Ending a commercial property lease in Scotland is not as simple as reading the text to see when the stated last date of the term is.
There are a few legal quirks you should be aware of to ensure that dealing with commercial leases goes smoothly and there are no nasty (and costly) surprises along the way.
How to end a commercial lease in Scotland at the end of the term?
To cause the lease to end, a Notice to Quit will need to be served on the other party to that lease.
If such a notice is not served, then ‘tacit relocation’ will occur. Tacit relocation in simple terms, means that if no notice is served by one party to the other to bring about the end of the lease at the end date, then the lease will continue.
The duration for which it rolls on depends upon the terms of the original lease, but most commonly this is for a further one-year period.
At the end of that extended period, the same principle applies where a notice is required to bring about the end of the lease.
The lease itself will likely not remind you of the need for a Notice to Quit to be served, so best practice would be to diarise this when entering into a new lease to avoid accidentally continuing the lease by tacit relocation at the end date.
The lease will likely contain provisions regarding how the notice should be effectively served and may stipulate the minimum notice period.
Commonly, this is 40 days for leases of 4 months or longer - and to avoid running the risk of late service, you should allow additional days for preparation and delivery of the notice.
Can I end a commercial lease in Scotland during the term?
At the outset of a lease, a break option - allowing for an early exit from a lease prior to the full term - may be agreed between tenants and landlords.
These are more commonly for the benefit of a tenant, but landlord and mutual break options can also be agreed.
A break clause will have strict requirements that must be met to ensure a valid break.
Generally, the break will allow for a break at an anniversary of the lease or during a set interval, although break options, which allow a break at any time to ensure greater flexibility may be agreed.
There will be a notice period for service of the break notice.
This notice periods are usually stringent and in the case of a one-off break clause - if you are slow off the mark and miss your deadline, you may well have lost your opportunity to break the lease early.
Parties looking to exercise a break option should also be aware of any other stipulations in their lease break clause.
For instance, it might require all rent or other costs due to be paid up to date at the service of the notice or at the break date, or it may not provide for a return of advance rent paid beyond the break date.
The three key things to keep in mind are:
- Be aware of your break dates from the start of the lease.
- Leave ample time to comply with any notice periods.
- Read very carefully any pre-conditions which must be met in your break clause to ensure you can effectively exercise the option.
If you are approaching the end of your lease term, wondering how to effectively exercise the break option in your lease, or looking to review and better understand your commercial lease, please get in touch with our Commercial Real Estate team who will support you throughout the process.