The high cost of living is having a significant impact on many Scottish businesses, encouraging many to investigate cutting their costs. Commercial tenants and landlords will be considering their leases in terms of whether their property portfolios satisfy their business needs. Where they can, they may choose to break their leases.
But what happens if a tenant does not give vacant possession on the break date? Does the tenant lose their break?
What is vacant possession?
In Scotland, it is primarily the right to actual unimpeded physical enjoyment of the premises. That right will only be breached if the impediment to the exercise of the right of actual occupation is a substantial one affecting a substantial part of the premises.
This test derives from an English case from 1946, and so it's likely that the recent English cases on vacant possession would be highly persuasive in a Scottish Court.
What happens if a tenant does not give vacant possession?
In Scotland, break notices are only valid and effective if they strictly comply with the break clause in the lease. Where preconditions are not complied with in serving break notices, the tenant may lose their right to break. Therefore, if vacant possession is a precondition set out in the break clause and the tenant fails to provide it, the tenant will lose the right to break. This is where the test for vacant possession in Scotland will be highly relevant (and contentious).
However, vacant possession is not often a precondition to the break. Will the tenant's failure to provide vacant possession affect their right to break?
Probably not, but it depends on the facts and circumstances. The tenant's conduct after the break date – occupying, continuing to pay rent, carrying out repairs to the premises, etc. – could mean the tenant has waived its right to the break. That may be its intention, but if not, it may create a problem for the tenant and an opportunity for the landlord.
Contributors
Partner
Head of Real Estate & Partner
Trainee Solicitor
Trainee Solicitor
