Commercial Leases In Scotland – Tacit Relocation & Notice to Quit

Commercial Leases

Tacit Relocation and Notice to Quit – An Overview of the Current Position

For those not regularly involved in commercial lease in Scotland, they may quite logically assume that if their Lease provides for an end date of 30th September 2024, that their Lease would come to an automatic end on that date.

Unfortunately, this is not the case and bringing a commercial lease to an end in Scotland is not as straight forward as simply collecting the keys or handing back the keys at the lease end date provided for.

Although the parties will have agreed a specific duration for the Lease and end date, due to a peculiarity of Scottish Law, a commercial lease will not terminate automatically at the agreed expiry date unless the requirements of notice are complied with.

In order to bring a commercial lease to an end, a notice requires to be issued and served on the other party intimating that the lease will end. This known as a Notice to Quit. If no Notice to Quit is issued, the Lease will continue by a doctrine known as tacit relocation, which is essentially the automatic renewal of the Lease. This principle works under the presumption that as neither party has issued a notice to bring the Lease to an end, then both parties’ consent to the Lease continuing.

Even those who have worked with commercial leases in the past before may not be aware of tacit relocation, as it will rarely be referred to explicitly within the lease. It is built into the provisions of every commercial lease in Scotland.

There are specific rules and deadlines in relation to serving Notice to Quits for commercial leases, which again the Lease may not make abundantly clear what they are. The Lease likely will not specify how much notice is required to given in order to bring the Lease to an end, nor that a notice is even required, which again is not helpful or clear for the parties within the lease.

With the absence of such information relating to notice periods specifically provided for within the lease, the general rule for most commercial leases is that 40 days minimum notice. With that in mind, it is widely recommended to provide for at the very least 42 days to allow for time for postage/service of the notice. The notice can of course be served any time up to that minimum notice period during the term of the Lease. This requires to be assessed on a case-by-case basis and the notice provisions of your Lease should be reviewed carefully to ensure all the requirements for notice are met.

In practice, this obviously creates uncertainty and confusion between the parties, especially if one either party is not aware of this doctrine of tacit relocation and the requirements of the notice period. At present, if parties have not instructed legal advice, it is likely they will not be aware of this, as this is contained within Common Law opposed to being laid out in any statute.

It could lead into a scenario, in practice, where a Landlord has the Tenant in the property for another year, when they were looking for a new Tenant to come in. Or conversely, it could mean the Tenant is under the financial burden of that Lease for another year if they were looking to surrender the Lease and look for other Premises.

The bottom line is that if no Notice to Quit is served on the other party, tacit relocation will kick in and the Lease will continue for a further period beyond the end date of the Lease.

The length of the continuation depends on the duration of the initial Lease. For a Lease with a duration of one year or more, with no Notice to Quit is served in the required time frame, the Lease will continue for one more year on top of that on the same terms as the Lease. This would continue on a year-to-year basis until ether party service the required notice to terminate, or conversely the parties agree an extension & variation of lease. There are slightly different rules for Leases with a duration of less than a year or for properties of over 2 acres for example, nevertheless in most cases it will be for a further year.

With that overview of the current position of bringing commercial leases to an end in Scotland, it is clear this is fairly intricate and can bring uncertainty and confusion for clients. In practice, parties will often fall short of the requirements, which is no wonder given the requirements not being very practical, which will lead to the lease carrying on for typically another year past the end date.

Fortunately, there is a draft bill that the Scottish Law Commission has proposed, which has the intention to clear up the confusion and uncertainty that the doctrine of tacit relocation has in practice.

Keep an eye out for a future article detailing what this proposes. In the meantime, if you require tailored advice in this regard, please contact our Commercial Property team and we can advise accordingly and assess your options going forward in relation to your Lease.

 

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