While all leases in Scotland are required to declare a date of expiration (otherwise known as the ish date), the provisions of Tacit Relocation under Scots Law allows leases to run beyond the date of expiration in certain circumstances. Tacit Relocation refers to the effect that section 37 of the Sheriff Courts (Scotland) Act 1907 has on leases. This area of law is set to be reformed in the coming years by the Leases (Automatic Continuation etc.) (Scotland) Bill, however, it is important to be aware of how Tacit Relocation currently functions and how it may affect your lease should it continue beyond its expressed expiration date.
The 1907 Act provides that a lease will, regardless of the expiration date expressed in the lease, continue to run “indefinitely” unless either the Landlord or the Tenant notifies the other that it will terminate on the stated expiration date no later than 40 days before the said date (otherwise known as a notice to quit). The concept of Tacit Relocation is based on the notion that when a lease is drawing toward its expiration date, silence of the parties to the lease is indicative of their intention for the lease to remain live.
If neither the Landlord or the Tenant issues a notice to quit timeously to bring the lease to an end on the expiration date, the provisions of tacit relocation apply which renew the lease to run on the same terms for a further calendar year (or less if the original term of the lease was less than one year). This renewal will continue to occur at the end of every subsequent year until a valid notice to quit is served timeously.
The consequences of not serving a notice to quit timeously can be significant. It can be easily assumed by either party that the lease will terminate on the stated expiration date, however, if no notice to quit is issued timeously, both parties will be bound to the lease terms for a further year. This provides any Tenant with security of tenure for a further 12 months and the Landlord with the right to charge rent and other outgoings in terms of the lease to the Tenant for a further 12 months.
Whether you are a Landlord or Tenant under a commercial lease, the following should be considered to ensure you are not adversely affected by the provisions of Tacit Relocation:
- When entering into a lease, you should diarise key dates, such as the expressed expiration date and the last possible date you are able to issue your notice to quit. If your lease contains a break clause, providing one or both of the parties an opportunity to end the lease early at a specified date or dates, these and the last possible dates you are able to issue the break notices should also be diarised. While the provisions of section 37 of the Sheriff Courts (Scotland) Act 1907 provide that notice to quit must be given no later than 40 days before the said date, if the terms of your lease declare a set notice period this must be followed for any notice to be valid.
- Familiarise yourself with your lease, as it may contain important information as to how the lease can be brought to an end and how notices are required to be served. Letting a lease run its course is not necessarily the only option available to either party. Our Commercial Property Team has a wealth of experience in the negotiation and drafting of assignation and variations of commercial leases and regularly assists our clients in exploring alternative avenues to termination of a lease.
- Don’t leave it to the last minute and issue your notices at the earliest opportunity (within reason). Set a reminder for at least one month before your last possible notice date and engage as early as possible with your legal representatives so that it is not left down to the wire.
- Don’t solely rely on Tacit Relocation if you and the other party wish for your lease to continue, especially if you wish for the lease to continue for longer than 12 months. If the parties are agreeable to extending the lease terms, a Minute of Extension should be entered into by the parties.
For more information, get in touch with our expert property team here.
