The Tenancy of Shops (Scotland) Act is a little-known piece of legislation which allows tenants of 'shops' (which is widely defined in the Act) to apply to renew a lease for a period of up to one year. There is no limit on the number of applications which a tenant can make in relation to the same premises.
An application is to the Sheriff Court and a Sheriff has a wide discretion on whether it is reasonable to grant the application. An application must be refused only if certain mandatory grounds are met. In practice, the court has not looked favourably upon applications made by large national and international retailers.
We have previously written about the 1949 Act and how it has been applied in practice . We have also written about an ongoing Scottish Law Commission consultation on whether reform is needed.
In this blog, we consider the practicalities of the time limit for an application and what happens if the court is unable to determine an application before expiry of the lease.
When must an application be made?
An application must be made not later than the expiry of 21 days after service of a notice of termination. Generally speaking, a 'notice of termination' will be either a notice to quit ("NTQ") or a landlord break notice. In either case, a tenant has just three weeks in which to prepare its application. That isn't much time.
How long will it take the Sheriff Court to determine an application?
Every case is different but, generally speaking, if an action is defended then it may take as long as several months to reach a final determination. That is borne out in practice by looking at the reported case law.
Whilst a landlord's right to break may require six months' notice or more, a NTQ will normally require to be given only 40 days prior to lease expiry. If a NTQ is served 40 days prior to lease expiry and an application under the 1949 Act can take several months to reach a final determination, then a fair question is: what happens in the meantime?
Can the court grant a tenant interim occupancy rights?
If a Sheriff is satisfied that it will not be possible to determine an application before expiry of the lease, then he or she can grant an order authorising the tenant to remain in occupation for a further period of up to three months. If such an order is made then it is up to the Sheriff to determine the terms which apply, including the amount of rent payable.
Key takeaways
First, the window in which an application must be made to the court is small – just 21 days from service of a notice of termination.
Secondly, there is a risk to landlords that – even if a tenant's application is ultimately unsuccessful – it might be granted a right to remain in the occupation for up to three months after lease expiry. This could have a significant negative impact on a landlord's plans to re-let or redevelop premises.
If a landlord is in control of when to serve a notice to terminate a lease of retail premises then it should consider doing so as early as possible, so as to allow sufficient time for determination of an application under the 1949 Act. In practice, that is probably easier said than done.
If you need advice on termination of a lease or on applications under the 1949 Act then please get in touch with our Real Estate Litigation team or your usual Brodies contact.
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