lenders, head landlords, etc.

Commerciality and co-operation

It may well be that many landlords would not wish to irritate in the current climate anyway. If a lease is irritated, the landlord might struggle to re-let the premises and could find itself with potential service charge and insurance premium shortfalls, as well as a business rates liability once empty property relief expires. Co-operation between parties is essential right now, as all businesses feel the consequences of the global pandemic. Hopefully a commercially sensible approach and spirit of co-operation can see landlords and tenants alike through to the other side of this public health crisis.

For more guidance on the impact of COVID-19 on commercial leases, see our interactive COVID-19 commercial lease tool for England, Wales and Scotland.