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Flashcards in Head 25: Leases Deck (170):

What is a lease?

A lease is a contract[ It is a contract but it can confer real rights.] under which a person (the landlord) grants to another (the tenant) an exclusive right to occupy property[ Heritable property.] for a certain period, in exchange for which the tenant agrees to tender (rent) payment, in money or otherwise.


How was the law of leases created?

The law in this area was generally created by the common law, but there has been extensive statutory intervention for certain types of lease: residential tenancies, agricultural tenancies, tenancies of shops. All of these statutory interventions overlay the common law. The one area of leases which is not touched really by statute is commercial leases - there are no special statutory provisions here. The leasing of movable property is called hire (i.e. Car hire).


What are the new restrictions on leases?

No new lease can be longer than 175 years since 9 June 2000 (to stop feudal system being recreated by the back door).


Lease Terminology:

⁃ (a) Landlord/lessor;
⁃ (b) tenant/lessee;
⁃ (c) tenancy[ Means the same as lease.];
⁃ (d) tack[ Old Scots word for a lease.];
⁃ (e) subjects;
⁃ (f) rent/maills and duties[ All terms for 'rent'.];
⁃ (g) grassum/premium[ Sometimes to get a lease you have to pay an upfront sum to the landlord.];
⁃ (h) casualty[ Additional sums of money - these have been prohibited by statute.];
⁃ (i) ish[ The date of termination of the lease.];
⁃ (j) term[ Can refer to a clause of the lease.

Can also refer to the duration of the lease.];
⁃ (k) renunciation;
⁃ (l) surrender[ is the tenant wants to give up a lease they can renunciate or surrender it.];
⁃ (m) Missives of let[ NB these are not the same as missives of sale. In lease law, the missives of let are often the lease itself. In other words, if parties exchange missives for a lease and the contract is concluded, then the result of this is in itself a lease.

In commercial contexts there are often much more formal leases.] - often there is a contract for lease which proceeds more formal Lease. Exchange of offer and acceptance. Sometimes the missives themselves may constitute the lease. The subsequent lease does not necessarily supersede all the terms of the prior missives: UPS Supply Chain Solutions v Glasgow Airport Ltd 2005 SCLR 67.
⁃ (n) Lease v licence: licence is "a contract falling short of a lease, whereby not the heritage itself but a right to use a particular part of it or to put a particular part of it to some use is granted" (Paton & Cameron, Law of Landlord and Tenant 12).


Joint Administrators of Rangers Football Club Plc, Noters 2012 SLT 599

A season ticket giving a football supporter the right to sit in a particular seat at matches cannot confer a lease as there is only intermittent possession.


What length must a lease be?

A lease is a contract so it can be any length.


What kind of document is a lease?

Since it is a contract, if in writing it must be signed by the landlord and the tenant.

A lease is a contract[ NB this must be distinguished from other types of contract over land. A contract for possession which falls short of a lease is often described as a 'licence' - this cannot be made real, whereas a lease can.

From the point of view of the tenant it is very important that the contract is a lease and not a licence since there are additional protections (e.g. to protect against change of ownership.)], which confers personal rights on the parties. As such, it will not bind a successor owner if the landlord sells the property. The tenant may acquire a real right in certain circumstances:
⁃ 1. Tenant takes possession, or
⁃ 2. Tenant registers the lease in the Land Register


Scottish Residential Estates Co v Henderson 1991

an example of an arrangement which did not constitute a lease where a person allowed someone to use property but wanted it back when the owner needed it; since the duration is not certain it could not be a lease: “you and your sons may have the use of the cottage until we require possession of it”. Held: no intention to create a lease. Co-owners cannot grant a lease to one co-owner.


What are the four cardinal elements in a lease?

There are four essential 'cardinal[ If theses are not present then it is generally not a lease at all.]' elements in a lease:
⁃ 1. Parties
⁃ There must be certainty as to who is making the contract. Landlord or tenant may be joint parties; may be natural or legal persons; may be trustee(s), for example for a partnership.
⁃ 2. Subjects
⁃ There must be certainty as to the property that is being leased. And if you have to register the lease to acquire the real right you must identify it in such a way that is sufficient for registration.
⁃ The lease must give the tenant the right to exclusive possession - if possession is shared then this is not a lease.
⁃ 3. Rent
⁃ No rent no lease. May be in money terms, or in kind, or services. May be ascertained by reference to a mechanism for calculation. May be a nominal sum[ E.g. 1 pence].
- Usually payable on a monthly basis in residential cases and quarterly in commercial ones.
- Must be periodical payment.
- A grassum on its own at the start of a lease is insufficient.
⁃ 4. A definite duration
⁃ There is a huge amount of variety concerning the length of a lease. Residential leases are often quite short. The only requirement at common law is that there is a duration. A lease for “as long as the grass groweth up and the water runneth down” is valid —>
⁃ The duration may be in perpetuity (Carruthers v Irvine (1717)) or for 999 years (Welwood v Husband (1874)).[ This is the general principle, however see below for the statutory provisions.]
⁃ There is a very big difference between Scotland and England. In England, it is very common to have long leases (these are essentially 'quasi-ownership' from a functional point of view). Why do they do this? The answer is that under the lease you are able to impose 'positive covenants[ In Scotland you can do this by real burdens in relation to ownership - in English law it is not possible to do this in relation to ownership; positive covenants can only be imposed in relation to leases in England.]' (e.g. obligations to upkeep the building).
⁃ Since 2004 (Abolition of Feudal Tenure Act 2000) it has not been possible in Scotland to grant leases of 175 years (to avoid the English practice of granting extremely long leases).
⁃ Moreover, the Long Leases (S) Act 2012 will automatically convert ultra-long leases (>175 years) to ownership from the 20th September 2015.
⁃ Leases in relation to residential property cannot be granted for more than 20 years. NB this is slightly misleading: the contract of lease cannot allow leases >20 years, but even when a lease comes to the end the tenant often has security of tenure. So although the contractual lease doesn't allow >20 years, the statutes provide that a tenant cannot actually be kicked out unless they breach the terms of the lease.


What happens if one of the last two essential elements is missed? I.e. the duration is not fixed or the rent is not fixed?

Although officially all four are required the courts have shown some flexibility where the tenant has taken possession.
⁃ If the parties have agreed everything except duration and the tenant is in possession and occupying the property then the law will imply a duration of 1 year [Gray v Edinburgh University 1962]


Gray v Edinburgh University 1962

In this case they hadn’t agreed rent or duration. the court held there was no lease on the facts. BUT it said that if they had agreed the rent and the tenants had moved in then the courts will imply a lease of one year. Must look at all the circumstances because it could be a license rather than a lease.

⁃ If the parties have agreed everything except the rent and the tenant is in possession the law is slightly unsettled[ In some cases option 1 is favoured, in other cases option 2 is favoured.]. The practical problem is that if someone is possessing then they ought to pay something, otherwise they would be getting the land for nothing.
⁃ 1) In some cases[ If the court goes down this line then the court is accepting there is a lease.] the courts imply a market rent as if the tenancy were a yearly tenancy. (Glen v Roy (1882))
⁃ 2) The other approach is where the court holds there to be no lease but nonetheless the person in possession must pay. Under this approach the recovery of the payment is on the basis of U/E (GTW Holdings v Toet 1994)

But cf Wallace v Simmers 1960 SC 255:


Wallace v Simmers 1960 SC 255

They secured a lease for so long as occupancy is required. The son sold the farm and the daughter tried to enforce the agreement against the new owner. Held: she merely had a personal right. “For as long as you desire” is not a usual duration.


Scottish Residential Estates Co v Henderson 1991 SLT 490.

