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What is today's blog about?
In this week’s blog, we look at tacit relocation. This is a Scottish common law principle (also known as doctrine) relating to the termination of commercial leases.
This is essential reading for any RICS APC or AssocRICS candidates working in Scotland or on Scottish property and pursuing the Landlord & Tenant, Property Management and Leasing/Letting competencies.
How does the position differ in Scotland?
In Scotland, the security of tenure provisions under Part II of the Landlord & Tenant Act 1954 do not apply (as they do in England and Wales). Instead, the provisions of tacit relocation apply at lease expiry. The parties cannot ‘contract out’ or avoid the provisions of tacit relocation through express contractual terms.
What is tacit relocation?
Simply put, tacit relocation means that a commercial lease will continue to run on the existing terms, unless formal notice to quit is served to terminate the lease. The notice to quit must be in writing and served as prescribed by the lease.
This effectively means that the expiry date stated in the lease is more of an ‘option’ date, rather than a strict termination date.
Tacit relocation will then apply on every anniversary of the expiry date, until notice to quit is served by either party. This means that leases can run on for multiple years due to the effects of tacit relocation.
What types of lease does tacit relocation apply to?
Tacit relocation only applies to commercial leases. Agricultural and residential leases are not affected.
What timeframes relate to the notice to quit?
Notice to quit must be served by either party to terminate the lease at least 40 days prior to expiry.
If notice is not served, then the lease will continue for:
Another year on the existing terms, if it was originally granted for more than one year
The same term as the existing lease, if it was originally granted for less than one year. For example, a 6 month lease will continue for 6 months (rather than one year, as above)
What are the potential pitfalls of tacit relocation?
Tacit relocation brings uncertainty into the landlord & tenant relationship, as a lease will continue unless it is terminated by either party. If key dates are missed, then this means that the lease will continue and this may not be desired by one or both parties.
If a tenant fails to serve notice in time, then the lease would continue and the tenant will be liable under the lease for a further year. If a tenant was planning to relocate or close the premises, for example, then this will affect their plans.
Equally, if a landlord fails to serve notice and wants to redevelop the premises or relet to another occupier, then their plans will be delayed.
Are any reforms planned relating to tacit relocation?
Yes! The Scottish Law Commission (SLC) published a report called, ‘Aspects of Leases: Termination’, in October 2022. In this report, the SLC put forward proposals to legislate lease renewals through a draft Leases (Automatic Continuation etc.) (Scotland) Bill.
This would introduce ‘automatic continuation’ for one year (or less than one year if the original lease was for less than one year, as per the existing position under tacit relocation).
However, the parties would be able to contract out of the provisions of ‘automatic continuation’ or adopt a flexible approach with a reduced continuation period of 28 days (or 7 days if the lease was originally granted for under one year).
The SLC also propose a statutory framework for the service of notices to quit by both parties, including the format, notice period and other requirements.
These proposals would remove some of the uncertainty around tacit relocation and provide more clarity to both parties over the process at lease renewal.
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Stay tuned for our next blog post to help build a better you.
N.b. Nothing in this article constitutes legal, professional or financial advice.