Mitchells Roberton
16 Contributions by Mitchells Roberton Experts
PRACTICE NOTES
What are back letters?
A back letter is a private contractual understanding between the granter and the grantee; in the context of a commercial lease, that is between the landlord and the tenant. Such letters are personal in nature. The terms of back letters are generally intended to be:
legally binding and enforceable at law
either personal to the parties, or binding on successors in title
When are back letters used?
A back letter moderates the lease terms in practice. They are used:
to offer the first tenant a sweetener or incentive to get the deal over the line. In such situations, the landlord will insist that any concession not meant for the tenant’s assignees is set out only in a direct back letter in favour of the initial tenant
to set arrangements and grant concessions (for example, concerning the
Property
PRACTICE NOTES
A fixed-term lease can include a mechanism allowing the parties, or just one of them, to end the tenancy before the stated expiry. This is commonly called a break option or break clause. Prospective tenants frequently decline to enter a lease from the outset unless they are granted the ability to exit early. Landlords typically consent, albeit hesitantly, to such a break (often timed to coincide with a rent review) in order to secure the deal or letting, while hoping the tenant will not use it, or that the attempt will fail on a procedural point about notice timing or for not meeting conditions tied to its exercise.
Who may exercise the break?
Where the lease does not specify who can operate the break option, either party may do so, because the lease is a bilateral contract. In day-to-day practice, most leases spell out clearly
Property
PRACTICE NOTES
This Practice Note
This Practice Note outlines the common law position and explores standard drafting practices in Scottish commercial leases, addressing landlord and tenant duties connected to insurance, insured and uninsured risks, reinstatement, rent suspension, and the circumstances in which termination may arise where the premises have been damaged or destroyed during the term. Where a lease is silent on repairing obligations, the landlord must put right any want of repair within a reasonable time after the tenant has notified the landlord of the requirement; refer to Practice Notes: Repair clauses in commercial leases in Scotland—Repair under the common law and Repair and dilapidation disputes—commercial leases in Scotland and Repair: Stair Memorial Encyclopaedia [501]. If the subjects are destroyed, or so damaged as to be unsuitable for use and occupation, the lease is terminated by the rule of rei interitus. It is usual for leases to
Property
PRACTICE NOTES
This Practice Note examines the landlord’s duty to repair at common law, how that duty is typically adapted in repairing clauses within full repairing and insuring (FRI) commercial leases in Scotland, points to address when drafting and construing such clauses, and the role of a schedule of condition when agreeing the tenant’s repairing obligations under the lease. The Practice Note does not deal with residential or agricultural leases. For agricultural leases, see Practice Notes: Buildings and other fixed equipment in agricultural tenancies in Scotland, Improvements and fixtures—agricultural tenants—Scotland, and Buildings and other fixed equipment in agricultural tenancies in Scotland. For disputes that may arise concerning repairs or dilapidations, see Practice Note: Repair and dilapidation disputes—commercial leases in Scotland.
Repair under the common law
At common law, a landlord, when compared to a tenant, bears relatively onerous
Property
PRACTICE NOTES
For a solicitor representing clients who acquire and exploit minerals, the priority in law is who owns those minerals and the liberty to extract them. From the standpoint of a general property practitioner, the central concerns are whether distinct ownership of minerals might compromise support for the ground and any buildings above, and whether recompense is due for any resulting damage in respect of the operations involved in working them and extraction.
What are mines and minerals?...
Property
PRACTICE NOTES
This Practice Note explains the legal framework governing rent and rent review clauses in Scottish commercial leases. For disputed elements of rent and rent review, see Practice Notes: Rent arrears in commercial leases—recovering—Scotland and Commercial property rent review disputes—Scotland.
Rent
At common law, one essential requirement for a lease is the obligation to pay rent, even if only a token sum. Rent is typically due quarterly in advance on the Scottish quarter days; however, it is also frequent for leases where the landlord is an English property company or pension fund to specify payment on the English quarter days (see below) to maintain uniformity across the landlord's portfolio. After the 2008 recession, retail tenants increasingly sought to pay rent monthly in advance, and many landlords have been willing to consent to this. Such arrangements are generally personal to the original tenant and are recorded by a back
Property
PRACTICE NOTES
This Practice Note examines how service charges are typically imposed on occupiers of multi-let buildings by commercial landlords in Scotland. It does not address disagreements about service charges or common parts; for that, see Practice Note: Service charge disputes relating to commercial property—Scotland.
Service charge
A service charge is a sum a tenant may have to pay under a commercial lease in exchange for the landlord undertaking works to shared areas of the property and, in some instances, supplying services. The lease must expressly provide for any service charge. It should also explain the basis for calculating each tenant’s contribution within the building and the timing of payments.
There are several ways to divide service charge liabilities between tenants, with the most suitable approach depending on the circumstances. Common methods include:
Floor area—the method most frequently adopted
Fixed percentage
Rateable
Property
PRACTICE NOTES
In Scotland, under common law, a lease does not in fact end on the specified expiry date (ish) unless:
either party serves proper and timeous notice of termination
that notice is then implemented by subsequent conduct; and/or
the tenant, in a separate document, confirms the lease will terminate and that they will vacate on the stated date
Tacit relocation applies whether the lease was constituted:
formally
informally through circumstances engaging rei interventus, or
orally
See: Introduction: Stair's Laws of Scotland (Stair Memorial Encyclopaedia) [373].
Tacit relocation does not extend to seasonal leases where no notice to quit is required, eg seasonal sporting leases or leases for grazing or mowing. For further information, see: Leases affected: Stair Memorial Encyclopaedia [375].
