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Summary LAWS10177 Commercial Leases Introduction
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LAWS10177 Commercial Leases Introduction
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Leases Introduction A lease is a contract by which a person, known as a tenant, is allowed to occupy
someone else's heritable property for a finite period. In return for this the tenant
pays to the person granting this right (ie the landlord) a periodical payment known
as rent.
Subject matter of a lease is the land and its pertinents- in legal theory the building
can be said to be the subject matter as it is the most valuable asset of the lease
The tenant (or tenants where there is a joint tenancy) must normally be given
exclusive possession of the leased subjects. Where the landlord has reserved the
right to share occupation in some way, the contract may not be a lease at all but a
licence (or right of occupancy). Exclusive possession is an essential requirement for a
lease in England. However, although it is undoubtedly a normal requirement in
Scotland, the principle is not quite so absolute in relation to Scottish leases. In
particular, there are certain exceptional types of contract that do not involve
exclusive possession by the tenant, but nevertheless have been traditionally
considered to be leases. These include leases of shooting rights, salmon fishings and
the right to extract minerals
The expiry or termination date of a lease is known in Scotland as the 'ish'.
Maximum length of leases Leases entered on or after 9 June 2000 have a maximum
length of 175 years- Abolition of Feudal Tenure etc (Scotland) Act 2000, s 67
Leases entered prior to that date could be very long indeed. Durations of up to 999
years were not uncommon and even a perpetual lease was possible; in Carruthers v
Irvine,[6] a lease was stated to endure 'perpetually and continually as long as the
grass groweth up and the water runneth down'. Because of their extraordinary
length, many of these older leases are of course still in existence. Under the Long
Leases (Scotland) Act 2012 the tenants' interests in such ultra-long leases will be
converted into ownership on an appointed day
the general law of contract also applies to leases. However, a lease confers a real
right.
Security of tenure If a lease's duration confers a sufficiently long period of tenure, the
tenant may erect and pay for some or all of the buildings. Even where this is not the
case, and the lease is not quite so long (eg 20 or 30 years), the tenant's legal interest,
because of the lease's length, will acquire a capital value and become a marketable
asset; in other words, a tenant may be able to charge a substantial sum of money for
an assignation (transfer) of the lease to a new tenant. In the case of very long leases
(eg 99 years or more) such a transaction will, in market terms, effectively be
equivalent to an outright sale of heritable property
Leases of more than 20 years must be registered
The distinction between urban and rural leases in Scots law is traditional, operating
independently of the other classifications described below. It does not quite mean
what these words suggest. Where the main subject of let is a building, and either
, there is no land attached or the land is subsidiary (eg garden ground), there is an
urban lease. However, where the main subject is land it is a rural lease. An
agricultural lease is therefore a rural lease
'Commercial lease' is the term generally applied to leases of shops, offices, factories
or other business premises. Commercial leases in Scotland (though not in England)
are almost free of statutory regulation
The four quarter days in Scotland are Candlemas, Whitsunday, Lammas and
Martinmas. Whitsunday and Martinmas are also known as term days. The traditional
dates for these were 2 February (Candlemas), 15 May (Whitsunday), 1 August
(Lammas) and 11 November (Martinmas), but were changed by the Term and
Quarter Days (Scotland) Act 1990 to the 28th day of the month in each case. The
change applies for the purpose of any enactment or rule of law and in relation to any
lease agreement or undertaking.
The purpose of the change was to divide up the year more evenly and also to sort
out the confusion caused by certain statutes which, for their own limited purposes,
had already defined Whitsunday and Martinmas as the 28th of the month.[30]
Although the new definitions apply generally and may affect any type of legal
document, they are particularly important in relation to leases, which have always
made wide use of the term and quarter days. For example, it is common in
commercial and agricultural leases for the rent to be payable quarterly at the
traditional quarter days (or half yearly at the term days), and for the expiry date (or
ish) to be specified as one of these days. And where leases contain provisions for
periodic rent reviews, it is normal for the review dates to be Whitsunday or
Martinmas in stated years.
A lease, if it is for more than a year, should be in writing. This has always been the
case, though in other respects the relevant law was changed substantially by the
Requirements of Writing (Scotland) Act 1995
Traditional documents A lease taking the form of a traditional document should be
signed by both the landlord and the tenant. [9] This can take the form of an offer,
signed by either the landlord or the tenant, followed by an acceptance signed by the
other party.
Statutory remedy The Requirements of Writing Act provides for a situation where a
contract has not been constituted either in a traditional or electronic document that
complies with the statutory requirements, but one of the parties to the contract has
acted or refrained from acting in reliance on the contract. In such a case the other
party (provided that he or she knew and acquiesced in the situation) is not entitled
to withdraw from the contract, and the contract will not be regarded as invalid. [30]
For the purpose of this provision it is not sufficient that the other party merely knew
generally that the first party was arranging his or her affairs in reliance on the
contract, but it is necessary to point to specific actings or examples of refraining
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