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Greater freedom for Scottish commercial landlords in recovering the cost of repairs

Commercial landlords in Scotland could find it easier to reclaim repair costs following a decision by the country’s highest civil appeal court.Does this development represent a positive step, or will it add to tensions between landlords and their tenants?

Repairs: a long-standing argument between landlords and tenants

Commercial lease contracts require tenants to keep properties in “good and substantial repair”, which means heating, electrics, windows and roofs must be maintained. This can prove costly over time, especially as contracts can run for years.

Agreements typically include a clause allowing landlords to request tenants to arrange repairs whenever they’re needed. To avoid disputes, however, such requests are often submitted when the lease comes to an end; tenants usually have the option to carry out the repairs or pay a settlement.

As a protective measure, landlords often insert payment clauses into leases to ensure that tenants remain liable even if the repairs or the settlement are disputed. However, a number of court decisions had effectively made these clauses unenforceable unless landlords could prove that the repairs were completed or about to be completed.

The court's decision and what it means for landlords

In the case – @SIPP (Pension Trustees) v Insight Travel Services Ltd – the tenant disputed the payment clause on the grounds that the landlord planned to sell the property and, therefore, didn’t intend to complete the repairs. On the other hand, the landlord argued that the clause explicitly held the tenant liable for the cost of remedial work, regardless of whether it intended to do the repairs.

Scotland’s Inner House of the Court of Session sided with the landlord, deciding that, because the payment clause was clearly specified, the onus shouldn’t be on the landlord to have to prove their intentions to undertake repairs. Rather, the responsibility lies with the tenant to pay.

The ruling is good news for landlords, but those with tenants already in commercial rent arrears should bear in mind that the decision has the potential to cause added financial strain. Landlords looking to secure rental incomes and increase their cash reserves may wish to enlist the help of ethical enforcement agent Dukes Bailiffs.

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