Compared to England and Wales, Scotland has very little legislation affecting leases of commercial property. One of the few Acts in Scotland to deal with this area is the Tenancy of Shops (Scotland) Act 1949, a mercifully short Act of three sections, which deals solely with provision for renewing the tenancy of a shop in the circumstances where the landlord has given notice to quit under the lease and the tenant is unable to obtain a renewal of the tenancy on terms that are satisfactory to him.
Application for renewal under the terms of the Act is by way of summary cause procedure in the sheriff court, and a case that took place last year, which has recently been appealed on technical grounds to the Court of Session, serves as a useful reminder of the availability of the procedure to tenants of shops.
Superdrug Stores plc v Network Rail Infrastructure Ltd
The case of Superdrug Stores plc v Network Rail Infrastructure Ltd centres around the issue of whether the application for renewal of the tenancy had been lodged in court within the statutory time limit imposed by the Act. The Act provides that, in the circumstances where a tenant of a shop has received a notice to quit and been unable to agree satisfactory renewal terms, then, at any time before the notice to quit takes effect and not later than the expiry of twenty-one days after the service of the notice, the tenant can apply to the sheriff for a renewal of his tenancy.
In Superdrug Stores, the lease in question was of a unit in the Caledonia Centre in Central Station in Glasgow. It had been extended by agreement a couple of times, and was due to expire on 7 January 2005. The landlords, Network Rail Infrastructure, served a notice to quit dated 24 November 2004, which Superdrug received on 25 November. It was agreed that the 21–day period referred to in the Tenancy of Shops Act therefore would expire at midnight on 16 December 2004, and the case focused on whether the application had been made timeously.
An employee at Superdrug's solicitors had taken the summons to the Sheriff Court on 16 December, and a "Lodged" stamp and the date (16 December) were marked on the summons, but when a senior member of staff at the Sheriff court realised that the date of expiry of the lease was 7 January, and that unless the period of notice required to be given for a summons was shortened, the case would not call until after the date of expiry of the lease, Superdrug's solicitors were asked if they wanted to apply to shorten the period of notice, which if they did would involve an appearance before the sheriff. As the person submitting the form was not qualified to appear before a sheriff, and it was not possible for a qualified person to appear that day, a qualified person from the firm of solicitors appeared the following day and the period of notice was shortened to seven days. At that point the summons was authenticated and the date changed by hand to 17 December and the words "fee paid" marked on it.
Both the sheriff and the sheriff principal to whom the matter was appealed, decided that the application had not been made in time and dismissed the action. Superdrug appealed to the Court of Session who granted the appeal, although one of their Lordships dissented.
The majority view taken by the First Division was that presentation on 16 December of a summons in proper form, together with the means of payment of the appropriate fee (in this case the submission of the necessary form required when the agents have a credit-charging arrangement with the court for payment of application fees) indicated that the presenter of the form intended that the summons should proceed to be processed in the usual way. Presentation of the summons and other documents on 16 December amounted to the making of an application under the Tenancy of Shops Act, and the subsequent appearance the following day before the sheriff to shorten the notice period were "consequential on an application which had already been made".
Renewal under the Tenancy of Shops (Scotland) Act 1949
The procedure applies to a "shop" as that term is defined in the Shops Acts 1912 to 1936 (consolidated in the Shops Act 1950) and includes any premises where any retail trade or business is carried on. In an application for renewal under the Tenancy of Shops Act, the sheriff has the power to renew the lease for a period of up to one year. If the sheriff grants a renewal then the landlord and tenant are regarded as having entered into a new lease for that period, so that if the landlord wants to remove the tenant at the end of the extended period, he must serve a fresh notice to quit. The tenant can apply for further renewals to follow on from the first period of renewal. The procedure only applies where a notice to quit has been served on the tenant and is not competent without it. If no notice to quit is served, the tenant may have to rely on the operation of tacit relocation. The procedure does not apply to sub-tenants.
If the application by the tenant cannot be fully disposed of by the sheriff before the period of the notice to quit expires, then it is possible for an interim order to be made which would allow the tenant to continue to occupy the shop beyond the date of expiry for a period of up to three months.
The sheriff can determine that the lease be renewed for up to a year and on such other terms and conditions, including the amount of rent that the sheriff considers appropriate.
Circumstances in which renewal will not be granted
The renewal provisions under the Act are not automatic. The sheriff can decide not to renew the lease if he considers that appropriate in all the circumstances, and simply dismiss the application. In particular the Act provides a list of six circumstances where the tenancy must not be renewed, if any of the following situations apply:
· where the tenant is in breach of any condition of his tenancy which in the sheriff's opinion is material;
· if the tenant is bankrupt, or if a company is unable to pay its debts;
· where the landlord has offered to sell the premises to the tenant at a price which may be fixed by an arbiter, in the absence of agreement;
· where the landlord has offered the tenant alternative accommodation which in the sheriff's opinion is suitable for the purposes of the tenant's business and on terms and conditions which the sheriff considers are reasonable;
· in circumstances where the tenant has previously given notice of termination of the tenancy, and as a consequence, the landlord has contracted to sell or let the premises or taken any other steps which would mean the he would be seriously prejudiced if he could not then obtain vacant possession of the shop; or
· if, having regard to all the circumstances in the case, greater hardship would be caused by granting a renewal of the tenancy than by refusing to renew it.