Darina Kerr: Coronavirus legislation spells changes for commercial property

Darina Kerr

Darina Kerr details the Coronavirus (Scotland) Bill’s provisions relevant to the commercial property sector.

The bill includes changes to the notice period required by landlords to ‘irritate’, or take back, a lease and pursue tenants for unpaid rent. This is now extended from 14 days to 14 weeks. It applies to termination notices served in the last 14 days since mid-March 2020 and could possibly be extended further beyond the newly implemented 14 week period.

This is welcome news to occupiers but, unlike the position in England & Wales, unpaid rent still remains due, including interest on late payments, and landlords are still able to immediately start termination proceedings. It is, however, hoped this measure will encourage greater dialogue between landlords and tenants, as both sides try to adapt to a new normality which is changing day to day.

These pragmatic discussions will be essential to help the commercial property sector get through what is undoubtedly one of the biggest blows it has faced in recent times. Indeed, many commercial landlords have already offered rent deferrals and holidays to tenants who are struggling with cashflow difficulties in the current climate.

Suddenly, many tenants either don’t require their premises or are unable to use them due to enforced shutdown on the grounds of public health. The last few weeks have seen wholesale closures of shops, offices and other facilities with a growing number of tenants unable to afford to continue with rental payments. Some are asking landlords to reduce rental payments, or to waive these completely until things improve.

While the measures within the Scottish Government’s Coronavirus (Scotland) Bill will provide some short term support, the practical measures resulting from discussion between landlords and their tenants are likely to be even more critical at this time of crisis.

There is no doubt that the COVID-19 outbreak is having a profound impact on the global commercial property model, where tenants pay rent to occupy premises that are owned and maintained by their landlords.

Darina Kerr is a partner at CMS

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