Irritancy: a legal remedy that can really annoy

When a commercial tenant breaches the terms of their lease, landlords in Scotland may have the right to bring that lease to a premature end and recover possession of the premises. This is known as irritancy. Irritancy can appear to offer a powerful remedy when a commercial tenant is in breach of contract. However, exercising this right is not always straightforward, and failing to follow the correct procedure can have significant consequences. Irritancy should also be viewed as a commercial decision, as it has the potential to have significant financial consequences for the landlord.

Irritancy notices and enforcing irritancy clauses

Commercial leases in Scotland commonly contain an irritancy clause specifying the circumstances in which the landlord may bring the lease to an end.

These can include:

1. Non-payment of rent;

2. Sequestration/liquidation of the tenant; or

3. Breach of a non-monetary obligation under the lease, for example, breach of a repairing obligation.

The Law Reform (Miscellaneous Provisions) (Scotland) Act 1985 places strict statutory controls on how and when a landlord can enforce an irritancy clause in a commercial lease.

Where a tenant has failed to pay rent or other charge, the landlord must serve a written warning notice giving the tenant a fixed period of time (usually 14 days, depending on the terms of the lease) to remedy the breach.

For non-monetary breaches, such as repairing failures, a pre-irritancy notice is not required. However, it is normal practice to serve a pre-irritancy notice, allowing the tenant a reasonable opportunity to remedy the breach (if it is capable of being remedied). The landlord must also consider whether termination would be regarded as fair and reasonable in all the circumstances, as the court will only order irritancy if it considers a fair and reasonable landlord would rely on the breach.

A pre-irritancy warning notice requires great care and attention when being drafted and served, as small errors can have large consequences. Failure to comply with the contractual or statutory requirements may render the termination ineffective. If a notice is invalid, the landlord may lose time, incur unnecessary expense and give the tenant an opportunity to challenge the termination of the lease.

If, on serving the pre-irritancy notice, the breach is not remedied within the stated time period, the landlord may irritate the lease, by serving a second notice, in accordance with the provisions of the lease.

If the tenant does not vacate the premises after the second notice has been served then the landlord must take steps to evict the tenant by raising court proceedings. The tenant cannot be lawfully removed otherwise.

Commercial considerations for landlords

It is also worth considering whether, as the landlord, terminating the lease is commercially the right option for you. Do you really want the property back, or would it be better to sue for arrears, particularly if the lease permits summary diligence? You are then in charge of the debt recovery process. Ending the lease brings the tenant’s future obligations to pay rent and other charges to an end, and finding a replacement tenant may take months or longer. During that period, the landlord may receive no rent or income from an occupying tenant. A landlord who irritates in haste may later discover that recovery of possession has lost them months or years of rental income, which possibly could have been recovered from the tenant by other means.

Considerations also apply for non-monetary breaches. Serving a pre-irritancy notice may have consequences for the landlord’s reputation if the termination is later held to be unreasonable. The landlord should also consider whether serving an irritancy notice is likely to resolve the breach or whether it could unnecessarily damage the landlord and tenant relationship. Equally, allowing a persistent breach to continue may have consequences with the landlord’s neighbouring tenants, particularly where their businesses are being adversely affected.

In every case, the facts and the lease terms must be carefully considered and thought must be given to the potential consequences of any notice. Vacant possession can be worth a huge amount to a landlord, but of course, irritancy may be a critical blow to the tenant. It is important to consider all of the factors before proceeding with irritancy.

Landlords should also take care that post-irritancy demands, acceptance of payments, communications or dealings with keys and/or access are consistent with the position that the lease has terminated, as inconsistent conduct may support defences based on waiver, personal bar or oppression.