Introduction: Definitions: Agreements for lease and missives of let
It is very common - in fact almost universal - in Scotland for property contracts of all sorts to be constituted by an exchange of formal offer and acceptance letters (known as “missives”) between the parties’ solicitors. The exchange of contracts thus constituted is known as conclusion of missives.
In the case of leases of commercial property, in most cases the missives are comparatively short and a formal draft lease, to be entered into between the parties subsequent to conclusion of missives, is annexed to them - akin to the practice south of the border of annexing a draft lease to an agreement for lease. (Indeed, where the property comprises a commercial building in course of construction, it is common for the parties to enter into a formal agreement for lease, with draft lease annexed, rather than simple missives.)
But as leases in Scotland are at common law simply contracts, and as the statutory protection is (for leases of 20 years or less) conferred simply by taking possession of the property, it is perfectly competent for the lease to be left to rest on the concluded missives alone, without any formal lease following. This is a relatively common practice for residential leases and short-term commercial leases, which are generally simpler than longer term commercial leases.
So for leases in Scotland Finance Act 2003 distinguishes between missives of let which are not to be followed by the grant of a formal lease, on the one hand, and missives of let (or agreements for lease) which are to be followed by the grant of a formal lease, on the other. Where
* missives of let are concluded and are not to be followed by the grant of a lease, the missives of let are to be treated as the grant of a lease in their own right. * missives of let are concluded (or an agreement for lease is entered into) and are then to be followed by the grant of a lease, this is a contract and is treated under FA03/S44 as modified by FA03/SCH17A/PARA19(3). This means that substantial performance of the missives or agreement for lease will be treated as the grant of a notional lease with the effective date being that of substantial performance. The subsequent grant of the lease may be covered by FA03/SCH17A/PARA19(4).
For further details and examples of substantial performance of agreements, see: SDLTM19605 onwards