Scotland may, at the time of writing, be behind England and Wales in terms of the number of confirmed infections but, in an age of international travel and business, Covid-19 knows no borders. We are all in this together, with the Scottish and UK governments taking similar approaches on most key issues. However, there are some nuances in the implications for real estate north and south of the border.
Construction sites
On 25 March, the Scottish Government advised that non-essential construction sites in Scotland should close. That advice has largely been followed, although it remains to be seen if the Scottish Government decides to tighten up on individual residential sites. Non-essential construction sites in England and Wales have not yet been advised to close.
Commercial leases: protection from irritancy
In England and Wales, commercial tenants have been given three months’ protection against forfeiture (ie termination of the lease by the landlord) for non-payment of rent or any other sums due under a lease. This is set out in the Coronavirus Act 2020, a statute which applies UK-wide, albeit with sections which are specific to Scotland, England, Wales and Northern Ireland. This Act contains no equivalent protection against irritancy (the Scottish equivalent of forfeiture).
On 7 April, however, the Scottish Government brought into force its own emergency legislation, the Coronavirus (Scotland) Act 2020. This Act extends the period which Scottish commercial tenants have to rectify a failure to pay rent (or other sums due in terms of a lease) and before which the landlord can irritate the lease from 14 days to 14 weeks.
On a commercial level, we do not expect there to be much difference north and south of the border in terms of the approach of landlords. In the current climate, irritancy is not an attractive option unless the landlord is confident of being able to re-let. We are seeing increasing dialogue between landlord and tenant on rent concessions across the whole of the UK.
Business rates
The rules on business rates for Scottish properties are devolved to the Scottish Government. Business rates relief measures for England were announced by the UK government on 18 March. The Scottish Government followed suit with its own business rates relief announcement on 20 March. There is a 1.6% rates relief for all commercial Scottish properties for 2020-2021. As in England, Scottish retail, hospitality and leisure business properties will get 100% rates relief for 2020-2021. The relief applies as long as the property was occupied on 17 March 2020, and is available if the property closes temporarily due to Covid-19. It includes bingo halls and letting agencies, but not estate agents. There is also 100% relief for airports and handling service providers. Additionally, as in England, certain Scottish retail, hospitality and leisure businesses may be entitled to a one-off grant of £25,000. A one-off grant of £10,000 will also be available to certain small businesses, determined by their eligibility for certain business rates relief schemes.
Ability to conclude real estate contracts in lockdown
In Scotland, contracts for the sale of property usually take the form of an offer letter signed by one party’s solicitor and a written acceptance letter signed by the other party’s solicitor. These letters are known as missives. As the solicitors sign the missives on behalf of their respective clients, there is no need for the contracting parties to sign any paperwork at the contract stage. This is very useful in the current lockdown situation. It is particularly useful because, in Scotland, the scope for using electronic signatures for documents relating to land is quite restricted.
Also useful is that, in Scotland, it is legally valid for documents which have been signed in “wet ink” to be delivered by electronic means. This means that missives can be concluded by way of an email exchange of scanned copies of the signed missive letters.
Ability to complete real estate transactions in lockdown
What is proving more challenging in Scotland is the actual completion of real estate transactions. Registers of Scotland (RoS) closed its offices and temporarily stopped accepting applications for land registration on 24 March. This means (except in a very small number of emergency situations) it is not currently possible to register title to Scottish property, whether heritable (the Scottish equivalent of freehold) or long leasehold (leases for a period over 20 years). Nor is it possible for lenders to register a standard security (the Scottish equivalent of a fixed charge) over Scottish property. We do not yet know how long the registers will be closed. Both RoS and the Law Society of Scotland recommend that completions be rescheduled where at all possible.
The main factor that has prompted the closure of the registers is the requirement (for most registrations) for the principal wet ink signed deeds to be submitted. This is in contrast to England and Wales, where HM Land Registry can accept scanned certified true copy deeds. As at 6 April, HM Land Registry is still open, although they are continuing to review how best to maintain their services.
There are solutions for Scotland on the horizon though.
RoS initially proposed interim measures for situations where the parties urgently wanted to complete. It proposed that completions could take place in reliance on an “advance notice”, with the application for registration of the actual deed being postponed until the registers re-open. An advance notice gives a particular deed priority for a 35-day period and guidance was issued to solicitors on working together to allow renewals of any advance notices that were due to expire before the registers re-opened. This “interim solution” however did not contain any protection against corporate insolvency of the seller.
However the Coronavirus (Scotland) Act 2020 now brings welcome news.
It contains emergency provisions which extend advance notice periods to 10 days after the full re-opening of the registers, meaning that new advance notices would not need to be applied for. But even more significant is the fact that the Bill contains an emergency provision which allows RoS to proceed to register applications on the back of a copy of a deed submitted electronically (similar to the position in England and Wales). This should allow the RoS to re-open for business (albeit with different procedures for solicitors to navigate) within a matter of weeks.
Final words
From a legal perspective, the main Scottish real estate issue is the temporary closure of our registers, a situation which we hope can be avoided south of the border. It is, however, anticipated that the registers in Scotland will re-open for business shortly. What is clear is that the commercial and market challenges which the property industry is facing are the same both north and south of the border. We are also seeing much common ground between the jurisdictions in terms of approach, with a focus on trying to support businesses in these challenging times.
Susan Gillon is a counsel at Dentons Glasgow and Lisa Cruickshank is a senior practice development lawyer at Dentons Edinburgh
