17 January 2023

In Scotland, commercial tenants who breach their lease obligations may find their leases terminated by “irritancy”. Since the 1980s, the lease provisions in question have been rendered less draconian by provisions in the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985. These require the landlord to serve a pre-irritancy warning notice by recorded delivery, giving its tenant an opportunity to remedy the breach before the irritancy is carried out; a minimum of 14 days for failures to pay and a “reasonable” time in other situations.

Given its importance to the parties, irritancy has, unsurprisingly, been the subject of much litigation over the years. It has been considered again in the judgment in the Glasgow Sheriff Court case of Lujo Properties Ltd v Gruve Ltd, issued on Friday the 13th of January.

The requirement for recorded delivery - This issue came before the Court of Session in 2009 in Kodak Processing Companies Ltd v Shoredale Ltd.  In that case, the landlord had the pre-irritancy notice delivered by sheriff officers instead because of a threat of industrial action by Royal Mail workers.  The Court made clear that the statute mandated the use of recorded delivery for pre-irritancy notices (albeit the statute was not concerned with whether the notice was actually signed for at the other end).  A harsh result for Kodak, whose notice fell at the first hurdle. 

Compliance with more onerous lease provisions - In 2011, in Edinburgh Tours Ltd v Singh, the Sheriff Principal at Edinburgh held that where the words in the lease provided that the notice actually had to be received (which is more onerous than the statutory rule), that requirement had to be complied with too.  This is the second hurdle.

Lujo Properties Ltd v Gruve Ltd – In this most recent case, Sheriff Reid held that since the landlord had posted the pre-irritancy notice by recorded delivery, it had cleared the first hurdle.  However, the notice was subsequently returned as undelivered, and the tenant did not receive it.  Since the Sheriff interpreted the terms of the lease as requiring actual delivery, the notice fell at the second hurdle.  

Oppression – An unusual aspect of Lujo Properties was the prominence of “oppression”.  Before the reforms of the 1980s, a tenant facing irritancy could sometimes fall back on a plea that the landlord had exercised the right of irritancy oppressively.  That is to say, improperly or abusively.  The Court’s power to disregard an oppressive irritancy is less important today, but it seems to have survived.  In Lujo Properties, the landlord knew that the notice had not been delivered, and, despite the ready availability of means of communication, failed to tell the tenant about the terms of the notice.  Consequently, the Sheriff held that an irritancy based on that notice would be oppressive.  So, if the notice had not fallen at the second hurdle, the whole irritancy would have fallen at this third hurdle. 

Take care - Lujo Properties may well be regretting its lack of candour.  The case serves as a salutary reminder that irritancy procedures require careful consideration.  In addition to the requirements for valid service, landlords contemplating irritancy must also take care to avoid a challenge based upon their having over-demanded sums.  Both landlords contemplating irritancy and tenants facing should seek specialist legal advice as early as possible.    

If you have any questions, please contact a member of our real estate litigation team.

Will Cole, Partner: wco@bto.co.uk / 0131 222 2947

Jamie Miller, Solicitor: jmi@bto.co.uk / 0131 222 2939