Leases (Automatic Continuation etc.) (Scotland) Bill - Fairer Scotland Duty Assessment

Fairer Scotland Duty Leases (Automatic Continuation etc.) (Scotland) Bill

Fairer Scotland Duty

Assessment not required declaration

Policy title: Leases (Automatic Continuation etc.) (Scotland) Bill

Directorate: Justice

Division: Civil Law and Legal System

Team: Private Law

Policy lead responsible for taking the decision: Michael Paparakis

Rationale for decision

The Bill implements recommendations of the Scottish Law Commission 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 essentially three main types of lease in Scotland: agricultural leases; residential leases; and commercial leases. It is only the last category with which the Bill is concerned.

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.^[2] 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.

A number of changes are made to specific aspects of the Scots law of commercial leases, including:

• the common law rules of tacit relocation and the difficulties they cause are replaced by a new statutory code which also clarifies the ability of parties to contract out of automatic continuation of a lease after its termination date;
• the form and content of notices to quit are reformed, with provisions laying out the essential content of a notice, the manner in which they may be communicated and the persons to whom they must be given;
• miscellaneous rules relating to the termination of leases generally intended to clarify the law and make it more straightforward to apply;
• allowing pre-irritancy warning notices to be delivered by sheriff officer, and further recommendations to protect the interests of lenders relying on a lease as a heritable security by allowing them to challenge irritancy notices in certain circumstances;
• an alteration to the law on apportionment of rent paid in advance, introducing an implied term obliging a landlord to repay overpaid rent covering periods after the ending of a lease.

The reforms to the Scots law of commercial leases that are made in the Bill do not specifically address underlying aspects of socio-economic disadvantage, as laid out in Part 1 of the Equality Act 2010.

I confirm that the decision to not carry out a Fairer Scotland assessment has been authorised by:

Name of Deputy director: Denise Swanson

Job title: Deputy director, Civil law and legal system

Date authorisation given: 02 December 2024