A lady was given the right to stay in a cottage. The owner said: “You and your sons may have use of the cottage until we require possession of it”. Held: license rather than a lease since there was no finite duration.


What happens if all four essential elements are satisfied?

If all the four essential elements are satisfied then there is a lease; if not then there is a license.


Joint Administrators of Rangers Football Club Plc, Noters 2012

season ticket holders hold a license because there right of possession is not exclusive.

NB: The court probably does not have the power to settle outstanding points. There will be implied rules.


What are the additional protections in a lease (as opposed to a licence)?

Possibility of creating a real right in a lease.
In certain types of leases there is legislation which is primarily designed to protect the tenant.


What is the required form a lease must take?

Insofar as we are talking about leases as an ordinary contract there are no requirements of form.

However if the lease is to be upgraded to a real right then writing is required (under RW(S)A 1995).
⁃ In practical terms this means that if there has been no change of ownership then it doesn't matter whether writing is used since a personal or real right is equivalent; but if there is a change in ownership then it does matter whether writing has been used.

There is one exception to the requirement of writing: leases for one year of less[ NB in practice it would be very unusual not to have writing.]. Those that exceed this period must be subscribed by both parties (s1(2)(b)).

There must be an external act.

A lease begins as an ordinary contract which confers rights and obligations on both parties. If you cannot have a lease as a contract then it will not be capable of conferring a real right. The landlord has the right to receive rent from the tenant; the tenant has the right to occupy the property.


What happens when a lease becomes a real right?

When it is said that a lease can become a real right, it is not the case that the entire contract becomes a real right; it is the tenant's right of occupation which becomes a real right[ The reason being to protect the tenant from a change in ownership.].


How can you obtain a real right under a lease?

To obtain a real right under a lease, one of the following routes must be followed[ Normally the creation of real rights takes place on registration, but historically leases could not be registered.


How can you obtain a real right under a lease?

To obtain a real right under a lease, one of the following routes must be followed[ Normally the creation of real rights takes place on registration, but historically leases could not be registered.

See methods on short leases and long leases below


How can you obtain a real right under short leases?

⁃ 1) Short leases
⁃ Short leases ( in Carruthers v Irvine could not confer a real right.]: thus a long lease for, say, 999 years is covered assuming this was granted before 175 year restriction came in. This means a finite period is required.
⁃ 4) *Tenant must have entered into possession[ Most important requirement.] of the subjects: possession may be natural or civil (e.g. via an employee to sub-tenant).

So you get a real right under the 1449 Act if you as a tenant are under possession of the land.
⁃ Millar v McRobbie 1949


Millar v McRobbie 1949

lease was negotiated and the prospective tenant was allowed to start using the property before the lease actually started. At around this time, the landlord sold this land and the buyer refused to recognise the lease since it was not yet a real right. The court upheld this view, that the lease was not yet a real right and thus wasn't binding on the buyer. Despite the possession, since the lease had not actually started yet it could not be a real right and the buyer did not have to recognise the lease.
⁃ [The offside goals rule was not applied (even though one would expect it to since a lease can be made into a real right.)]
- The tenant was allowed to enter in early for some preliminary agricultural preparations including preparing the ground, sowing crops etc. While they were sowing, the landlord sold the land.
- The tenant claimed that he had a real right against the new owner. The court held that the limited agricultural acts did not amount to exclusive possession. Even if it had been significant enough, there was a fatal flaw (he took possession before the lease started). So the possession was irrelevant.


How can you obtain a real right under long leases?

⁃ Long leases (> 20 years) must be registered in the Land Register[ Even if the land itself is held on a Sasine title.

NB historically registration of long leases in the Sasine Register was possible but not compulsory. However this is no longer competent because of the Scotland wide application of the Land Register.] under the 1857 Act[ Registration of Leases (S) Act 1857] which remains in force today. In order to make a long lease a real right it must be registered. This registration will create a separate title sheet[ So if land has been leased on a long lease, the land will have two title sheets.].
- Registration in the Land Register is now the ONLY way of obtaining a real right. So LA 1449 today applies only to short leases. If a long lease is not registered it is not a real right!! (So if you move in that is not enough).


What if the new owner knows there is a lease which has not yet been recorded/registered? Can the offside goals rule apply?

In the case of Millar v McRobbie 1949 it was held that the offside goals rule did not apply since they did not have the relevant possession. It is unclear whether a case with similar facts would be decided differently today.
- The tenant may seek to invoke the offside goals rule if the new owner knew about the grant. The balance of the authority is against the applicability of the rule here. But the law cannot be regarded as certain.


What are pro indiviso shares in land?

A lease of land can include a pro indiviso share in other land: Gyle Shopping General Partners Ltd v Marks and Spencers plc [2014] CSOH 59.


Gyle Shopping General Partners Ltd v Marks and Spencers plc [2014] CSOH 59

This was a lease of one of the shops plus a third share in the parking area. He held it did not. It is competent to lease subjects plus a share in other subjects. [**Look this up***].


What if the tenant wants to transfer the lease?

⁃ Since the tenant's lease is a right, it can be transferred by assignation[ NB some leases cannot be assigned - there are often restrictions on assignation.].
⁃ If there is a new landlord and a new tenant, are these new parties bound by the terms of the lease?
⁃ If A grants a lease to B and B obtains a real right. A then sells to C, C is bound by the lease.


What is the effect of real right on singular successors? Do the terms of the lease bind successors?

The difficulty is that you generally cannot assign obligations; however under the law of leases you can! So when there is a change of personnel, the incoming landlord/tenant receives all the rights under the lease and also all the obligations. So the new tenant must pay the rent and the new landlord is under the various landlord obligations.


Is it true that every single term of the lease will bind successors?

⁃ The courts have answered this question by saying that there may be some terms which are not binding on a new landlord. The successor will be bound by the lease, but not by all of its terms. The main test is whether the obligations are inter naturalia of the lease (natural/essential parts of the lease) - i.e. are these the sort of terms you would expect to find in a lease of this kind (duty to let tenant occupy). If the answer is yes then they can bind a successor landlord. If a particular term is an unusual one then it will be regarded as personal and it will not transmit to a subsequent landlord.


Turner v Nicholson (1835)

landlord made an agreement to compensate the tenant for improvements made to the land. Landlord sold to someone else. It was held the agreement was personal (not inter naturalia of the lease) so the new owner was not bound. So held: this does not bind the successor. It was a personal agreement by the outgoing landlord.


Ross v Duchess of Sutherland (1838)

lease where the rent was £12 a year. The tenant was to be allowed a £5 deduction provided he acted as the 'ground officer' of the estate. The land was sold and the new landlord didn't want the tenant to work for him so discontinued the arrangement that the tenant was acting as a ground officer. It was held by the court that this term was only personal to the original landlord and was not found generally in leases - thus it did not bind the incoming landlord.
- So a provision for a reduction in rent in return for services performed by the tenant will not bind a successor landlord.


*Bisset v Magistrates of Aberdeen (1898)

option to buy in a 999 year lease. Land was sold. Held the option did not bind the new landlord/successor. It was not fundamental to such a long lease to have such an option.


