If you are a landlord or tenant of commercial property in Scotland, understanding rent abatement could be crucial - especially if the premises you let becomes unusable for its intended purpose. Knowing the circumstances in which tenants might be entitled to suspend full or partial payment of rent can not only help tenants protect their business and ensure they're not paying for space they cannot use; it might also help landlords to prepare in advance for any disruption affecting a tenant’s occupation.
What is Rent Abatement?
In Scotland, tenants have a common law right to abate their rent in certain circumstances where have not enjoyed the full benefit of the premises they have contracted to pay rent for.
Abatement means the rent, or part of it depending on the extent of disruption, is no longer due in law. It is a different remedy to, for example, a right to withhold rent where a landlord is in breach of their own obligations. Withholding rent doesn’t stop the rent being due, as abatement would, but instead allows a tenant to leverage payment on the landlord remedying their own breach of the lease. If the breach is remedied, the withheld rent should generally then be paid in full.
Abatement, by contrast, isn’t conditional on a landlord being in breach.
The test for abatement has been clearly stated by the courts as being met if a tenant loses the “beneficial enjoyment” of any part of the subjects let to them, either through the fault of the landlord or through some “unforeseen calamity” which the tenant was not able to prevent.
The idea is that if, through no fault of its own, a tenant has been either fully or partially deprived of the premises they let, they shouldn’t have to pay rent (or at least not all of it) if they can’t use the space as intended.
When does it apply?
As a first step, the lease should always be checked to see if it says anything about rent abatement. As a common law right, rent abatement will apply by default but it can be contracted out of by express provision in a lease.
If the lease doesn’t prohibit abatement, the next question is whether there has been any loss of beneficial enjoyment of the premises caused by a breach of the lease by the landlord or an unforeseen calamity.
While there is no set definition of what will constitute an unforeseen calamity, a relatively recent example was considered by the Sheriff Court in Fern Trustee 1 Ltd and Fern Trustee 2 Ltd v Scott Wilson Railways Ltd 2021 S.L.T. (Sh Ct) 7.
In this case, the tenant couldn’t use part of their leased office space due to extensive remedial works on the building’s curtain walling - works that did not arise as a result of any fault on the landlord or tenant’s part. The court held that the wording of the lease did not operate to exclude the tenant’s right to an abatement.
Key takeaways:
- Lease terms are critical: while the right to rent abatement may be available at common law, leases always need to be checked as parties may have contracted out of the common law.
- Beneficial enjoyment matters; if a tenant can’t use the space as intended, they may not have to pay full rent. The amount of rent to be abated will depend on the extent to which a tenant has been deprived of beneficial enjoyment of the premises.
- Keep detailed records: both tenants and landlords can benefit from keeping a clear paper trail on any issues with a premises, access requirements, repair timelines and communications about this to help document what has happened to prevent full beneficial enjoyment of leased premises.
For more information, speak to one of our real estate litigation lawyers, or get in touch with your usual Brodies contact.
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