Coronavirus: protection from termination of commercial leases in Scotland - update

Protections for commercial tenants that were introduced by the Coronavirus (Scotland) Act and that were due to expire at the end of last month have been further extended to 31 March 2022.   The Act protects commercial tenants who lease property in Scotland from termination for non-payment of rent by extending the usual pre-irritancy notice period set out in the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 from 14 days to 14 weeks.

Unlike in England and Wales, where there is an outright moratorium on lease forfeiture for non-payment of rent in commercial leases which has also been extended  until 25 March 2022, landlords of properties in Scotland have been free to serve pre-irritancy and irritancy notices throughout the pandemic (albeit subject to the longer notice period).

We have seen instances of pre-irritancy notices being served, often at the start of the pandemic in order to bring tenants to the negotiating table to discuss rent payment or a rent concession in exchange for an extended/regeared lease.  We haven’t seen many landlords following through with final notices terminating leases and it’s likely that concerns about having to foot an empty rates bill if a replacement tenant hasn’t been lined up is a major factor in that decision.

We have, in the last few weeks, however, noticed an uptick in landlords seeking to recover rent arrears that have been built up since the pandemic began.  Although the  ban on statutory demands and winding-up petitions was essentially lifted at the end of last month there are still temporary restrictions in relation to the recovery of commercial rent arrears and these are expected to remain in place until early next year.  It means that landlords can’t petition to wind up tenants on the basis of the rent arrears where they have built up as a result of the pandemic.

However, the other remedies normally available to a landlord in Scotland to recover rent arrears (including execution of summary diligence such as arrestment and money attachments relying on extract registered leases) remain available so tenants would be well advised not to simply ignore the issue.

Landlords and tenants should seek advice if they are concerned about what this means for them so that their options can be explored.