Coronavirus (Scotland) Bill and its impact on commercial leases

The Coronavirus (Scotland) Bill was passed on Wednesday evening, having been introduced on Tuesday this week as an Emergency Bill. It will come into force after receiving royal assent and will be known as the Coronavirus (Scotland) Act 2020 (“the Act”).

The Scottish Government’s emergency legislation has an important provision for commercial leases.

Current position

Commercial leases can be terminated for non-payment of rent and other sums due under the lease. The exact mechanism will depend on the lease but the legislation (from 1985) requires the landlord to issue a warning letter to the tenant. The warning letter has to give the tenant a minimum of 14 days to make payment of the outstanding arrears. If they fail to do so, the landlord can then terminate the lease.

New position

The Government’s new emergency measures extend the minimum period in the warning letter from 14 days to 14 weeks. This minimum period applies to all leases and includes those where a warning notice may already have been issued. If a warning letter has already been issued, and the 14 days has not yet expired, then that notice will be invalid.

Impact

This will be of some comfort to tenants to know that a landlord is not going to be able to terminate their lease where the financial difficulties may be outside of the tenant’s control.  However, the arrears will still be mounting and after the 14 weeks has expired, tenants could still be in a difficult financial position. Landlord and tenants would be well advised to seek early advice from their professional advisors about how best to manage the situation.

This latest measure, coupled with the Scottish courts only dealing with urgent matters at present, effectively puts a halt on evictions for non-payment of rent in the commercial sector, at least for the time being. We'll keep you updated as things progress, but please do get in touch if you have any queries.

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