Will Cole

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 the tenant an opportunity to remedy the breach before termination; a minimum of 14 days for failures to pay and a “reasonable” time in other situations.

The Sheriff Appeal Court (SAC) has just issued a judgment in 24 Drury Street Ltd and DST Prop Hold Ltd v Brightcrew (Management) Limited [2026] SAC (Civ) 9, which has the potential to be another important touchstone in disputes about irritancy terminations. Before turning to this new judgment, it may be helpful to recap on some other recent decisions in this controversial area.

The requirement for recorded delivery

The statue said pre-irritancy warning notices “shall be sent by recorded delivery” (albeit the statute was not concerned with whether the notice was actually signed for at the other end). The landlord fell foul of this in Kodak Processing Companies Ltd v Shoredale Ltd 2010 S.C. 113, when a notice delivered by sheriff officers because of a threat of industrial action by Royal Mail workers was held invalid.

Compliance with more onerous lease provisions about service

In 2011, in Edinburgh Tours Ltd v Singh 2012 Hous. L.R. 15, 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. The landlord fell foul of this in Lujo Properties Ltd v Gruve Ltd 2023 S.L.T. (Sh Ct) 31. The notice had been sent by recorded delivery, but it was returned as undelivered, and the terms of the lease had required actual delivery.

Compliance with contractual requirements for formal validity

Notices must also comply with these. In Ben Cleuch Estates v Scottish Enterprise 2008 S.C. 252, the Inner House of the Court of Session confirmed that a break notice which had not been given to the landlord, as required by the lease, would be ineffective. If a notice meets the requirements of formal validity but contains errors, the court can then consider whether the notice is invalid because there are errors in it which would mislead an imaginary “reasonable recipient”.

Oppression

An unusual aspect of Lujo Properties was the discussion 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, i.e. improperly or abusively. In Lujo Properties, the landlord knew that the pre-irritancy warning notice had not been delivered and failed to tell the tenant what it had said. Consequently, the sheriff considered that that the subsequent termination was oppressive. If the lease had not required actual receipt, the tenant could have challenged the termination on this alternative basis.

24 Drury Street

This latest case involved a Glasgow strip club which had apparently suffered a drop in revenue during the Covid-19 pandemic. The landlord issued a pre-irritancy warning notice in November 2020 respect of rent arrears of around £63,000 for the period from March to November 2020. The landlord subsequently issued a termination notice in February 2021, although that was far from the end of the matter.

Formal validity of the notice

The case had already been to the SAC in 2022. We can take it that the pre-irritancy warning notice cleared the service hurdles mentioned above. The tenant unsuccessfully appealed to the SAC, challenging the sheriff’s finding that the pre-irritancy warning notice was formally valid. It had demanded payment “within 14 weeks [a longer period temporarily introduced during the pandemic] of the day of service upon you of this Notice” rather than demanding payment by a specific date. The lease contained a common provision that notices were to be treated as served 48 hours after posting, if served by recorded delivery post, and the tenant’s contention was that the wording was liable to confuse the recipient about the deadline. However, the SAC held that the notice was valid because it reflected the wording of the 1985 Act, and the potential for confusion was a consequence of the Act, rather than the notice. This is a technical but important issue for practitioners issuing these demands.

The proof on waiver/personal bar

The case went back to the sheriff and there was a proof (civil trial). The validity of the notices having been established, the focus moved on to the question of whether the landlord had waived the right to rely on the termination notice or was personally barred from doing so. The problem for the landlord was that it had done certain things post February 2021 which the sheriff, and then the SAC, decided meant the landlord could not rely on the February 2021 termination notice.

The landlord had served a further pre-irritancy warning notice in March 2021, for a larger sum. The covering letter said it was a protective measure only; understandable given the context being that the November 2020 notice was still being challenged at that time. However, the notice itself demanded payment of around £113,000 of rent for the period from March 2020 to May 2021, the last three months of which were after February 2021 when the lease had supposedly been terminated. The notice indicated that in the absence of payment, “the Lease may be terminated”. A person reading that might think it indicated that there was still a lease.

The tenant claimed that there was then a telephone call between Mr Warr, for the tenant, and Mr Taylor, for the landlord, in which Mr Taylor said that if the tenant paid the £113,000, it could continue to occupy the premises. Mr Warr had raised money, some of which he then loaned to the tenant company to pay the £113,000.

Mr Taylor denied saying that. His position was that he was merely seeking payment in respect of unauthorised occupancy under a terminated lease. The sheriff rejected that, and preferred Mr Warr’s account. (The sheriff’s rationale for his approach to the evidence was discussed in the SAC’s judgement.)

In August 2021, after the disputed conversation and the payment of the £113,000, the landlord had handed over a new set of keys and intruder alarm codes to the tenant and removed the boarding and physical obstacles that had been put up outside the premises. The landlord seemingly then changed its position (as the tenant would have it anyway) and raised proceedings to evict.

Establishing waiver and personal bar

Ultimately, the sheriff, and the SAC, held that when Mr Taylor told Mr Warr that payment of the arrears meant that the tenant would retain the premises and the tenant arranged payment of the £113,000 in reliance on that, the landlord waived the right to rely on the February 2021 termination. Put very simply, the landlord had waived the right because there had been a voluntary and unequivocal abandonment of the right and the other party relied on it; and the landlord was separately personally barred from relying on the right, because there had been a representation which had induced the other party to act in a manner prejudicial to its own interests.

Oppression, again

Interestingly, the question of oppression also came up, although the case did not turn on it because it had been resolved by the findings of waiver and personal bar. The sheriff found that the landlord’s post-February 2021 conduct would also have rendered it oppressive to rely on the termination, and the SAC agreed. The landlord’s senior counsel argued that a distinction should be made between conduct leading to the termination in February 2021 and the later conduct, which should only be regarded as relevant to waiver and personal bar. It might be thought that there is force in that submission. Certainly, in Lujo Properties, it was conduct up to and including the purported termination that the sheriff thought had been oppressive. The approach of the court in 24 Drury Street, on the other hand, could be said to allow the reclassification of a termination – the February 2021 termination - as oppressive, which had not been oppressive at the time it happened. That does seem to risk creating additional uncertainty. It may not make much difference in practice: if the same facts allow a tenant to avail itself of waiver/personal bar defences, it will not need to fall back on the oppression defence.

Take care

Irritancy procedures require careful consideration and this latest case highlights how complicated things can get. In addition to the requirements for valid service, and the need to be wary of oppression, waiver and personal bar, landlords contemplating irritancy must also take care to avoid a challenge based upon their having over-demanded sums. Landlords contemplating irritancy and tenants facing it should seek specialist legal advice as early as possible.

Will Cole is a partner at BTO Solicitors LLP