We reported here that the Scottish Government is set to further extend the 14 week irritancy period to 31 March 2022 and potentially beyond. Many commercial landlords have reacted with despair at this news as it means that they must continue to give tenants 14 weeks to pay their rent arrears instead of the pre-pandemic 14 days. This is a significantly longer period for landlords to wait for payment and understandably frustration is building as many businesses continue to suffer under the ever continuing restrictions in place.
At the beginning of the pandemic, there was a clear emphasis from the Government on commerciality and co-operation and landlords were encouraged to consider granting rent concessions or deferred rent payments. To that end, the Code of Practice for commercial property relationships during the COVID-19 pandemic was introduced with the aim of “supporting businesses to come together to negotiate affordable rental agreements”. The Code only applied until 24 June 2021, however it is hoped that its principles will continue to guide landlord and tenant relationships going forward.
Unfortunately, despite best efforts from both sides, non-payment of rent can sometimes result in a complete breakdown of relations between parties. In these situations, landlords should bear in mind that there are other options available to them. Whilst the irritancy provisions have changed, other remedies exist which have been unaffected by the pandemic and these may prove effective in obtaining payment of arrears from tenants. We outline some of these options below.
Provided that the lease is registered in the Books of Council and Session and contains the requisite wording, the landlord can execute summary diligence by instructing sheriff officers. There are various different types of summary diligence and what is appropriate will depend on the particular circumstances. Here are some examples:
Charge for payment
Perhaps the most popular is a Charge for Payment as it is quick and relatively inexpensive. Sheriff Officers will serve a written demand for payment on the tenant which gives them 14 days in which to pay. Often, this is enough to secure payment from the tenant however if they fail to pay, then the landlord can take further action in the form of Attachment.
Attachment involves a Sheriff Officer attending the premises to value items up to the value of the debt. If the arrears are still outstanding, an auction will be arranged to sell the items and recover funds to the landlord. Again, this can be a strong incentive for the tenant to make payment.
Another type of summary diligence available to landlords is arrestment. Usually, this involves freezing funds in the tenant’s bank account. This is often effective in forcing the Tenant to sign an authorisation for the funds to be released to the landlord to settle the arrears. If they fail to authorise release of the funds, then a court action can be raised.
Finally, if the tenant owns premises in Scotland, an inhibition could be registered against them and this would cover all property that they own in Scotland. The inhibition would prevent the tenant from selling, transferring or granting security over their property until the inhibition has been discharged (ie once payment has been made to the landlord). Unlike the options above, this is less likely to result in quick payment by the tenant.
It is worth remembering that the changes to the timescales for irritancy proceedings only relate to monetary breaches. Landlords are therefore still able to proceed in the usual way where there is a non-monetary breach, for example a breach of the repairing obligations or use clause. In the event of a non-monetary breach, termination of the lease is possible where it is fair and reasonable and where the tenant has been given a reasonable period of time to remedy the breach. In assessing what is fair and reasonable, the impact of the pandemic should be taken into account.
How can we help?
If you are a landlord struggling to recover rent arrears, please get in touch with our specialist Real Estate team and we can provide bespoke advice in relation to your options.