Davidson v Zani 1992

In contrast to Bisset: Davidson v Zani 1992 - Sheriff Principle case - an option to buy a shop at the end of a lease was enforced against the new landlord under the offside goals rule. It was argued that the new landlord was bound because they knew about it in bad faith.
⁃ [Yet for the offside goals rule to apply there must be some form of breach and it was argued that the offside goals rule shouldn't have applied since there was no such breach. This was was the position taken in Advice Centre for Mortgages Ltd v McNicoll [2006] - Outer House case in which the offside goals rule was not applied in similar facts to Davidson. This was because there was no breach of a previous obligation — the selling of the shop was not in itself a previous breach. NB an Outer House decision cannot overrule a Sheriff Principle so Davidson is still a valid decision. **From tutorial see Gibson v RBS for options to purchase - the offside goals rule was applied to an option to purchase**


Optical Express (Gyle) Ltd v M&S 2000

This concerned exclusivity agreements. The Gyle shopping centre was owned by Edinburgh City Council who entered into a series of leases with different shops. One of the units was leased to Optical Express and there was a separate letter which provided that the council would not lease any other shop in the Gyle to a rival opticians - an exclusivity agreement. The City Council sold the Gyle to a consortium (of which M&S were one of the parties). The consortium leased one of the units to another optician. Optical Express sued. The defence raised was that the agreement did not bind the new landlords. The court upheld this defence since the agreement was not inter naturalia of the lease since it was not about the property that was being leased, it was about other properties, so it did not bind successors.
- So an exclusivity clause providing that the tenant was to be the only optician in a shopping centre was not inter naturalia.
- NB in this case this agreement was not in the lease but there was a separate document “back letter” which said they were to be the only opticians in the centre. The landlord then sold the centre and the question was whether the exclusivity agreement bound the successors. The court said no.

⁃ NB in the earlier case of Davie v Stark (1876) - an exclusivity agreement was enforced against a successor landlord but it was not challenged, it was accepted in this case (not a strong authority as the point was not specifically pled).


What is the effect of a real right on heritable creditors[ Typically standard security holders.]?

Since it is a real right, in principle it will bind subsequent creditors, but not prior creditors under they consent.


Trade Development Bank v Warriner & Mason 1980

there was a standard security over land and one of the conditions of a standard security is that you cannot lease the land without the creditors agreement. The owner leased the property without the agreement of the creditors. It was held that the creditors could set the lease aside.


*Trade Development Bank v Crittal Windows 1983

an agreement to assign a lease and then the lessee (the tenant - the person agreeing to assign) granted a standard security over the lease prior to the assignation. This would mean the standard security was in place before the new tenant takes the lease by assignation and the new tenant is bound by it (the standard security). However, the standard security holder knew about the agreement to assign and therefore the offside goals rule was applied and the standard security was set aside.


What can the common law imply about the rights and obligations of a lease?

Governed by the express terms of the lease. In the absence of specific terms the common law implies certain things. Lease is a ‘nominate contract’ so comes with its own set of implied-in-law terms.

Starting point: (1) What obligations have the parties set out in the lease.


What if there a no specific terms or silent on a particular issue?

⁃ The common law applies.
- However typically for residential and agricultural leases there are detailed statutory frameworks and the common law rarely applies.
⁃ For commercial leases, in the absence of specific terms (which is unusual) the common law implies certain obligations upon landlord and tenant.
⁃ If the parties wish to exclude common law implied terms then the lease must make this clear (as in Mars Pension Trustees Ltd v County Properties & Developments Ltd 2000).


What are the implied conditions of common law?



What are the obligations of the landlord with regards to possession?

The landlord is obliged to put the tenant in natural possession of the subjects and to maintain him in possession through the term of lease.
⁃ The landlord must give the tenant possession of all the subjects of let[ So if they've agreed to let 10 fields, they must let the tenant into the 10 fields.].
⁃ The landlord may not encroach (interfere) upon the tenant's possession and must prevent his total or partial eviction[ I.e. if someone else tries to move in the landlord must take action to protect the tenant's rights.].


What are the obligations of the tenant with regards to possession?

The tenant is obliged to enter into possession, and to occupy and use the subjects.
⁃ If the tenant fails to enter into possession then he is in material breach.
⁃ *Graham & Black v Stevenson (1792)
⁃ Blair Trust Co v Gilbert 1940


*Graham & Black v Stevenson (1792)

- a hotelier took the tenancy of another nearby hotel with the intention to close it to wipe out the competition. The court held that he couldn't do this since he had to occupy it rather than simply close it down.
⁃ This is implied by law but often it will also often be written into the lease.


Blair Trust Co v Gilbert 1940

- in this case the lease provided that the said tenant binds and obliges himself and his ??? to reside on the said land. However the court held that reasonable periods of short absence would not breach this. In this case the tenant was in prison and had been absent for a year, so here the tenant was held to be in material breach so the landlord could bring the lease to an end.
- In this case, the absence of the tenant due to detention in Saughton Prison for culpable homicide for more than a year meant the landlord could bring the lease to an end on the ground of material breach.


Mickel v McCoard 1913

A tenant who breaches the obligation to be in possession will be liable for damage sustained to the property due to non-occupation


What is the requirement for the tenant to plenish the subjects?

The tenant is bound to plenish or stock the subjects - this applies where the landlord's hypothetic applies[ Where the landlord? is allowed to enforce the rent by selling the tenant's assets.

Since 2007 the landlord's hypothec only applies in commercial leases.].


When does the landlord's hypothetic apply?

Since 2007 the landlord's hypothetic only applies in commercial leases so this duty of the tenant (probably[ But the amendment to the landlord's hypothec was not done very well so it is not entirely clear.]) only applies in commercial leases.


Co-operative Insurance Society Ltd v Halfords 1998

If the tenant does displenish the stock then the landlord can obtain interdict to prevent this.


When is the tenant required to pay rent?

The tenant is obliged to pay the rent when it falls due.


How do you know when rent is due?

The lease will normally state payment date when the rent is due (often in advance). If there is no payment date specified, the tenant will be obliged to pay at a legal term date (this depends on the types of lease in question) - there are "horrible" rules on this.


What is a rent review?

Because of inflation, leases for more than about 5 years usually provide for review of the rent at the end of a certain period, for example, after every give years in a 25-year lease. If they cannot agree the lease says that a third party will set it in line with market rates (rent review clauses).


What is the landlord obliged to provide under the lease?

The landlord is obliged to provide subjects reasonably fit for the purposes of the let
⁃ This obligation only applies at the outset of the tenancy (so if the tenant takes possession and finds that the subjects are not reasonably fit he can rescind the contract. In contrast, if the subjects become unfit later on, it is usually a question of the landlords duty to carry out repairs - below.


What is the standard of subjects required?

The standard is only "reasonably fit" - thus it is not one of perfection. See North British Storage Co v Steele's Trustees 1920


North British Storage Co v Steele's Trustees 1920

it was held that while a drainage system could have been upgraded to a higher standard, this was not actually required since it was reasonably fit for the purposes of the let.


What is the common law duty required by the landlord?

The common law duty:
⁃ Urban subjects[ E.g. buildings. NB there are specific provisions for houses so this only applies under the common law where the housing provisions do not apply.] must be wind and watertight.
- See Wolfson v Forrester 1910


Wolfson v Forrester 1910

there was water from a choked down pipe which leaked through a hole into the premises causing flooding. The hole in the wall of the premises was to allow a gas pipe to enter. The court held the premises were wind and watertight - the hole in the wall would only cause problems in extraordinary circumstances whereas wind and watertight means under ordinary conditions. Furthermore, one of the judges added that the tenant could see the hole when he moved in anyway so if he wasn't happy he should have raised the issue at that point.
- Held: the premises were wind and water tight
- The LP said the hole in the wall would only cause problems in extraordinary circumstances e.g. Leakage in the pipe.
- Wind and water tight is under ordinary conditions not in extraordinary circumstances.


What does the standard assume of use by the tenant?

The standard also assumes reasonable use by the tenant:
*Glebe Sugar Refining Co v Paterson (1900)


*Glebe Sugar Refining Co v Paterson (1900)

held that the landlord only required to provide a building of sufficient strength for weight that would be put on it by ordinary trade use. The tenant was obliged not to overload it and he did, therefore he was liable in damages.


What is the tenant obliged to use the property for?

