Member Article

Unlike the position in England, in Scotland there is virtually no statutory protection for a commercial tenant at the expiry of their lease.

Provided sufficient notice has been given by their landlord, the lease will come to an end on the expiry date and, unless a deal can be struck with the landlord, the tenant is required to leave the property on or prior to that date.

The one exception comes in the form of the Tenancy of Shops (Scotland) Act 1949, which was brought in to protect the livelihood of post-war small shopkeepers in the face of an increasing number of evictions from unscrupulous property investors.

It allows a shop tenant to apply to the court for a renewal of their lease for a period of up to one year following their receipt of a notice to quit from their landlord. The court can then provide for a renewal of the lease for a period up to one year, and at a rent and on other conditions as the sheriff considers reasonable.

The actual purpose of the Act, being to protect small-scale traders, is not stated in the Act, and as the years have passed, it has become increasingly popular for multiple retailers - often organisations considerably larger than their landlords - to make applications under the Act, or at least to threaten to do so as part of lease renewal negotiations.

In the recent case of Edinburgh Woollen Mill v Surinder Singh and others as Partners and Trustees for the firm of Gold Brothers, the tenant, Edinburgh Woollen Mill (EWM), applied under the terms of the Act for a renewal of their lease of a shop in the Lawnmarket, Edinburgh, having received a Notice to Quit from their landlords terminating their lease as at 31 December 2013.

In this case, the landlords had acquired the heritable interest in the property with the specific intention of trading from it themselves once the lease had expired. Both parties led evidence regarding the impact on them of an unfavourable decision and the lack of available, equivalent premises nearby.

The judgement of the court acknowledges that the Act 'gives an extremely wide latitude to the sheriff' and in making his decision the sheriff, taking account of 'the absence of clear direction within the Act' looked back to the original purpose of the Act, with references taken from Hansard on the Third Reading of the amended bill being regarded as particularly informative.

The sheriff, having considered the purpose of the Act, took the view that 'it empowers, and requires the Court to act to avoid injustice, in the historical context of widespread economic oppression of small scale shop traders'.

With this in mind, the view was taken that there were no such considerations in this case. Of particular note to multiple retailers is the statement supporting the decision to refuse the application, that EWM's failure to retain the lease of the premises 'is only an economic blow. It is not an injustice and there is nothing unreasonable in requiring the pursuer to remove at the end of the lease'.

This decision does not spell the end of the Tenancy of Shops (Scotland) Act. The courts of course still have discretion to renew a lease where it is reasonable to do so, but this case may now lead to national multiple retailers being less successful in such an action.

With the courts looking to the original purpose of the Act to guide the test of reasonableness, anyone not regarded as a small-scale shop trader will find it difficult to mount a successful action to have their lease renewed.

 

Link to article