In order to bring a commercial property lease to an end, clear advance notice of a party’s intention to terminate the lease must be given by one party to the other within the specified statutory timeframe. Where neither party serves the termination notice within the specified timeframe, the lease will continue to run on an implied re-lease with the same terms and conditions as the original lease due to the doctrine of ‘tacit relocation’.
For leases with a duration of one year or longer, this "silent" extension of the lease will initially operate for a period of one year and will then continue on a year on year basis until one of the parties successfully serves the relevant termination notice on the other. If the lease was initially for a duration of less than a year, then the initial period of extension under tacit relocation will be for the same period as the initial duration of the lease (e.g. a six-month lease would have a six-month initial “silent” extension period) and the lease will then continue on this basis until successfully terminated.
The Sheriff Courts (Scotland) Act 1907 outlines the different notice periods (listed below) to be given for the various durations of leases:
The list above provides a selection of the notice periods required and the full list can be found detailed in the Act. It is always advisable to seek legal advice when issuing a notice to terminate a lease to ensure that the correct period is ascertained and the notice is validly issued. If a notice is served too late (or is not validly issued), then the lease may fail to be terminated on the termination date. Tacit relocation will then operate and the lease will be extended on the same terms, most likely for at least another year. This extension may be to the detriment of the parties.
It may be possible to contract out of tacit relocation; however, this is a grey area with very few definitive answers. Caution in this regard may be sensible, especially given that contracting out of tacit relocation is prohibited by statute when dealing with agricultural holdings. The simplest, and most obvious, way to avoid the operation of tacit relocation is to properly serve the notice to quit within the required timeframe.
The Scottish Law Commission’s (SLC) discussion paper Aspects of Leases: Termination concluded that “tacit relocation gives rise to a number of consequential requirements (e.g. notices to quit) which in turn can create complexity, uncertainty, expense and the risk of professional failure”. This conclusion has gained traction in the legal community.
The SLC has suggested changes and proposed that clarifying the position in respect of contracting out of tacit relocation, to confirm that parties to a commercial lease have the right to do so, may be beneficial. This option would return control to the parties, enabling them to decide whether or not tacit relocation would be of benefit to them.
A bolder proposal offered by the SLC is to reform the law so that the doctrine of tacit relocation is disapplied entirely in relation to commercial leases. The general lack of awareness in respect of tacit relocation and its operation means that unless it is disapplied, landlords and tenants may unintentionally extend leases and find themselves dealing with the unwelcome and unexpected consequences.
It is imperative that landlords and tenants seek legal advice both prior to entering into a commercial lease so they are fully aware of the role tacit relocation may play and also prior to serving any notice to quit to ensure that it is properly served within the required timeframe.
Murray Beith Murray Partner, Bill Meldrum, has a wealth of expertise and experience in the area of commercial leases. If you have any queries regarding tacit relocation and its implications, or any questions regarding commercial leases, please complete the enquiry form or call on 0131 225 1200.
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