The tenant is obliged to use the property only for the purposes of the let. In commercial leases there will typically be a "(permitted) use clause". A breach is often known as "inverting the possession".


Mercer v Esk Valley Railway Co (1867)

The subjects were let for use as a paper mill. However the tenant brought a railway onto the subjects. This was held to have inverted the possession. It thus was unlawful.


British Linen Bank v Purdie (1905)

tenant affixed displays to the outside wall of the shop which he wasn't permitted to do and this was held to constitute inversion of the lease.

Nb if the tenant wants to change use the landlord will demand money for that.

Unauthorised alteration may also count as inversion.


What is the state of the subjects?

This is similar to 'purposes of the let' above, but instead this is about the state of the subjects during the lease.


What obligation does the landlord have in relation to the state of the subjects?

The landlord is obliged to carry out repairs. In urban leases the landlord must maintain the subject in a tenantable or habitable condition during the term of the lease, making such repairs as are necessary to keep this obligation. This includes (but is not restricted to) keeping the property wind and watertight.

The obligation is to carry out appropriate repairs once the matter is highlighted by the tenant.


Gunn v NCB 1982

the landlord failed to deal with rising damp and was held to be in breach of his obligation. Held: liable to the tenant in damages.


What is the landlord NOT required to effect repairs in respect of?

The landlord is not required to effect repairs in respect of damage caused by:
⁃ i) damnum fatale (acts of god)
⁃ ii) the action of a third party
⁃ iii) the negligence of the tenant (damage by the tenant would constitute a breach by the tenant of the corresponding duty to take reasonable care of the property. e.g. Glebe


*Wolfson v Forrester 1910

court held that even if the premises were no longer wind and watertight because of the hole, the landlord's obligation was only breached if the tenant drew the matter to the landlord's attention and they failed to do anything about it.
⁃ This means the landlord's obligation is not a warranty - there is no obligation to keep the subjects in a habitable condition permanently - the obligation is, if the tenant draws things to your attention to the effect that the obligation has not been met then the landlord must rectify it, it not then this is a breach. So if premises cease to be in a tenantable position and the tenant suffers a loss as a result, the tenant cannot successfully sue the landlord for breach unless they have previously drawn it to the attention of the landlord.
⁃ If the tenant does bring it to the landlord's attention then the landlord must repair within a reasonable time. It is not a warranty as such because the landlord is only liable if no action is taken within a reasonable time following notification.


What are FRI leases?

- Commercial leases are often called FRI (full repairing and insuring). So tenant is responsible for repairs and insurance.

⁃ Commercial leases normally include express provisions about this. The landlords obligation to repair is normally expressly excluded and repair obligations are imposed on the tenant.
⁃ A property burdened by a commercial lease without such full repairing obligations would be almost impossible to sell.


What obligation is on the tenant in relation to the care of the property?

The tenant is obliged to take reasonable care of the property. Where the tenant is liable, as well as being in breach of this obligation, the landlord is not liable.


Mickel v McCoard

tenant left the property vacant for around 2 weeks in the winter and didn't turn the water off. The pipes burst and the tenant was held liable for damage.


What is the common law obligation on the tenant to take care of the property?

This common law obligation on the landlord to repair is almost always expressly excluded in commercial leases, and full repairing obligations imposed on the tenant (for an example, see Lowe v Quayle Munro Ltd 1997 SLT 1168, 1997 SCLR 701). A property burdened by a commercial lease without such full repairing obligations would be almost impossible to sell.


Are the remedies found in the contract of lease?

There may be express remedies in the contract. Otherwise there may be special remedies:


What remedies are available to both parties?

⁃ 1) Specific implement[ Positive remedy to compel performance. It is a strong remedy because if you breach it then you are in contempt of court which can lead to a fine or imprisonment.] / interdict[ Preventative/negative remedy to stop someone from doing something. NB cannot enforce a positive obligation with interdict. ]
⁃ In the case of positive obligations (obligations ad factum praestandum) such as the landlord’s obligation to carry out repairs, specific implement is the appropriate remedy. But only if the obligation is sufficiently clear and precise.
- There were many cases concerning 'keep open clauses' in which firms in shopping centres etc had to keep open their shops. The question arose as to whether if a shop closed in breach of this obligation could specific implement be obtained to keep the shop open. It became clear[ *Retail Parks Investments Ltd v The Royal Bank of Scotland plc (No 2) 1996

*Highland & Universal Properties Ltd v Safeway Properties Ltd 2000] that the Scottish courts would enforce this positive obligation by specific implement. This is in contrast with the English position - the English courts[ Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997]] will only award the remedy of damages.


Grosvenor Developments (Scotland) plc v Argyll Stores Ltd 1987



*Retail Parks Investments Ltd v The Royal Bank of Scotland plc (No 2) 1996

⁃ A bank was shut and it tried to get around the keep open clause by only having cash machines instead. The Inner House awarded the landlord specific implement for the bank to be open at the hours specified in the lease. The important point was that the courts would only be willing to enforce these obligations by specific implement where the clause in the lease is clear and precise.
- So in Scotland you can get interdict or specific implement in Scotland.


Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997]

England case. In England, they do not accept specific performance. The remedy is ONLy damages.


*Highland & Universal Properties Ltd v Safeway Properties Ltd 2000



When can damages be claimed?

Damages can be claimed for breach of a lease provision where the tenant has suffered a loss. They are a contractual remedy.
- See Douglas Shelf Seven Ltd v Co-operative Wholesale Society Ltd [2007] CSOH 53.


Douglas Shelf Seven Ltd v Co-operative Wholesale Society Ltd [2007] CSOH 53.



When will an action for payment be used?

3) Action for payment[ This is because specific implement cannot be used for recovering money since if specific implement is breached it can lead to imprisonment.]
⁃ This is most likely to be used by a landlord for the recovery of unpaid rent. Once you have a decree for payment this can be enforced by diligence[ This is essentially judicial security / enforcing debts against assets by unsecured creditors. It is seizing and freezing assets. ]: attachment[ This is diligence against corporeal moveables. This is seizing hold of things. ], arrestment[ This is diligence against incorporeals (usually money in bank accounts).].
⁃ Normally a court order is required for diligence, however it is possible for the parties to agree that diligence will be carried out if a debt is not paid - summary diligence.


What is a summary diligence clause and when will it be used?

Commercial leases[ Common for 25 years ] almost always have a summary diligence clause which allows you to do diligence without having to go to cour[ Normally you have to get the order of a judge provided the tenant has signed up to the preservation execution then. Preservation ensures a copy is saved incase the original gets lost (e.g. registration of wills in books and council of session for preservation). ]t - the lease must be taken and registered in the books of council and session. This then entitles the landlord to carry out summary diligence.
- Summary diligence - If lease contains clause like this: “The parties hereto consent to registration hereof [and of all Memoranda by or on behalf of the parties hereto] and of all determination or decrees of any arbiter appointed hereunder for preservation and execution.”
- See Cowie v Martalo 2011 GWD 32-676.


Cowie v Martalo 2011 GWD 32-676



What is rescission and when will it be used?

Rescission is bringing a contract to an end because of a material breach. A contract can only be rescinded if there has been a material breach[ I.e. If the tenant isn't allowed to possess the property, this would constitute a material breach or if the subjects were not fit for occupation this would be a material breach.

But more minor things would probably not be a material breach.

e.g. The breach going to the root of the contract - Wade v Weldon**. The root of the contract is unclear….unless the contract specifies. ], so a tenant can rescind where the subjects are not reasonably fit for the purposes of the let.


