Date: 06/04/2020 | COVID-19, Commercial Property, Dispute Resolution, Residential Development
The following changes will be covered:
It should be noted that the 2020 Act is temporary in nature. Its provisions will initially expire on 30 September 2020, but its duration can also be extended beyond this date if required. Alternatively, there are also powers that allow provisions to expire earlier than 30 September or be suspended and revived.
Changes to minimum period of irritancy notices issued under commercial leases
A landlord cannot rely on any clause of a lease that allows that lease to be terminated where the tenant fails to pay rent in most circumstances unless the landlord has served an irritancy notice and the tenant fails to comply with it.
The irritancy notice needs to be served on the tenant and must (a) require the tenant to make payment of the outstanding rent (and any interest) within a period specified in the notice; and (b) put the tenant on notice that if they fail to make payment, the lease may be terminated.
Prior to the introduction of the 2020 Act, the minimum period that the notice could provide for payment to be made was 14 days, beginning immediately following the service.
The 2020 Act changes this so that the minimum period that a notice can give for payment to be made is 14 weeks. That new minimum period can be amended by the Scottish Ministers making regulations.
Additionally, if an irritancy notice was served on a tenant before the date that the 2020 Act came into force and the minimum 14 days period notice has not yet expired, then that irritancy notice will be void.
The 2020 Act also makes clear that the new 14 week minimum period applies where the event that would have entitled the landlord to serve an irritancy notice occurred prior to the 2020 Act coming into force but an irritancy notice has not yet been served.
The intention of these amendments is to allow tenants some breathing space and to enter into constructive and commercial discussions with their landlords regarding rent. Given the current circumstances, it is unlikely that landlords will be looking to remove tenants because of the likely shortage of new tenants that will be in the market.
The options that a landlord has when a tenant is in default under a commercial lease are covered in a separate article which will follow shortly here.
If you require advice and assistance in relation with lease negotiations or disputes, please get in contact with the Davidson Chalmers Stewart Dispute Resolution Team.
Changes to Advance Notices and registration of deeds
On 24 March, the Keeper of the Registers of Scotland announced that the application record and the Register of Sasines would close as at 5pm.
The application record consists of:
The Register of Sasines is another, older property register - it consists of properties that have not yet been registered in the Land Register of Scotland since the latter was established. Only Advance Notices and some types of deeds (e.g. a discharge of standard security) can still be recorded against property in the Sasine Register.
Advance Notices give a prospective purchaser protection by providing a 35 day “protected period” during which deed(s) in their favour set out in the Advance Notice will take priority against any other deeds attempted to be registered over the same property.
In Scotland, property rights in a party’s favour only come into effect when the relevant deed is registered (not for example when the price is paid or the deed delivered). It follows that closure of the application record and Register of Sasines meant that new applications for registration and new Advance Notices could not be processed.
Problems immediately arose because the existing legislation that the Keeper operates within was not flexible enough to allow scans of original deeds to be emailed to the Keeper in lieu of the original copy. The Law Society of Scotland advised practitioners not to proceed with completions.
The 2020 Act makes changes to provide that flexibility. It does so in two ways:
The first change allows for applications for registration to proceed where the Keeper allows the application record or Register of Sasines to be partially opened.
The second change provides comfort for parties having the benefit of existing Advance Notices or registering them during the period when the application record and/or Register of Sasines is closed by extending the protected period under them until such time as some level of normality returns.
It is important to note that these measures are designed to facilitate completion of property transactions from a strictly legal perspective. Where buildings are involved and a change of occupant would follow (eg a typical house sale where the property involved is not a new build), parties should take safety considerations and government advice only to travel where essential into account and consider whether social distancing can be safely effected. These practical aspects are likely to delay a sizeable proportion of property transactions during the period when the Registers of Scotland are closed or operating with limited capacity.
If you have any questions in relation to the topics covered above, please contact the Davidson Chalmers Stewart Commercial Property Team.
This article is part of a series covering the implications of the Coronavirus (Scotland) Act 2020. Further information on other aspects of the 2020 Act is available in a separate note.
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