Van McKellar | Partner

Shopping Around

The media is filled these days with stories of major commercial tenants falling into insolvency (Maplin; Toys R Us etc) causing major problems for their creditors including their landlords. Other stories circulate about major retailers being in financial difficulties and having to renegotiate the terms of their leases. These are difficult commercial times for retailers and for their commercial landlords but resulting negotiations are driven by commercial reality and more often determined by insolvency law rather than normal landlord/tenant laws.

An interesting irony set against that commercial backdrop is the protection given under Scots law to shop tenants. Commercial leasing law in Scotland (unlike England) is remarkably free from statutory interference, but the Tenancy of Shops (Scotland) Act 1949 stands out as one of the rare exceptions. It is also a legal trap for the unwary.

Under Scots law, if proper notice has been given by a landlord to a business tenant then that business tenant requires to vacate the premises at the termination date. But in such a situation and where a shop is concerned, the 1949 Act allows the (solvent) shop tenant to apply to the Sheriff court for a renewal of the lease for a period of up to a year with the court empowered to grant that and to fix the rent and such other conditions as it considers reasonable. The Act gives the court a wide discretion to determine the case as it deems reasonable.

In a further irony a supposedly temporary piece of legislation enacted almost 70 years ago which aimed to protect small shop keepers from a perceived problem of exploitation from property speculators increasingly has been relied upon by large retailers simply to advance their commercial interests. While a decline in reported cases rather hints at a reduction in such applications, in turn no doubt reflecting the commercial backdrop, the last two reported cases (from 2013 and 2015) both involved large commercial tenants seeking the Act’s protection. Perhaps unhelpfully but rather reflecting the rather loose legal drafting involved in the Act, the Sheriffs did not entirely agree in their legal analysis of how the Act fell to be applied. In the 2013 case the Sheriff looked back to the reason the legislation was enacted and concluded it no longer applied or indeed reflected the large commercial tenants’ position and that influenced his decision in refusing to exercise his discretion in the tenants’ favour; the lease was not renewed. The 2015 case saw a similar outcome with the Sheriff in that case agreeing as to the width of the discretion afforded to the court by the Act, but so decided on the facts of the case and what he considered reasonable in the circumstances. He however disagreed that consideration could be had as to why the legislation had been enacted and declined to speculate further on the Act’s continuing application. But it may be relevant to note that in both cases the court declined to protect the commercial tenants from their landlords decision to terminate the lease.

So regardless of the current commercial backdrop, and one Sheriff’s recent doubts about its relevance, the 1949 Act still remains in force and a trap for the unwary. Its time may have come commercially and legally but to the latter it seems that is for Parliament to call and not the court.

Van McKellar

Van McKellar

Dispute Resolution Team

“I see my role as a problem solver – seeking to understand the factual basis of my clients’ disputes and applying a legal and commercial analysis in seeking to resolve them, whether by negotiation or by means of litigation or some other alternative means of dispute resolution.”

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