Crieff Highland Gathering v Perth and Kinross Council 2011

Example of alleged material breach by the tenant:
Council had an area which was let to Crieff. Their maintenance obligations were not adequately carried out. The judge held that there was a breach of the landlord's obligations but it didn't amount to a material breach.
- The council sought to rescind the lease on the basis that the subjects were not being properly maintained (e.g. The boundary fences). Held: there was not material breach and there was not sufficient lack of repairing to cause the breach. NB there is a specific duty on the tenant to repair.


Davie v Stark (1876)

Example of an alleged material breach by the landlord:
landlord bound himself not to let a neighbouring shop to anyone in the same trade as the tenant. The landlord did let to someone in the same trade. The tenant sought to rescind. The court held that this was an important clause and the tenant had committed a material breach.


Can the landlord's ability to rescind be restricted?

There are provisions in the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985[ Not in Avizandum Statutes so don't worry about it.] which restrict the landlord's ability to rescind in some circumstances. Can look up s5 if you want: can only rescind where it is “fair and reasonable to do so”.


What is irritancy?

NB irritancy is a remedy whereby the landlord can bring a tenancy to an end prematurely.


If the tenant is in breach, does the landlord use irritancy or rescission?

⁃ Rescission is available to the landlord only where the tenant is in material breach AND refuses to implement the terms of the lease in the future.[ So a past breach by the tenant which they are willing to remedy will not permit the landlord to rescind.]
- In the case of non-monetary obligations, it must be fair and reasonable to rescind.


What are the self help remedies?

A) Retention
B) Lien


What is retention?

⁃ This would typically be retention of the rent.
⁃ This relates to the mutuality of contract.
⁃ Retention does not extinguish your obligation but it suspends it until the other party performs.


If the tenant is continuing to pay the rent during a period for which defects complained, can the tenant now retain?

Possibly not - if the defect has been there long enough you may be taken to have accepted it and you can be barred from exercising the right of retention later for that breach [BRB v Roccio 1979]
- If you have accepted a state of the premises then pay rent for a while, you may be personally barred from withdrawing rent because you will be deemed to have accepted.
⁃ If the tenant suffers partial eviction (e.g one room is unfit to use) then the tenant is entitled to abatement of rent (reduction of rent).
⁃ If the tenant suffers total eviction (e.g. property has been destroyed) the lease comes to an end (it is frustrated) (although in commercial leases this may be contracted out of).


Is it possible to contract out of the right to retain rent?

It is possible to contract out of the right to retain the rent (Skene v Cameron 1942).


What is lien?

⁃ This is the ability to retain corporeal moveables (or possibly land) but this is an uncommon remedy in a lease situation.
⁃ Example: landlord and tenant agreed that the tenant would repair things but the landlord would pay for it and the landlord gave the tenant tools to carry out the repair, the tenant could hold onto the rules until the landlord pays him for the cost.
- Lien in theory is available but it is not used in practice? [Look up*].


What are the landlord's remedies?

These are:
1. Irritancy
2. Action of removing at common law
3. Landlord’s hypothec


What is irritancy?

This is the right of the landlord to bring a lease to an end prematurely for reason implied by law (of which there is one[ "Legal irritancy"]) or under the express terms of the lease. The result is to extinguish the lease and any rights in it, such as subleases. The effect is similar to rescinding the lease but it has a more defined scope.


What is legal irritancy?

Legal irritancy is non-payment of rent for 2 years[ So if the tenant doesn't pay the rent for two years, it is implied that the landlord may irritate.

Legal irritancy is never used because no landlord is going to wait for two years.] (or 6 months for agricultural tenants).
⁃ The tenant may prevent the irritancy up until the extract decree is obtained by paying (even at the very last moment.)
- The tenant is entitled to stop the irritancy — known as “purging” it — by making payment at any time before decree is extracted.
- SLC has suggested that legal irritancy be replaced with an implied option to terminate if rent has not been paid for 6 months (2003).


What is conventional irritancy?

Conventional irritancy is far more important and is stipulated expressly in the lease[ NB this is subject to statutory controls.]. Here are a number of examples of trigger events in current commercial lease irritancy clauses (express grounds):
⁃ Non payment of rent for 21 days
⁃ Failure to fulfil any other obligation under lease
⁃ Tenants going into liquidation or having receiver appointed
⁃ Tenants having administration order made against them
⁃ Tenants becoming apparently insolvent or signing trust deed for their creditors.


Under conventional irritancy what happens if the tenant pays the rent after irritancy proceedings have begun. If the landlord accepts this, is he bound to have waived the breach which gives rise to the irritancy?

⁃ The rule seems to be that if the landlord makes it clear that the breach has not been waived but that the tenant can stay on temporarily and make rent payments then the landlord can still irritate.
⁃ On the other hand, consistent acceptance of rent with no qualifying explanation can amount to acquiescence and the landlord may be barred from irritating.


HMV Fields Properties Ltd v Bracken Self Selection Fabrics Ltd 1991

the landlord served a notice of irritancy for various trigger events listed in the lease and the matter went to arbitration. The tenant stayed on in occupancy meanwhile and was paying rent. The landlord returned the payments immediately except for two which they delayed returning (one for six months). The court held it was a question of fact whether the tenant's breach had been waived (e.g whether the acceptance of rent amounted to personal bar or waiver) - on the facts they agreed with the arbiter and held that there had been no waiver and the landlord was entitled to irritate. Thus the landlord was permitted to continue irritating.


Aubrey Investments v Crawford 1998

landlord had a right to irritate upon the receivership of the tenant. When this occurred, the landlord didn't irritate immediately but rather entered into negotiations with the receivers on the possibility of the tenant assigning the lease. In the meantime the landlord still collected the rent. Negotiations on the assignation broke down and the landlord purported to irritate. It was held the landlord's had not waived the right to irritate (they had only accepted the rent as a precondition of negotiating the assignation.


Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd 1998

there had been an irritancy. It was held the landlords could keep windfall benefits from improvement of the property following conventional irritancy - it was held they were not unjustifiably enriched.


Can you purge a conventional irritancy?

Under the common law you could not purge a conventional irritancy - the landlord had an absolute right to irritate. However, under the Law Reform (Misc Provisions) (S) Act 1985 ss 4-7[ Not in Avizandum Statutes so the detail is not necessary to know.] there is now a difference between monetary breaches and non-monetary breaches.


What is the difference between monetary breaches and non-monetary breaches?

Under the common law you could not purge a conventional irritancy - the landlord had an absolute right to irritate. However, under the Law Reform (Misc Provisions) (S) Act 1985 ss 4-7[ Not in Avizandum Statutes so the detail is not necessary to know.] there is now a difference between monetary breaches (e.g. no payment of the rent) and non-monetary breaches (
⁃ For monetary breaches a 14 day notice must be given.
⁃ For non-monetary breaches there is a "fair and reasonable" landlord test.[ Tawne Overseas Holdings v Newmiln Farms [2008] - if these rules are not complied with then the lease is not irritated. Said you have 14 days from the date on the notice. This was held to be incorrect because the 14 days can only run from receipt/receiving the notice.

This is 14 days from receiving the notice. ] e.g. not maintaining the property or something like that.

[Not expected to know this in detail just that there are statutory controls and a difference between monetary and non-monetary breaches].


Whitbread Group v Goldapple 2005

rental payment tendered by tenant's agent by cheque suspends the landlord's right to irritate.


Aubrey Investments v DCS 2000 -

this is an example of the "fair and reasonable" landlord test being examined - it really is a matter of the facts of the case.


When is the "fair and reasonable" landlord test applied?

The "fair and reasonable" landlord test is applied at the time of termination of the lease and not during the previous part of the lease.


Maris v Banchory Squash Racquets Club [2007]



What is an action of removing?

