Plan to modernise the law of ‘tacit relocation’ is long overdue
The termination of commercial leases in Scotland is influenced by the principle of “tacit relocation”, a concept I frequently find myself explaining to clients, surveyors, and fellow solicitors.
Tacit relocation originated from Roman law and has developed over time through judicial rulings. The standard rule is that leases will automatically renew unless the involved parties take action to prevent it. This principle comes into play when a commercial lease in Scotland reaches its contractual end, and neither the landlord nor the tenant has issued a notice to stop the automatic continuation of the lease. For leases with a duration of one year or more, the lease will extend for an additional year beyond the original termination date. If the initial term was less than a year, it will renew for the same duration.
Many view tacit relocation as unjust. A layperson might reasonably assume that a lease would conclude on the specified termination date, which seems logical. However, legally, this isn’t the case. Tenants often find themselves obligated to continue paying rent for a property they no longer want to occupy.
On the other hand, tacit relocation can be advantageous for landlords. In the absence of a new tenant, they can keep the current tenant bound for another year. However, there have been instances where landlords have re-let properties to new tenants, mistakenly believing the existing lease has ended, only to discover that the original tenants still hold legal rights to the premises.
The Leases (Automatic Continuation etc.) (Scotland) Bill, introduced in 2022 by the Scottish Law Commission, aims to enhance, modernise, and simplify tacit relocation. The Bill aims to update the law by introducing a new statutory rule of “automatic continuation” to replace the existing common law. Key proposed change includes:
- Substituting legal terms such as ‘ish’ with ‘termination date’ and ‘tacit relocation’ with ‘automatic continuation’.
- Extending the minimum notice period for leases of six months or longer to three months (currently, the most common notice period is 40 days). For leases shorter than six months, a notice period of at least half the lease duration is required, while no notice is necessary for leases under 28 days.
- Establishing guidelines for the format, content, and delivery methods of notices to quit.
Modernisation of this law is long overdue, and the Bill’s proposals are a positive step forward for both tenants and landlords. While some landlords may lose out on an additional year of rent from tenants who are unaware of the current ambiguities, the new legislation is expected to clarify and enhance the rules regarding lease expiration and termination. This will benefit not only those unfamiliar with commercial leases but also solicitors practising in other jurisdictions.
Until the new Bill is implemented, landlords and tenants must still provide valid notice if they wish to terminate the lease on the specified termination date; otherwise, it will be assumed that both parties intend for the lease to continue. If in doubt and to mitigate risks, legal advice should be sought at the earliest opportunity. Finlay Campbell is a partner in DLA Piper's Real Estate practice, based in Scotland
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