It is a well-known principle of Scots law that where neither party to a lease serves a termination notice (a ‘notice to quit’) timeously prior to the expiry of the agreed duration, the parties are presumed by their silence to have agreed that the lease is to be prolonged for a further period. For leases of more than one year, this period is a further 12 months. This concept, known as tacit relocation, broadly operates to extend the original lease on the same terms as were previously agreed between the parties on a year-to-year basis, until either party serves a valid notice to quit.

To avoid the operation of tacit relocation, parties must, by their words or conduct, communicate their clear intention to end a lease on the expiry date. While the most common way of doing so is to serve a notice to quit, the Court of Session’s recent decision in Rockford Trilogy Ltd v NCR Ltd [2021] CSOH 49 demonstrates that an informal intimation of a tenant’s intention to leave will in some cases suffice.

Decision

Rockford Trilogy Ltd (‘Rockford’) and NCR Ltd (‘NCR’) were the landlord and tenant in terms of a 17-year lease of commercial premises in Motherwell.

On 21 January 2020, just over two months before the contractual expiry date of the lease, and following more than six months’ negotiation about the terms of a possible new lease, agents acting on behalf of NCR issued an email to Rockford’s agent in the following terms:

“NCR are ready to commit to a relocation nearby and have advised that the only way they would consider remaining at the [existing premises] is if the dilapidations are capped at £300k together with the nil rent proposed for 12 months. Do you think this is something the landlord might agree to in order to retain NCR as an occupier of Trilogy?”

The court determined that the wording used in this email communicated the clear message that there was only one scenario under which NCR was prepared to continue its lease of the premises, and that was if Rockford agreed to an alternative arrangement in relation to financial caps under the lease.

The final sentence of the email, the court concluded, confirmed NCR’s intention to terminate its occupation of the premises in the event that the alternative arrangement was not agreed, and therefore amounted to sufficient notice that they would not remain on the old, existing terms.

It followed that sufficient notice had been given of NCR’s intention to leave, thus preventing the operation of tacit relocation.

Comment

This case serves as a useful reminder that whilst a formal notice to quit is the more traditional route to ending a lease, an informal notice or ‘overt intimation’ that the lease is not to continue can, in some cases, be sufficient to prevent the operation of tacit relocation. However, that was only established in this case after a proof, or trial, where the Court considered the evidence in support of the parties’ competing positions.

Disputes of this nature will inevitably be determined on the facts, so best practice remains to ensure that a valid, timeous notice to quit is served, as the simplest way of communicating a clear intention to bring the lease to an end.

For further information please contact Colin Archibald or Alyson Shaw of our property and infrastructure disputes team or get in touch with your usual Shepherd and Wedderburn contact.

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