If the tenant fails to leave the property at the ish then the landlord can remove them using a common law "action of removing".
⁃ If the tenant stays put then the landlord can obtain compensation known as "violent profits" - penal damages (usually double rent.)
⁃ An example is Jute Industries v Wilson and Graham 1955


Jute Industries v Wilson and Graham 1955

the tenants remained for two months over the ish / notice to quit and were held liable to pay double rent for the two months.


What is the landlord's hypothec?

The landlord has a right in security over the goods brought into the property by the tenant — known as the invecta et illata — for the rent.


What is alienation?

This is transferring ones interest / disposal of a leasehold interest, normally but the tenant. There are two main ways to do so: assignation or subletting.


What are the differences between the rules of assigning or subletting?

The rules on whether you can assign or sublet are much the same. The starting point is always what the lease says.
⁃ Assignation - when tenant 1 transfers to tenant 2 (the original (1) tenant disappears)
⁃ Subletting[ In commercial practice, subletting may be more attractive to the landlord because the original tenant is still in the picture and can still be sued for the obligations.] - where tenant 1 sublets to tenant 2 (the original tenant (1) remains liable)

NB it is relatively common to sublet part of the subjects, e..g part of a shop.


Can a lease be assigned/sublet?

⁃ The starting point is whether the lease expressly permits or precludes it (alienation clause).
⁃ NB there are rules concerning delectus personae - so if the lease is of a special nature then you cannot assign and if the lease is silent on the question of the assignation, then the rule is that permission is required.


When is delectus personae presumed?

⁃ Deluctus personae is presumed in agricultural leases of ordinary duration (not fixed, probably 20 years or less) and furnished house lets - this means they cannot be assigned in these cases without the landlord’s permission.


When is delectus personae not presumed?

⁃ In contrast, deducts personae is not presumed in agricultural leases of extraordinary duration (probably 20 years or above) or unfurnished urban lettings (e.g. Commercial properties or a house which is not furnished) - this means in these instances the common law allows assignation.


What is the difference between ordinary and extraordinary leases?

- The difference between agricultural leases of ordinary or extraordinary may be that one of ordinary duration is a short lease (20 years of lease) where extra is probably a long lease.


Can the landlord sell their interest without the tenant’s permission?

The landlord can generally alienate his/her interest (i.e. by sale) without the tenant's permission. The new owner simply becomes the new landlord. It is also competent for the landlord to create an “interposed lease” between itself and the tenant. In that event the original tenant becomes the owner’s subtenant


Does delectus personae only apply to natural persons?

Deluctus personae is not just about natural persons, it can affect juristic persons also: Scottish Ministers v Trustees of the Drummond Trust 2001.


What happens to the tenant's future obligations upon assignation?

On assignation the previous tenant's future obligations come to an end (obligations already incurred pass to the assignee - so no need to pay future rent). In the case of past obligations of arrears of rent the original tent probably remains liable but the assignee can also be sued.


How does an assignee actually obtain a real right?

It would seem that all that is needed for a short lease is possession (the new tenant moving in) and for a long lease registration. In other words it would seem that intimation to the landlord is not crucial.

“The assignation of his lease by a tenant who has power to assign has the effect of making the assignee sole tenant from the time he takes possession of the subject of the lease, and of discharging the cedent from future liability to the landlord”: Lord Watson in Lord Elphinstone v Monkland Iron & Coal Co (1886) 13 R (HL) 98

English position was substantially different until Landlord and Tenant (Covenants) Act 1995. 
Under 1449 Act, mere possession gives assignee real right. Under 1857 Act, assignation must be recorded/registered to give real right to assignee.

You get a real right as the transferee in the same way as you get the transferee to create the real right. The method used to create the real right in the first place is the method that the assignee needs to follow to get his/her real right. So in short leases the assignee must take possession, and for long leases this requires registration in the Land Register.


Is the tenant liable for future obligations in a sublet?

The party in the middle (original tenant) is not at law excused from his/her obligations.


What is the key distinctions between early termination and termination at the end of the lease?

There is a clear distinction between terminating at the end of the lease (the ish) and terminating prematurely. You can write into the lease as specific obligation for the tenant to remove him or herself.


What are the general rules on termination at the ish?

There is often a specific obligation for the tenant to leave at the end of the ish. However the general position is that the tenant only has to remove if the landlord serves a notice to quit. If the landlord doesn't serve a notice to quit then it is assumed that the parties don't wish to continue the lease.[ Is this wrong???] In other words, a fixed date of termination is regrded as being merely a mutual option to terminate at that date. The option is exercised by notice: “warning to remove” when served by the landlord but the English “notice to quit” is now generally used. When given by the tenant it is a “letter of removal”.
⁃ Alternatively the tenant can serve a notice on the landlord informing him that he is leaving.
- NB the obligation to serve notices to quite probably still apply in this obligation.


What are the prescribed periods of notice for the different types of tenancy?

There are prescribed periods of notice for different types of tenancy [not expected to memorise as not in statute - just be aware for practice]:
⁃ 1) Agricultural holdings: not less than one year and not more than 2 years prior to the ish
⁃ 2) Other leases of land exceeding two acres: as above, save leases less than 3 years where the minimum is six months.
⁃ 3) All other leases: for leases greater than 4 months the minimum is 40 days notice (same as common law requirement). For leases of four months of less then the minimum is one third of the duration of the let. For dwelling hours the minimum is four weeks. **This is the most common lease.
⁃ NB it is unclear if e.g. 40 days includes the date of service/date of ish, therefore it is safer to give notice 42 days.
- NB there are rules and you must serve a notice to quit.


What is tacit relocation?

⁃ If there is no notice to quite served, and the tenant does not serve a notice that he is leaving, the law presumes the parties intend to continue the lease and 'tacit relocation' (implied re-lease) occurs and the lease continues.


How long is the period of extension?

⁃ In leases under one year, it renews itself for the same period again.
⁃ In leases of one year or over, the renewal period is one year.
⁃ This process continues indefinitely until notice procedure is used. Lease continues on the same terms (except for length if greater than 1 year and terms inconsistent with lease of 1 year.)[ Since leases over one year continue for a further year.]


Can you contract out of tacit relocation in the lease?

*Macdougall v Guidi 1992 - this suggests yes you can. However this is a Sheriff Court case and it is not absolutely certain. Not settled except for agricultural holdings where statute prohibits contracting out of the doctrine (AH(S)A 1991, s.3).
- So the safe thing to do is the serve the notice.


Are unilateral actings of the tenant sufficient to exclude tacit relocation?

Signet Group v J Clark Retail Properties 1996 - the tenant sent a notice of termination to the landlord but not in conformity with the notice provisions of the lease. The tenant's argued that there actions in closing down their business and removing from the premises (moving out) well before any date the notice was due amounted to conduct sufficient to exclude tacit relocation.
- The court held that while actions could communicate an intention to quit and therefore exclude tacit relocation - none of the actions here were communicated to the landlord, and therefore tacit relocation applied and the lease continued.
- On the facts, the actions were not communicated to the landlord, they did not tell the landlord that they were moving out; therefore tacit relocation applied. To stop tacit relocation there needs to be communication from the landlord to the tenant.


What is premature termination (before the ish)?

This is where the lease comes to an end before the ish.
⁃ If the parties agree for the lease to come to an end early the tenant would enter into a deed of renunciation in favour of the landlord. (Recession, Irritancy already considered).


What is a break clause?

⁃ Sometimes the leases itself gives opportunities to end early: these are known as break clauses. These might be in favour of the landlord or tenant. These are typically available on an anniversary of a date of entry.
⁃ These clauses typically prevent a tenant from exercising the option if they are in breach of the conditions under the lease (Trygort (No 2) v UK Home Finance [2008]. e.g. cannot walk away from the lease if you have not been paying rent.
- So you could have a 5 year lease but either party could withdraw after 3 years.