Effect of tacit relocation
The principle of tacit relocation (silent re-letting) is that, where neither party gives notice of an intention to end the lease at its
Property
PRACTICE NOTES
Common law on making alterations
Under common law, an implied term confines a let property to the use for which it was demised; put another way, the tenant must not invert the possession. By virtue of that implied obligation, a tenant is restrained from undertaking material, structural changes to the leased subjects without the landlord’s agreement or permission. Where unauthorised material structural works are carried out, the landlord may, in the absence of acquiescence, oblige the tenant to reinstate the premises to their former condition. In short, works of that nature done without consent are prohibited. Consent remains essential always. See: Leck v Fulton and Thomson (1854) 17 D 408 (not reported by LexisNexis®) and Muir v Wilson.
That said, a landlord’s behaviour may amount to acquiescence, precluding any later challenge to an inversion of possession. In Moore v Munro (1896) 4 SLT 172 (not
Property
PRECEDENTS
NOTICE FROM LANDLORD TO STOP TACIT RELOCATION OPERATING
Our Ref: [ insert reference ]
Your Ref: [ insert reference ]
Date: [ insert date ]
To: [ Insert name of addressee and addresses of all tenants ]
Dear [ insert organisation or addressee name ],
Premises: [ insert address of premises ].
Lease: the lease between [ Insert name of landlord ] and [ insert name(s) of tenant (s) ] dated [ date signed by landlord ] and [ date signed by tenant(s) ] [ which expires on [ insert date of expiry of lease ] OR expired on [ insert date of expiry of lease ] and has continued by tacit relocation, the anniversary being [ insert anniversary date ] ].
We act for [ insert name of landlord ] (the ‘Landlord’), your landlord under the Lease.
On the Landlord’s behalf, we give notice [ that the
Property
PRECEDENTS
NOTICE FROM TENANT TO STOP TACIT RELOCATION OPERATING
Our Reference : [ add reference ]
Your Reference : [ add reference ]
Date : [ enter date ]
To : [ Provide name of recipient and address ]
Dear [ enter organisation or recipient name ],
Premises: [ enter address of premises ] more precisely described within the Lease
Lease : The lease made between [ Enter the landlord’s name ] and [ enter name(s) of tenant(s) ] dated...
Property
CHECKLISTS
What is a break clause?
A lease granted for a fixed term may include a provision enabling one party, or both, to end the lease before it naturally expires. This is referred to as a break clause or break option. It permits the landlord and/or the tenant to terminate early on a set date or when a specified event occurs. Such clauses provide the benefiting party with flexibility, for example to react to shifting market conditions. A break option is exercised by serving a break notice. The clause will often spell out what that notice must contain and how it must be given, including:
the required form, timing and any stated conditions for service,
the method of service, and
the identity of the parties who must be served.
These points may instead appear in a general notice provision in the lease, or in both
Property
CHECKLISTS
Checklist
This Checklist outlines how to serve notices to quit aimed at preventing tacit relocation in commercial leases in Scotland. It covers:
Who may serve a notice to quit;
When it must be given; and
How service should be effected.
It does not address notices to quit for residential or agricultural property, nor does it cover the particular protection afforded to shop tenants under the Tenancy of Shops (Scotland) Act 1949 (see Practice Note: Protection for shop tenants), which are outside the scope of this Checklist and are not considered here. In Scotland, the principle of tacit relocation provides that a commercial lease will not end on the stated contractual expiry date but will continue, unless one of the parties serves a notice to quit in good time to bring it to an end at that date and then follows through by acting on the
Property
CHECKLISTS
This checklist highlights matters a Scottish commercial lease tenant (assignor) in Scotland ought to review. It explains when the landlord’s consent to assignation is needed, whether the landlord must act reasonably in giving that consent, the form and content required for both consent and assignation, and the points both parties and the assignee should weigh up regarding the landlord’s letter of consent to assignation and the assignation legal instrument itself. An assignation passes to the assignee the tenant’s (assignor’s) interest in the lease from an agreed date until the lease comes to an end. It allows the assignee to occupy the premises on the same terms as the assignor; see: Nature of assignation: Stair's Laws of Scotland (Stair Memorial Encyclopaedia) [290]. A style letter of consent to assignation, and a style assignation, are available to view from the Property
Property
CHECKLISTS
Repair under the common law
Under the common law, a landlord, relative to a tenant, bears notably heavy duties regarding upkeep and repair of the leased premises, see Practice Note: Repair clauses in commercial leases in Scotland—Repair under the common law. Within commercial leasing, landlords will almost invariably aim to exclude all such common law repairing liabilities for the demised premises, though not for common areas in multi-let buildings; see Practice Note: Service charge and outgoing provisions in commercial leases in Scotland. Consequently, tenants usually shoulder substantial repair commitments. The prevalent model is the full repairing and insuring (FRI) lease, under which the tenant assumes responsibility for repairs of every kind save for damage arising from insured risks; see Practice Note: Repair clauses in commercial leases in Scotland—Contracting out of the common law—the full repairing and insuring (FRI) Lease and The modern
Property
CHECKLISTS
This Checklist
This Checklist sets out the key questions for landlords, tenants and subtenants when a tenant grants a sublease of commercial premises in Scotland. Matters to consider include:
restrictions on subletting
financial strength of the subtenant
form of landlord consent
requirements for landlord consent
form of sublease
irritancy protection agreements
In this Checklist, the parties are referred to as landlord, principal tenant and subtenant. Although a sublease is granted by a party that is itself a tenant (the principal tenant), it is regulated by the same principles that apply to leases generally. The sublease may cover the whole of the premises under the principal lease, or only a part, and it may run for all or part of the remaining term of the principal lease.
The principal tenant must continue to fulfil its duties under the head lease, but these obligations are typically flowed down to the subtenant through the
Property
If you expected to see yourself on this page, click here.
