Chamber and committees

I do not have any information on that, because it is technical. I will pass the question to Lori Pidgeon or Michael Paparakis.

Good morning. The Leases (Automatic Continuation etc) (Scotland) Bill will implement recommendations that the Scottish Law Commission made in 2022 to reform aspects of the Scots law of commercial leases. This is the fourth SLC bill in the current parliamentary session and a fifth, which is on contract law, was recently announced in the programme for government, demonstrating our commitment to law reform.

Most businesses, large or small, operate from let premises, at least to some extent, and the relationship between landlord and tenant is crucial to commercial life in this country. It is important that the law that governs that relationship functions effectively, so the bill aims to improve, simplify and update aspects of the Scots law of commercial leases so that it meets the needs of a modern Scottish economy.

The bill’s principal purpose is to reform the current law of tacit relocation. That is the process whereby a lease continues automatically after its termination date unless one party gives notice to the other that it will come to an end or both parties agree at the time that it will come to an end.

I have listened to the evidence of stakeholders, including those who have questioned the need for reform in the area and others who have suggested that the bill might need to be rewritten. I do not agree with the latter view. As far back as 2010, the SLC was approached by practitioners and solicitors in the area who said that the law should be reformed because it was uncertain and was acting as a deterrent to commercial property investment. The SLC’s project sets out clearly that the law of termination of commercial leases is inaccessible, uncertain and outdated and why that is so. Representative bodies of Scottish small businesses and landlords have welcomed the bill and are supportive of it. No doubt we will discuss that further in today’s meeting.

All that aside, however, a number of technical issues have come up during stage 1 evidence. I have worked constructively with the committee on previous SLC bills and I will continue to do so as this bill progresses. I look forward to answering the committee’s questions.

I will pass over to Michael Paparakis or Lori Pidgeon, because that is a technical issue.

We will look into it and I will write to the committee with that information.

The new law is intended to replace the pre-commencement law underlying a lease, including any implied terms. It is not intended to validate or invalidate the arrangements that the parties have expressed in their lease, as paragraphs 8 and 10 of schedule 2 make clear.

Any express lease terms that are carefully negotiated by the parties will be unaffected by any provisions in the bill coming into force. For example, if a lease has an express term providing for a three-week period of notice for a lease that is longer than six months, that period will continue to be valid, notwithstanding the fact that the bill provides for a minimum period of 28 days.

The alternative that has been suggested by some stakeholders is to apply the new law to leases that are entered into after the coming into force of any other provision, but that would mean that one kind of complexity would be replaced by another. For instance, if the new law were to apply only to new leases, then, for many years into the future, the current common law would apply only to old leases, and landlords and tenants could encounter difficulties in the future because they do not understand which legal regime applies to their case.

The provisions of the bill will be commenced by regulations, and I will ensure that there is sufficient lead-in time for legal professionals and interested stakeholders to make sure that they have all their affairs in order with regard to this issue.

It is just a suggestion, and I think that any prudent landlord would normally undertake to do that before entering into a lease.

That goes back to your point about raising awareness to simplify things for tenants and landlords. I recognise that the provisions of the bill are important for small businesses and landlords across the country. The changes that will be made by the bill will ensure that the legislation on termination of leases will be brought together in one place and be accessible to all. Stakeholders have been clear that they would like to see the Scottish Government raising awareness of the reforms. I am open to working with representative bodies such as the FSB and the SPF to consider what the Scottish Government can do to ensure that tenants and landlords know that they might be bringing their lease to an end.

As for legal professionals, generally, the familiarisation costs of any change in the law will be incurred by the legal firms that provide training. Such training is typically already provided for within firms’ budgets and the cost of maintaining solicitors’ legal knowledge is covered by fee-earning income. Scottish solicitors are required to undertake 20 hours a year of continuing professional development, and familiarisation training on changes to the law would typically count towards that figure. I am happy to meet representatives and discuss how we can raise awareness of the proposed changes.

No, I have just considered the bill that we are discussing. I do not know whether the SLC has been looking at that in work of a wider scope.

No. Thank you very much for the opportunity to discuss the bill.

The drafting of section 5 strikes an appropriate balance, and it will ensure that the law can respond flexibly to an array of circumstances that tenants and landlords might find themselves in. The drafting reflects the current common law, and it will allow the courts to continue to apply the law flexibly in many different situations in which landlords and tenants might find themselves on the termination of a tenancy.

Dr Brown told the committee that what might appear to be ambiguous drafting is likely, in practice, to provide flexibility. I know that some stakeholders suggested that “reasonable period” should be replaced with a specific timeframe, such as 28 days or 30 days, but I disagree. Such a rigid rule cannot take into account all circumstances that parties to a lease might find themselves in. There could be many reasons why a landlord might fail to take steps within 28 days or 30 days—for example, they might be away on holiday or have an illness or incapacity. That would result in automatic continuation of the tenancy, which would be an unfortunate result, especially if the landlord already had a new tenant lined up.