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Wednesday, March 21, 2024

Scottish court makes landmark shopping centre ruling

Knight Frank has provided expert advice in a landmark case at the Court of Session that could have major implications for Scotland's retail sector.

Andrew Oswald, Managing Partner at Knight Frank, provided expert property and valuation advice at the Scottish Court of Session which, on Friday 9 March 2007, ruled in favour of Douglas Shelf Seven Ltd, the landlord of the Whitfeld Shopping Centre in Dundee, for the first time in the history of Scottish law.

The landmark ruling in favour of Douglas Shelf Seven Ltd against the Co-operative Wholesale Society and Kwik Save, awarded over 600,000 in damages (450,000 capital loss and 149,000 in past losses, as well as interest on past losses) to the landlord.

The ruling centred on the 'Keep Open' clause in a supermarket lease, which was designed to ensure that the anchor tenant, in this case the Co-operative Wholesale Society, continued to trade. Anchor tenants underpin the profile and draw of a shopping centre and are key to its commercial success and reputation.

The Co-operative Wholesale Society's long lease at the Whitfield Shopping Centre in Dundee allowed them to sublet the unit to Kwik Save, which was trading as Shoprite, but closed the premises in 1995. This put them in breach of the 'Keep Open' clause. The landlord chose to sue for damages resulting from the breach of the 'Keep Open' clause.

Douglas Shelf Seven Ltd had to establish that there was indeed a loss and to quantify that loss during the 66-day case where they were represented by legal outfit, McClure Naismith.

The ruling in favour of the landlord represents the first time such a decision has been made in Scotland to award damages for breach of a 'Keep Open' clause.

Andrew Oswald, Managing Partner at Knight Frank, said: "This has been a lengthy but very interesting test case in relation to the 'keep open' clause of a supermarket lease. The ruling has sent a word of caution to all landlords and tenants in the retail sector and will have an impact on negotiating the terms of a lease, specifically in relation to the 'keep open' clause, which they will have to adhere to. Both landlords and tenants will now have to be fully aware of the consequences of breaching the 'keep open' clause and ensure that it is given due consideration when agreeing leases."