Tenants under certain long leases in Scotland as from 28th November 2015 automatically became the outright owners of the property as a result of key provisions of the Long Leases (Scotland) Act 2012.
In contrast to England and Wales, long leases in Scotland are relatively rare. In 1974, legislation restricted the maximum length of newly created residential leases to 20 years with further legislation in 2000 restricting the maximum length of newly created commercial leases to 175 years. This latest legislation in 2012 will now operate to abolish those remaining historic long leases which the Scottish Government consider grant a tenant a right more akin to ownership than the right of a tenant under a lease. The result is that the landlord will have no further interest in the property and the tenant will become the owner.
To qualify for conversion, a lease must:
- Be registered
- Have originally been granted for a term of more than 175 years
- Have more than 175 years of the term left to run (if non-residential)
- Have more than 100 years left to run (if residential)
- Have an annual rent of £100 or less
- Not be a lease of a harbour in respect of which there is a harbour authority
- Not be a lease of minerals
- Not be a lease granted for the sole purpose of installing and maintaining pipes or cables
As from 28 November 2015 the following happened:
- The tenant’s interest under a qualifying lease automatically converted to ownership.
- Tenants could chose to opt out of the legislation but landlords could not.
- Compensation may have become payable to the landlord for loss of rent or other rights.
- Certain lease conditions automatically converted into title conditions affecting the tenant’s new interest in the property for the benefit of neighbouring properties. Other lease conditions may have converted to title conditions on registration of a notice by the person entitled to enforce the condition.
- The landlord’s title was extinguished on 28 November 2015 and any standard security over the landlord’s title ceased to have effect.
- Any standard security over the tenant’s interest in a long lease will remain and the tenant will own the property subject to that security.
If a lease has not already been registered in the Land Register, the tenant (now owner) may apply for voluntary registration of their interest in the Land Register. As noted above title conditions affecting the original owner’s title will remain in place and some conditions in the lease may convert into encumbrances burdening the property. For example if there are any access or other rights benefiting the lease, these will transmute into rights benefiting the property.
Such matters will need to be considered as part of any application for registration of a disposition of the property or application for a voluntary registration in order for the Land Register to be accurate.