A little piece of legislation from 1949 still has the capacity to wreak havoc on a landlord’s well laid plans. Intended to protect the interests of small shop-keepers in the lean post-war years, the Tenancy of Shops (Scotland) Act 1949 is almost unique in Scotland in attempting to regulate the relationship between landlord and tenant: generally in Scotland landlords and tenants are left to their own devices and expected to set out the terms and conditions of the contract between them wholly in the lease itself.
The 1949 Act gives shop tenants an additional protection, in that a shop tenant can apply to court for an extension of a lease which is about to expire, for a period of up to one year. The Act is unusual in Scotland in that it allows a tenant to stay in the premises for longer than was ever agreed at the outset, without the agreement of the landlord.
The sheriff determining a 1949 Act application to the court has discretion in whether to allow the requested extension, although the Act sets out six circumstances where the sheriff should refuse an extension:-
- where the tenant is already in material breach of the lease;
- where the tenant is insolvent;
- where the landlord has offered to sell the property to tenant;
- where the landlord has offered the tenant reasonable alternative accommodation on reasonable terms and conditions;
- where the tenant has previously given notice of its intention to terminate the lease and in consequence of that the landlord has arranged to sell or let the property to another party; and
- if greater hardship would be caused by allowing the extension than refusing it.
While an application has the potential to seriously impact or delay a landlord redeveloping or re-letting a property, case law has shown that few, if any, applications succeed. Most recently the courts have decided against multiple or national retailers making an application.
The Scots Law Commission is considering the 1949 Act, with a view to repeal. It will be some time before any changes or repeal of the legislation take effect and so it will pay for landlords to be vigilant when dealing with retail premises and for retail tenants to consider if they can be the ones to persuade a court to extend their lease.