Generally, redevelopment cannot take place when land and buildings are occupied with sitting tenants. In Scotland, unlike in England, if a lease has no break option and negotiations don't work, a court order is almost always required to obtain vacant possession of commercial premises.
That can present challenges where a landlord wishes to remove a tenant to facilitate redevelopment.
A commercial lease can be terminated by irritancy (the equivalent of forfeiture in England). To irritate a lease, the tenant must be in breach.
For monetary breaches, the lease can generally be terminated after 14 days warning has been given to the tenant (unless the lease provides for a longer period).
If a tenant is aware of a landlord's intention to redevelop, it will likely keep up to date on its payments and will most certainly pay in response to a 14 days pre-irritancy warning notice.
Alternatively, a landlord can terminate a lease for non-monetary breaches if it would be reasonable to do so. That is not as easy as it sounds. Landlords have attempted to terminate leases because of the tenant's failure to keep the premises in repair, but most have failed because a reasonable landlord would not have terminated in the circumstances (see for example Crieff Highland Gathering Ltd v Perth and Kinross Council).
It seems to be the case that a reasonable landlord would generally only terminate a lease for material breaches by the tenant. And even then, a reasonable landlord would normally give the tenant a reasonable period to remediate the breach before it terminated.
If the lease is terminated, compensation will not be payable to the tenant and IT will still be liable for all its breaches of the lease, including any arrears and dilapidations.
The tenant's liability for dilaps may be reduced if the landlord plans to redevelop the premises and has no intention of carrying out all of the works.
Redevelopment does not, however, mean that the landlord has not suffered any loss. Some of the works may ultimately have to be carried out by the landlord before redevelopment, such as removing the tenant's fit out.
Alternatively, the landlord may have a payment obligation in its lease for dilapidations. That would allow it to recover the full cost of the dilapidations irrespective of its plans to redevelop the premises. If it has a certificate procedure within the payment obligation, the landlord's position is even stronger.
It can often be hard for a landlord to obtain vacant possession in circumstances where the tenant is aware of its intention to redevelop the premises.
Even if the landlord has a valid basis for terminating the lease, the need for it to go to court to obtain an order to remove the tenant could have a significant impact on the landlord's programme, albeit, it might be able to recover those losses from the tenant.
Redevelopment of larger sites is generally part of a long term strategy. Landlords should have an eye to such redevelopment when negotiating any new leases or extensions of existing leases, for example, granting them for shorter terms or incorporating break options and relocation terms which will allow them to bring the leases to an end if and when development begins.
The strategy to achieve vacant possession should therefore be agreed as early as possible so that redevelopment can go ahead as planned.