Thousands of retail businesses, cafes, pubs, takeaways, hairdressers, wholesale, and distribution centres lease their premises. What happens as the lease comes to an end? Can it be renewed? If not, how much time should the tenant have to find suitable alternative premises? In its Discussion Paper on Aspects of Leases: Tenancy of Shops (Scotland) Act 1949, the Scottish Law Commission discusses these issues and makes proposals.

If unable to obtain renewal on satisfactory terms from their landlord, the 1949 Act allows these tenants (and possibly also restaurants) to apply to the sheriff court to renew their lease for up to one year. The test for the renewal is whether, “in all the circumstances”, it is “reasonable” to renew or “reasonable” to end, the lease. The Act does not limit the circumstances to be taken into account. Cost and delay in processing court applications are an issue.

The 1949 Act was intended to assist small tenant shopkeepers following the Second World War when there was commercial property scarcity. Renewal was intended to allow them time to relocate and stop their business from closing. The 40 day notice-to-quit at the end of a lease was too short.

Market conditions have changed greatly since the 1950s. Nowadays, the Act is rarely used, except apparently by large retail tenants employing the threat of going to court so as to extract favourable concessions from their landlords during renewal negotiations.

The consultation proposes three alternative options for the Act:

• Repeal of the Act: all commercial leases would be treated the same. The tenant would receive a 3 month notice-to-quit at the end of the lease unless a lease clause allowed no notice (or a different notice period);

• Replacement of the Act: retail, food and drink hospitality, hair and beauty tenants would receive a 6 or 3 month notice-to-quit at the end of the lease regardless of any lease clause;

• Reform of the Act: the criteria for one-year renewal would be restricted to these categories of tenant if needing extra time to agree renewal or find alternative premises. A “gateway test” would restrict its availability to “small tenants”. Compulsory mediation before any court application could encourage landlord and tenant agreement without expensive, time-consuming, and uncertain litigation.

Launching the consultation lead Commissioner, David Bartos said:

“The proposals in this Paper affect virtually every let shop, pub or eatery on the High Street, not to mention retail parks and shopping centres large and small. It’s vital that in these difficult economic times the law is as helpful as possible to both tenants and investors. We invite everyone to have their say.”

Consultation runs until 31 July 2024. The Commission’s website has the Paper and a response form. Not all questions in the form need be answered but the Commission is keen to know business’ order of preference for the options.