COVID-19 : Irritancy (termination) of leases in Scotland
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Commercial property has not been left unaffected by the COVID-19 pandemic. The closure of all non-essential businesses has caused disruption and uncertainty for both landlords and tenants. One particular concern for tenants is the prospect of their lease being terminated early due to an inability to continue to pay rent.
The Coronavirus Act 2020 includes a temporary prohibition on landlords in England, Wales and Northern Ireland from exercising the forfeiture provisions under commercial leases for a tenant’s non-payment of rent(s). As the moment this protected period will last until 30 June 2020, but it may be extended by the Government in the future. From a tenant’s point of view this is a welcome protection as they face an uphill struggle in the continuity of their business.
The Act does not, however, create a rent-free holiday and a tenant’s liability for rent will not be terminated. A tenant will continue to be liable for all rents as they fall due in this period – it is rather a landlord’s power of enforcement against a tenant for unpaid rent that has been temporarily suspended.
The Scottish equivalent of forfeiture is irritancy. Irritancy operates as a contractual remedy available to landlords in the event of a tenant’s breach of contract, allowing for the early termination of the lease. Where a lease is irritated, i.e. terminated, the tenant has no claim for compensation, unless the lease provides otherwise.
At the time of writing, there has been no equivalent Scottish legislative provision to protect Scottish business tenancies. This is largely expected to follow in legislation to be brought forward by the Scottish Government, and will likely create a temporary prohibition on the enforcement of irritancy on similar grounds.
How much different this makes in practice remains to be seen. In some parts of the country, certainly in the Aberdeen area, many landlords have been reluctant to irritate leases as the liability for payment of local authority rates will fall back on them. For some tenants, however, such provisions will bring a measure of comfort in difficult times.