What is frustration?

If the purposes of a contract cannot be fulfilled then it may be 'frustrated’, e.g. where it is not possible to continue the contract.


What are the three main examples of frustration?

There are three main examples of this happening in a lease:
⁃ 1) rei intreats[ This is where the property is totally destroyed. NB commercial leases typically contract out of this on the basis that there is insurance. ]
⁃ 2) constructive destruction[ Not total destruction but in practical terms the property cannot be used. “For all intents and purposes it is not inhabitable”. ]
⁃ 3) supervening impossibility


Tay Salmon Fisheries v Speedie 1929

- lease of subjects which the MoD subsequently designated an area as a firing range for the army.
- Some of the land had a lease for salmon fishing.
- The purposes of the lease were rendered impossible so the court held that the lease was frustrated.


What are the other events that may terminate a lease?

⁃ Rescission - see above
⁃ Irritancy - see above
⁃ Death of tenant? [Don’t worry too much about death].
⁃ If there is a prohibition against assignation (or assignation prevented by delectus personae) then the lease comes to an end. If not then the deceased can pass the lease on in their will. If there is no will then it is for the executor to deal with (Succession (S) Act 1964 s 16).
- Executor can then transfer without consent.
- If it is a freely transferable lease it will pass to the person who it is left to under the will.


How are commercial leases governed?

There is little statutory regulation of commercial leases.[ And these are not in the Avizandum Statutes so there will be no examination in any detail on provisions which are not in this statute book - but the information on the handout is examinable (without memorising the numbers of the provisions).] They are governed by relatively lengthy documentation agreed by the parties and much may depend on market conditions and relative negotiating strength. Some law firms have produced standard documents for related transactions such as assignation and rent review, but not for the lease itself. See http://www.psglegal.co.uk/.


What are the typical clauses in a commercial lease?

(A) Definition and interpretation clauses

(B) Tenant's obligations clauses, these may include[ (i) payment of rent (Scottish quarter days: Candlemas (28 Feb), Whitsunday (28 May), Lammas (28 August), Martinmas (28 Nov))
(ii) payment of all outgoings
(iii) payment of VAT
(iv) compliance with statutory requirements
(v) to maintain and repair
(vi) to paint
(vii) to leave in good repair
(viii) to permit access
(ix) to pay insurance premiums; not to endanger insurance
(x) not to make alterations without prior (written) approval
(xi) permitted user
(xii) not to affix signs without prior approval
(xiii) not to pollute
(xiv) not to deposit goods or materials
(xv) not to cause nuisance
(xvi) not to overload electrical circuitry
(xvii) to observe all real burdens etc.
(xviii) to allow landlord facilities to relet/resell
(xvix) to indemnify landlord against loss
(xx) to pay costs in connection with lease]. These (in comments) are standard conditions in "full repairing and insurance" leases (FRI leases). Payment of repairs, insurance premiums, general maintenance…etc.
This is a normal commercial lease. So the tenant is responsible for the cost of insurance and the cost of repairs, not the landlord. In commercial leases the landlord is often an institutional investor (like Pension fund or LA and use rent as income with as little financial liability as possible so repairs and insurance are all for the tenant to pay).
See Tenancy of Shops (S) Act 1949 which is a rare example and enables shop tenants who receive notice to quit in the run-up to the ish to apply to the sheriff court for renewal of their lease. The Sheriff can extend it for a period of a year.

(C) Landlord's obligations clauses
⁃ Generally much less than the tenant. These may include:
⁃ i) to insure [however, tenant may have to meet premiums - see (viii) above]
⁃ (ii) "Under the reservations, conditions and others herein contained or referred to, to warrant lease to tenants against all hands and against all mortals."

⁃ There may well be no others save the above - will depend on relative bargaining powers of the parties. In cases where the subjects let are part of a larger development (e.g. a shopping centre) the Landlord may also bind itself in the lease not to let other units in the development to a business of the same type as that carried on by the tenant: see Warren James (Jewellers) Ltd v Overgate GP Ltd [2007] CSIH 14.

(D) Consent to registration
⁃ Typically a commercial lease will have consent by the tenant to reservation and execution in the Books of Council and Session.
⁃ Consenting to registration for execution allows summary diligence to be carried out.

(E) Arbitration
⁃ There are typically clauses about arbitration in a commercial lease, but often only for rent review provision.


What is a rent review?

This is a crucial part[ Since there is no implied right to change the rent.] of a commercial lease unless it is for a very short duration.


What is the typical commercial lease rent review period?

Typically commercial leases last for 25 years and often these rent review clauses operate every five years. The formulae are usually complex.
⁃ The rent review will normally be the greater of (i) existing rent; (ii) open market rent". NB the rent review can only increase - so if the open market rent review has fallen, you cannot review downwards.


What if there is a dispute as to what the open market rent should be?

The lease will normally have a clause stating that the matter will go to an expert or an arbiter (in both cases this individual is almost always a chartered surveyor).

There is a limited right of appeal from an arbiter's decision to the CoS.

An expert carries out a professional valuation of his own (usually cheaper) - the danger is that the expert reaches an amount that neither party wants.
⁃ There is no appeal from the decision of an expert.


What happens if the date for rent review has passed and nothing has happened? Is it crucial to trigger at the exact date?

⁃ The English courts have taken the view that there is a rebuttable presumption that time was not of the essence (United Scientific Holdings Ltd v Burnley Borough Council [1978])
⁃ The presumption can be rebutted by contra-indications in the lease:
⁃ Charterhouse Square Finance v A&J Menswear 1998 - the lease contained a provision setting out the consequences of failing to adhere to an agreed time limit. It was held that this demonstrated the parties intended a strict enforcement of the time limit so the presumption was rebutted.

The English law has been followed in Scotland:
⁃ Visionhire Ltd v Britel Fund Trustees Ltd 1991 - review intimated, but then time was allowed to pass. Lease therefore permitted tenants to intimate their own rental proposal. Held that tenant's right in the circumstances to propose rent rebutted the presumption that time was not of the essence. Landlord had therefore lost the right to review.


What happens in the case of failure to trigger the review process for a lengthy period?

You may be personally barred from enforcing the rent review - i.e. held to have waived your right to enforce the rent review:

Banks v Mecca Bookmakers (Scotland) Ltd 1982


Banks v Mecca Bookmakers (Scotland) Ltd 1982

Landlord missed rent reviews by between 1 and 2 years. During this time the landlord continued to collect the rent at the existing rate. The landlord was held to have waived the right to review.


Amherst v James Walker Goldsmith & Silversmith [1983]

[ So this case contrasts with Banks but it is English so Banks is probably better authority.]

English case. Landlord missed a rent review for six years and was still allowed to trigger the relevant rent review (they were not held to have waived the right).


What does the contract provide for where there is a failure to agree rent by the require date?

There is typically a contractual provision covering failure to agree rent by the required date e.g:
⁃ "If the Open Market Rent is not agreed or determined on or before the review date in question, the Tenants shall pay a provisional rent at the rate payable immediately prior to the review date in question and, upon the amount of the reviewed rent being agreed or determined, the Tenants shall, forthwith on demand, make good and pay to the Landlords any deficiency or underpayment, together with a sum equal to interest ..."


What are the other valuation methods?

There are other valuation methods:
⁃ Index-linked rent
⁃ Turnover rent (the greater the turnover, the higher the rent)


R M Prow (Motors) Ltd Directors Pension Fund Trustees v Argyll and Bute Council [2012] CSOH 77.

It is important to serve notices correctly


What is a service charge clause?

