(DISCUSSION PAPER No 165) Discussion Paper on Aspects of Leases: Termination discussion paper Discussion Paper on Aspects of Leases: Termination May 2018 DISCUSSION PAPER No 165 This Discussion Paper is published for comment and criticism and does not represent the final views of the Scottish Law Commission NOTES 1. Please note that information about this Discussion Paper, including copies of responses, may be made available in terms of the Freedom of Information (Scotland) Act 2002. Any confidential response will be dealt with in accordance with the 2002 Act. We may also (i) publish responses on our website (either in full or in some other way such as re-formatted or summarised); and (ii) attribute comments and publish a list of respondents’ names. 2. Where possible, we would prefer electronic submission of comments. A downloadable electronic response form for this paper as well as a general comments form are available on our website. 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This publication is available on our website at https://www.scotlawcom.gov.uk/. Any enquiries regarding this publication should be sent to us at [email protected]. ISBN: 978-0-9500276-3-0 Produced for the Scottish Law Commission by APS Group Scotland, 21 Tennant Street, Edinburgh EH6 5NA. ii The Scottish Law Commission was set up by section 2 of the Law Commissions Act 1965 (as amended) for the purpose of promoting the reform of the law of Scotland. The Commissioners are: The Honourable Lord Pentland, Chairman Caroline S Drummond David E L Johnston QC Dr Andrew J M Steven. The Chief Executive of the Commission is Malcolm McMillan. Its offices are at 140 Causewayside, Edinburgh EH9 1PR. The Commission would be grateful if comments on this Discussion Paper were submitted by 14 September 2018. Please ensure that, prior to submitting your comments, you read notes 1-2 on the facing page. Respondents who wish to address only some of the questions and proposals in the Discussion Paper may do so. All non-electronic correspondence should be addressed to: Charles Garland Scottish Law Commission 140 Causewayside Edinburgh EH9 1PR Tel: 0131 668 2131 iii Contents Contents .................................................................................................................... iv Glossary and List of Abbreviations ...................................................................... viii Chapter 1 Introduction ....................................................................................... 1 Introduction ......................................................................................................... 1 Economic background ......................................................................................... 1 What is a commercial lease? .............................................................................. 2 The role of legislation .......................................................................................... 3 The need for reform ............................................................................................ 3 Tacit relocation ................................................................................................ 4 Notices to quit .................................................................................................. 4 Apportionment of rent ...................................................................................... 4 Tenancy of Shops (Scotland) Act 1949 ........................................................... 4 Irritancy ............................................................................................................ 5 Confusio .......................................................................................................... 5 Legislative competence ....................................................................................... 6 Impact assessment ............................................................................................. 6 Acknowledgements ............................................................................................. 6 Chapter 2 Tacit relocation .................................................................................. 7 Introduction ......................................................................................................... 7 Historical Development ....................................................................................... 7 Leases to which tacit relocation does not apply .................................................. 9 Agricultural leases ............................................................................................. 10 Avoiding the operation of tacit relocation .......................................................... 10 Contracting out of tacit relocation ...................................................................... 10 Comparative commentary ................................................................................. 11 South Africa ................................................................................................... 12 Germany ........................................................................................................ 12 France ........................................................................................................... 13 Australia ........................................................................................................ 14 Canada .......................................................................................................... 15 England and Wales ....................................................................................... 15 Comparative summary ...................................................................................... 16 Challenges with the current law ........................................................................ 16 iv How might the law be reformed? ....................................................................... 17 Option 1 ............................................................................................................ 18 Option 2 ............................................................................................................ 19 Chapter 3 Notices to quit – history and current law ...................................... 20 Legislation ......................................................................................................... 20 The Sheriff Courts (Scotland) Act 1907 ............................................................. 22 Case law and commentary ................................................................................ 24 Drafting of commercial leases ........................................................................... 26 Conclusion ........................................................................................................ 27 Chapter 4 Notices to quit – options for reform .............................................. 28 Introduction ....................................................................................................... 28 Form of notices to quit ....................................................................................... 28 Essential requirements ...................................................................................... 29 Period of notice ................................................................................................. 30 Comparative commentary on periods of notice ................................................. 31 Germany ........................................................................................................ 31 France ........................................................................................................... 31 England and Wales ....................................................................................... 31 South Africa ................................................................................................... 32 Australia ........................................................................................................ 32 Comparative conclusions .................................................................................. 32 Moving forward .................................................................................................. 32 Calculation of the period of notice ..................................................................... 33 Should all leases have the same length of period of notice? ............................ 33 Extent of property .............................................................................................