A landmark legal change around the law underpinning shop and other retail leases in Scotland should create a level playing field across the commercial property market.
That’s the view of a lawyer who says that moves to simplify how tenancies are governed should provide clarity to landlords and tenants.
For more than 75 years, The Tenancy of Shops (Scotland) Act 1949 has been the piece of legislation underpinning how lease renewals on shops and other retail premises, such as garages, cafes and hairdressers, are handled.
It generally gives tenants the power to apply to the sheriff court to renew their lease if they have received a notice to quit from their landlord who has refused to continue the lease - with no limit on the number of renewals they can seek.
But the Scottish Law Commission has recommended that the 1949 Act be repealed, saying it has become “outdated” and “doesn’t work for the small businesses it was intended for” - opening the door for the automatic continuation of leases.
And it’s one which a senior commercial property lawyer at independent Scottish legal firm Lindsays believes could help clear confusion around what a “shop” is in the legislative sense.
Dawn Anderson, a Director in the Commercial Property team at Lindsays, said, “Under the current Act, a ‘shop’ includes not just retail premises but also those used for hospitality, including cafes and pubs.
"There’s even an argument that tattoo parlours are also covered. That in itself is confusing. There have long been question marks around the ‘reasonableness’ test through which courts consider lease renewal applications.
“It all amounts to a piece of law which is outdated in the modern market. A move to bring leases in line with those for office, leisure and industrial properties seems widely acknowledged as a sensible one to take.
“Greater legal clarity would be better for business.”
The Scottish Government will consider whether to take forward the Commission’s recommendations.
It is widely expected that this could involve an amendment to the Leases (Automatic Continuation etc.) (Scotland) Bill, currently being considered by MSPs to incorporate modernised elements of the current Act.
Another option is to reform the 1949 Act which would allow only small businesses to apply to the court for a lease extension.
Anderson added, “There is always a balancing act to strike between the rights of landlords and tenants.
“But we’re talking about repealing a law which was introduced in an attempt to protect small shops in the wake of World War Two.
"Retail has changed seismically in the generations since, not least with the advent of out-of-town retail parks and the changing face of town and city centres.
“To have all commercial leases in Scotland governed by the same body of law will make things much clearer and simpler for landlords and tenants.
“While there’s still some way to go in the legislative process, clients and other property professionals to whom we speak seem broadly positive about the prospect of change.”
Lindsays lawyers, operating from offices in Glasgow, Edinburgh, Dundee, Perth and Crieff, advise clients across the full spectrum of commercial property issues.
