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Scotland reveals major overhaul of how shops are rented out by landlords

scottish shops

Landlords are being asked for their views on whether the Tenancy of Shops (Scotland) Act should be repealed, replaced, or reformed.

The 1949 Act was originally a temporary measure covering commercial lease renewals for retail, food and drink, hair and beauty and wholesale tenants after World War Two and was made permanent in 1964 when urban development prompted concerns that small firms would not be able to afford rents.

Under the Act, if tenants fail to renew on satisfactory terms, they can apply to the sheriff to renew their lease for up to one year. If successful, they can continue to apply indefinitely for further one-year renewals.

Many stakeholders believe the rules for the expiry of shop leases should not be different to those for offices or industrial units, while the definition of a shop under the Act is unclear, making it difficult to know which businesses are entitled to apply for renewal.

Reasonable test

The reasonableness test used by the court to decide whether to renew a lease is also vague, and applying can be costly and time-consuming.

Propertymark explains that although the Act is now rarely used, the threat of applying to the court unduly favours sitting tenants who are national or multi-national retailers in renewal negotiations with their landlords, prejudicing the landlord’s ability to let the premises to other tenants.

The Scottish Law Commission’s consultation suggests options for legal change including an extended notice period to allow tenants to find suitable alternative premises or an improved Act, including mediation.

David Bartos (pictured), the lead commissioner on the project, says: “The proposals in this paper affect virtually every let shop, pub or eatery on the high street, not to mention retail parks and shopping centres large and small. It’s vital that in these difficult economic times the law is as helpful as possible to both tenants and investors.”

The consultation runs until 31st July.


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