Leases (Automatic continuation etc.) (Scotland) Bill: equality impact assessment

Equality Impact Assessment for the Leases (Automatic Continuation etc.) (Scotland) Bill

Title of legislation:

Leases (Automatic Continuation etc.) (Scotland) Bill

Summary of aims and desired outcomes of policy:

The Bill implements recommendations of the Scottish Law Commission published in its Report on Aspects of Leases: Termination. The overall policy aim of the Bill is to improve, simplify and update aspects of the Scots law of commercial leases so that it meets the needs of a modern Scottish economy.

Directorate:

Justice

Division:

Civil Law and Legal System

Team:

Private Law

Executive summary

The Bill implements recommendations of the Scottish Law Commission published in its Report on Aspects of Leases: Termination. The overall policy aim of the Bill is to improve, simplify and update aspects of the Scots law of commercial leases so that it meets the needs of a modern Scottish economy. The EQIA process has confirmed that the proposed Bill has no impact on a protected characteristic and so no direct changes have been made to the policy as a result of this EQIA.

Background

The Bill implements recommendations of the Scottish Law Commission published in its Report on Aspects of Leases: Termination (“the Report”).^[1] A lease is an agreement under which one party, the landlord, grants to another, the tenant, the right to use land or buildings for a definite period of time in return for regular periodic payments, more commonly referred to as rent. There are three main types of lease in Scotland: agricultural leases; residential leases; and commercial leases. It is essentially the last category with which the Bill is concerned^[2].

The Scots law of commercial leases is principally governed by common law rules. Where that law is not clear or readily accessible, this can result in unnecessary costs for landlords and tenants. Aside from the monetary costs incurred by legal fees, this can involve delay and inconvenience to tenants and landlords. Needless disputes and litigation can occur with the result that investment in Scotland may be deterred.

The overall policy aim of the Bill is to improve, simplify and update aspects of the Scots law of commercial leases, particularly in relation to the circumstances in which leases continue after their termination dates, so that it meets the needs of a modern Scottish economy. Most businesses, large or small, operate at least to some extent from let premises, entering into leases for a variety of uses - from manufacturing through to professional services, retail, digital start-ups and the hospitality sector - and for widely differing durations. They are one of the essential building blocks of the Scottish economy and a key driver of growth and productivity, taking up 44% of all non-domestic premises that pay rates and the rateable value from those premises (which is based upon annual rent), comes to about £2.6 billion.^[3] The relationship between landlord and tenant is crucial to commercial life in this country and it is important that the law governing that relationship functions effectively.

The policy objectives of the Bill will contribute to the National Outcome on fair work and business, by providing the necessary legislative framework to help make our economy more stable, productive and efficient.^[4]

Consultation

In May 2018, a Discussion Paper^[5] (“the Discussion Paper”) was published by the SLC asking how the law of Scotland in relation to the termination of commercial leases should be reformed or clarified. The questions were focused principally on reform of the common law rules of tacit relocation and was open for four months, during which the SLC’s project team delivered seminars on the Discussion Paper to many Scottish law firms, surveyors and organisations with an interest in the law relating to commercial property.^[6] There were a total of 39 responses,^[7] coming from representative organisations such as the Law Society of Scotland, the Faculty of Advocates, the Royal Institution of Chartered Surveyors and the Scottish Property Federation, as well as a range of legal firms, academics, businesses and interested individuals.

In December 2021, the SLC invited comments on a draft Leases (Automatic Continuation etc.) (Scotland) Bill, particularly on certain provisions which had been developed after publication of the Discussion Paper. There were 25 responses received from a wide range of practitioners, academics and representative groups. A final version of the draft SLC Bill was published in its Report.

Those affected

The policy will impact parties to a commercial lease – that is, tenants and landlords of commercial property. The overall policy aim of the Bill is to improve, simplify and update aspects law of commercial leases so that it meets the needs of a modern Scottish economy. Tenants and landlords can come from any group or community of people and so this legislation has the potential to impact on any person operating from leased commercial property or letting such property.

While young people in student lets by educational institutions may be covered by the Bill, those lets are currently excluded from the rules on the continuation of leases which the Bill replaces^[8], and so they will not be adversely affected.

The Scope of the EQIA

We have been unable to identify public statistical data that would usefully aid the assessment of the impact of the Bill on protected characteristics. No issues were raised during the consultation process.

Key Findings

The Bill will impact parties to a commercial lease – that is, tenants and landlords of commercial property. The proposals in the Bill are neutral and would apply equally to any person who falls within these categories of person.

There is no compulsion on any persons to rent commercial property, and for those not wishing to do so alternatives might be sought. Further, many of the provisions in the Bill are default provisions that apply where parties have not agreed an alternative or where the commercial lease might be silent.

Recommendations and Conclusion

The EQIA process has confirmed that the proposed Bill has no impact on a protected characteristic and so no direct changes have been made to the policy as a result of this EQIA.

If the Bill is passed by Parliament, the Scottish Government will monitor its impact in practice.