Proposals to scrap lease renewal rules under discussion

The Scottish Law Commission has opened a consultation on the Tenancy of Shops (Scotland) Act 1949, which deals with commercial lease renewals for retail, food and drink, hair and beauty and wholesale tenants. They are seeking the views of agents, tenants, and landlords on whether there is still a need for the Act, and whether it should be repealed, replaced, or reformed.

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Law designed for a specific challenge

The 1949 Act was originally a temporary measure to assist small shopkeepers in the aftermath of World War II when commercial property was scarce. It was made permanent in 1964 when burgeoning urban development and modernisation raised concerns that small businesses would not be able to afford the rents for new premises. 

If tenants cannot obtain renewal on satisfactory terms from their landlord, the 1949 Act allows them to 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.

Problems with the Act

Many stakeholders no longer agree that the rules for the expiry of shop leases should be different to those for offices or industrial units. Furthermore, the definition of a shop under the Act is unclear, making it difficult to know which businesses are entitled to apply for renewal.

The reasonableness test the court must apply in deciding whether to renew a lease is also vague, and applying to the court can be costly and time-consuming, leaving both landlords and tenants unable to plan for the future confidently.

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

Options for change

The Discussion Paper presents four potential ways forward;

  1. Repeal the 1949 Act, bringing the retail, pub, hospitality, and other leases currently covered by it into the law applicable for all other commercial leases;
  2. Repeal the 1949 Act and replace it with a six-month (or less) compulsory notice to quit scheme – ensuring that retail, pub, hospitality, hairdressing and other tenants covered by the Act are given sufficient time to relocate to alternative premises;
  3. Reform the 1949 Act by making amendments to address its operational difficulties;
  4. Do nothing and keep the 1949 Act in its current form.

Agent voices needed

It’s important that the views and experience of commercial agents working in Scotland are represented in the recommendations made by the Commission. The consultation runs until 31 July 2024, and we strongly encourage members to provide their input.

Propertymark is hosting a roundtable session with the Scottish Law Commission at 12pm on Tuesday 2 July to discuss the proposals. Commercial agents can book their place by emailing [email protected]. 

The Discussion Paper and the consultation response form can be found on the Scottish Law Commission Website  →