Another common feature of commercial leases is a service charge clause (e.g. in office blocks, commercial estates, industrial estates, shopping centres). This imposes on the tenant a proportion of the costs of dealing with the wider building ("common parts" of the building) for things like refuse collection, security, heating, etc.


What is a "sweeper clause"?

Sometimes the leases have a "sweeper clause" [These are quite vague so tenants should be careful when signing up to these.] - this encompasses any other service which the landlord may reasonably provide from time to time.
⁃ Marfield Properties v Sec of State for the Environment 1996 - no objective definition of common parts - depends on the property in question.


How are the costs of the service charges calculated?

The cost of the service charges will be calculated and then apportioned between the tenants. The apportionment can be challenged:
⁃ Mars Pension Trustees v County Properties & Developments 2000.


What is the landlord's hypothec?

The landlord's hypothec is a specific remedy available to landlord's only - it only applies to commercial leases (under the Bankruptcy and Diligence etc (S) Act 2007 s 208).

⁃ The landlord's hypothec is a security over moveables kept on the subjects (the landlord can sell the moveables to pay the rent). The rent covered is any rent unpaid but due[ This means you can go back 5 years in principle (until prescription extinguishes the rights).] (s 208(8)).


What moveables are covered by the landlord's hypothec?

⁃ invecta et illata owned by the tenant (ordinary moveables brought in by tenant in the premises).


How will a commercial lease deal with assignation and subletting?

The typical commercial lease will deal with this expressly. It might include:
⁃ (i) a prohibition against assignation or subletting; or
⁃ (ii) a prohibition against assignation/subletting except to a group/associated company; or
⁃ (iii) a prohibition against assignation/ subletting [often also charging] "without the prior written consent of the Landlords, which consent will not be unreasonably withheld in the case of a respectable and responsible assignee of sound financial standing". [most common]


What does "unreasonably withheld" mean?

Renfrew District Council v AB Leisure (Renfrew) Ltd (In Liquidation) 1988 - the landlords would not agree to the assignation until arrears of rent were paid, in addition to an immediate rent review, the addition of a full repairing and insurance clause and future rent reviews every 3 years rather than 5 years. The court held the landlord was effectively trying to rewrite the lease and this was not reasonable - consent had been withheld unreasonably.


Lousada v JE Lesser (Properties) 1990

In contrast to the above, in this case the landlord made consent to assignation subject to conclusion of an outstanding rent review; this was held to be reasonable - consent had not been withheld unreasonably.


Burgerking Ltd v Rachel Charitable Trust [2006]

If the landlord gives several independent reasons for refusing consent, so long as one of these is reasonable that renders the refusal to consent reasonable


What is security of tenure limited to in Scots commercial leases?

In Scots law there is only very limited security of tenure in commercial properties. It is limited to the Tenancy of Shops (S) Act 1949 which gives a right to apply to a Sheriff to extend the lease of a shop[ "Any premises where any retail trade or business is carried on."] (and certain other premises) for another year.
⁃ This is a matter for the discretion of the Sheriff.
⁃ The tenant can continue going back each year in theory.


How are residential leases regulated?

Residential leases are very heavily statutorily regulated. There is a distinction between private and public sector leases.


What must a landlord do before granting a lease?

Landlord must register with the local authority before granting a lease: Antisocial Behaviour etc (Scotland) Act 2004 s 93. See https://www.landlordregistrationscotland.gov.uk/Pages/Home.aspx


What are the rules on the letting of assured tenancies?

(i) assured tenancies – since 2 January 1989, under the Housing (Scotland) Act 1988.
- House must be leased as a separate dwelling and be occupied by the tenant as his or her only principal home (s 12(1). House can mean flat or hotel room occupied by a long-term resident. Assured tenancy cannot arise in cases of leases to students by educational institutions, or asylum seekers.


What are the rules on short assured tenancies?

(ii) short assured tenancies - a special type of assured tenancy, also under the Housing (Scotland) Act 1988.
- A landlord can avoid the difficulty of recovering property by creating a short assured tenancy. This must have a minimum length of six months. Advance written form (Form AT5) must be given to the tenant that this type of lease is being granted. There is no security of tenure beyond the ish.
⁃ Most common type of private sector tenancy. Minimum 6 months. No security of tenure beyond that.[ If it is a short assured tenancy then the landlord can remove you at the end.]


What are the rules on regulated tenancies?

regulated tenancies - under (latterly) the Rent (Scotland) Act 1984 - not possible since 1989, though a few still in force.


When is an HMO licence required?

For properties of 3 or more unrelated persons an HMO licence is required.
⁃ Them Properties LLP v Glasgow City Council 2010


Antisocial Behaviour etc (Scotland) Act 2004 s 68.

There is a duty on the landlord to control anti-social tenants


What is the duty on the landlord to meet "the repairing standard"[ This is not expected to be learned but it differs from the common law.]?

Housing (Scotland) Act 2006 s 14. Defined in s 13 as being met if:
⁃ (a) the house is wind and water tight and in all other respects reasonably fit for human habitation,
⁃ (b) the structure and exterior of the house (including drains, gutters and external pipes) are in a reasonable state of repair and in proper working order,
⁃ (c) the installations in the house for the supply of water, gas and electricity and for sanitation, space heating and heating water are in a reasonable state of repair and in proper working order,
⁃ (d) any fixtures, fittings and appliances provided by the landlord under the tenancy are in a reasonable state of repair and in proper working order,
⁃ (e) any furnishings provided by the landlord under the tenancy are capable of being used safely for the purpose for which they are designed, and
⁃ (f) the house has satisfactory provision for detecting fires and for giving warning in the event of fire or suspected fire.


What if there is a breach of the landlord's duties under s 14 Housing (S) Act 2006?

The tenant can apply to private rented housing committee (s 22). It can make a "repairing standard enforcement order" (s 24). Failure to comply with this without reasonable excuse is an offence (s 28).


Who must the deposit go to?

Now the deposit must go to a third party under the Tenancy Deposit Schemes (Scotland) Regulations 2011.


What are public sector leases?

This is for local authorities etc. The landlord has to be a local authority, water or sewerage authority or a registered social landlord (s 11(1)(b)). The property must be a house let as a separate dwelling and the tenant must be an individual whose only or principal home is that house (s 11(1)(a)).


What are the two types of public sector leases?

⁃ 1) Scottish secure tenancies
⁃ (replace earlier secure tenancies from 30 September 2002), under the Housing (Scotland) Act 2001 – where the landlord is local authority, water or sewerage authority, or a 'registered social landlord'.

⁃ 2) Short Scottish secure tenancies
⁃ (again from 30 September 2002) - modelled on private short assured tenancy.
- Requires a minimum duration of six months and advance notice to the tenant that such a lease is being granted. Its use is limited to a small number of cases inc. Where the tenant has been guilty of anti-social behaviour or is homeless (Sch. 6). There is no extended security of tenure, nor right to buy for tenants.
⁃ South Lanarkshire Council v McKenna 2013


South Lanarkshire Council v McKenna 2013

Challenge to the legislation on human rights grounds concerning removing tenants in relation to Article 8 ECHR. It was held the legislation did not contravene Article 8


What are the statutory regimes for agricultural leases?

Five special statutory regimes (first two most important):
⁃ (a) agricultural holdings - Agricultural Holdings (Scotland) Act 2003;
⁃ (b) crofting tenure - Crofters (Scotland) Act 1993;
⁃ (c) small landholders - Small Landholders (Scotland) Act 1911;
⁃ (d) statutory small tenants - Small Landholders (Scotland) Act 1911;
⁃ (e) cottars - Crofters (Scotland) Act 1993 s 12.


Salveson v Riddell [2013] UKSC 22. ECHR art 1 protocol 1

This was a challenge to some of the Agricultural Holdings Regulations - this succeeded.