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The Coronavirus (Scotland) Bill: What does it mean for Real Estate?

The Coronavirus (Scotland) Bill was introduced by the Scottish Government on 31 March 2020 to respond to the emergency caused by the COVID-19 pandemic. The Bill complements and supplements the Coronavirus Act 2020 which the Scottish Parliament gave its consent to on 24 March 2020.

The Bill makes a range of provisions designed to ensure that business can continue to operate efficiently during a period where controls on movement are imposed.  The majority of measures in the Bill will automatically expire six months after coming into force. However, the Bill includes provision allowing the measures to be extended for two further periods of six months, giving a maximum duration of 18 months.

So far as real estate is concerned the Bill, much like its English counterpart, makes provision for changes to the rights of private and commercial landlords to bring existing leases to an end due to non-payment of rent by their tenants,  It also includes provisions which would enable the Land Register of Scotland to reopen for business. 

Commercial Leases – termination for non-payment of rent

The effect of the Bill when it receives Royal Assent will be that landlords of commercial properties will now have to give at least 14 weeks’ notice to tenants before being able to terminate a commercial lease for non-payment of rent and other sums due by the tenant – an increase from the previous term of 14 days. 

The new 14-week period will apply irrespective of whether a notice has already been served (provided the 14-day period has not already expired) and irrespective of whether the circumstances which would allow the landlord to terminate the lease already exist. 

This means that where a landlord has served an irritancy warning notice for non-payment and the 14 day period has not expired the landlord cannot validly serve a final irritancy letter bringing the lease to an end at the end of the 14 day period. 

What about non-monetary breaches?

The Bill doesn’t amend the existing provisions in relation to irritancy for non-monetary breaches.  If however a landlord wishes to rely on a non-monetary ground to bring the lease to an end it must act fairly and reasonably. A reasonable period of time must be given to allow the tenant to remedy the non-monetary breach. There are likely to be few circumstances where a court would consider that a landlord was acting fairly and reasonably in bringing a lease to an end where a tenant was unable to rectify the breach within the timescale given due to the restrictions on movement that are currently in place. 

Landlords can however still pursue other remedies that were available to them before the coming into force of the Bill in order to recover arrears.  However, with the courts operating on a restricted basis (as noted below) and other restrictions in place on movement of people generally this may prove to be difficult from a practical perspective for landlords to do. 

Private and Social Landlords

The Bill also extends the minimum notice period for private and social tenants to up to six months during the duration of the outbreak, provided there are not grounds involving antisocial or criminal behaviour, or if the landlord needs to move into the property themselves.

Registers of Scotland

The Registers of Scotland closed the applications record on 24 March. As a result of this the Law Society of Scotland recommended that solicitors in Scotland do not complete any conveyancing transactions until such time as clarification is obtained from Registers.  New measures in the Bill allow for the submission of applications for registration to the property registers digitally while the Registers of Scotland are unable to receive applications by post and so once the Bill is passed the Registers should be able to reopen for business sooner rather than later.  

Current conveyancing practice is that an Advance Notice is registered in the run up to completion.  This is a notice which provides interim protection for a prospective purchaser from an inhibition against the seller (which would stop them transferring ownership) or a competing deed being registered before theirs. Until such time as the Registers re-open some protection is offered by the provision in the Bill, which extends the existing 35 day protective period to a date which is 10 days after the registers are fully reopened.

Planning Permission

The Bill also extends the time period in which planning permission lapses if development has not begun. 

If planning permission lapses during the “emergency period” (defined as the period of 6 months after this Act comes into force) it will now lapse after the extended period of 12 months, unless development has already started.

Similar provision is also made for planning permission in principle. If permission in principle is due to expire in the above emergency period this will also be extended to 12 months after the Act comes into force.

Lastly, if the last date by which an application for a requisite approval can be made is within the emergency period then that application can be made before the end of the extended period.

Court proceedings

Whilst not covered by the Bill the Scottish Court Service issued a guidance note that from 25 March until further notice only urgent court business will be dealt with. All existing cases are being continued or adjourned administratively. The continuations are for approximately 10-12 weeks. Urgent business is restricted to Interim interdicts (injunctions), child abduction petitions and other urgent matters where sufficient cause can be shown. It is also worth noting that urgent court business does not include insolvency hearings and so any attempt by a landlord to embark on a winding up will potentially be significantly delayed where a tenant has registered a Caveat. The Act allows for electronic signature of court documents and for hearings to take place via telephone or video link which should allow court actions to progress with home working even where they are not deemed “urgent.”

What happens next?

Stage 1 debate is to take place today (Wednesday 1st April 2020) at Holyrood. The Bill is being fast-tracked as emergency legislation and a final vote is expected to take place this evening. As soon as the bill receives royal assent, it will become law. 

Process through Parliament

Stage 1 debate took place on Wednesday 1st April 2020 at Holyrood. The Bill was fast-tracked as emergency legislation receiving Royal Assent on 6 April and coming into force on 7 April 2020. 

Contributor: Alexandra Holsgrove-Jones

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.

 

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