Certain long leases converted into ownership on 28 November 2015 so that the tenant is now the outright owner of the property. This as a result of key provisions of the Long Leases (Scotland) Act 2012 which came into force last November.
To qualify for conversion, a lease must:
- be registered in the Land Register or recorded in the General Register of Sasines
- have had an initial term of at least 175 years and have more than 175 years left to run (or at least 100 years left to run where the property let is mainly used as a dwelling house)
- have an annual rent of £100 or less.
There are some exceptions where a lease complying with all of the above will not convert. For example, if it was granted only to allow the tenant to install or maintain pipes or cables.
Where there is a head-lease and a sub-lease (both of which are qualifying leases) only the sub-lease will convert and the tenant's and landlord's interest will disappear.
At conversion, the landlord's interest will disappear. Compensation may be payable to the landlords, however, the level of this is likely to be fairly low.
If the 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.
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. If there are any access or other rights benefiting the lease, these will convert into rights benefiting the property. These 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 so that the Land Register is accurate.
If you wish further information about the above, please contact a member of our Commercial Property team.