Tacit relocation is typically built into every commercial property contract in Scotland – but many with signed commercial lease agreements are unaware of this automatically in-built law.
As it can lead to significant financial fall out, it’s important to know if and how tacit relocation can impact you.
General rules relating to tacit relocation in Scottish law
- In Scotland, generally speaking, the legal position on commercial leases is that they will not come to an end automatically on expiry of the contractual term. They will instead continue for a further time period, dependant on the length of the original lease, unless one of the parties to the lease serves notice that it is to end.
- Typically, parties to a lease need to give 40 clear days’ notice to prevent automatic (or silent) renewal of the lease via tacit relocation.
- If notice is not given by either the landlord or the tenant within this time period, the lease will continue past the lease expiry date for a further period on the same terms as the original (usually for another year).
Please see our extended article on tacit relocation for further detail on the general law around tacit relocation and how it operates.
Leases of larger than two acres – beware different rules apply
Some leases (for example agricultural holdings) have their own specific rules. But for standard commercial lettings, one particular point to bear in mind is in relation to leases of commercial premises which are larger than two acres:
- The Sheriff Courts (Scotland) Act 1907 outlines that for the purposes of the removal process under that Act, notice of not more than two years and not less than one year is required to bring the lease to an end.
Generally, commercial lettings won’t be of larger than two acres – but in some cases they will (e.g. letting of a commercial car park to a tenant, or of a large single let warehouse together with car parking, etc.), and landlords and tenants need to be aware of notice periods in this context.
Is shorter notice possible?
For properties larger than two acres, the process under the 1907 Act requires a much longer notice period – which in turn requires thinking further ahead in serving notice than landlords (or tenants) may do in the normal course of business, particularly where they are accustomed to operating in terms of the 40-day notice period.
There is a risk that the landlord or the tenant then realise that they wish to terminate the lease at the end of the fixed term, but that they have missed the longer notice period required under the 1907 Act.
However, all is potentially not lost if that minimum of one years’ notice is missed:
- While it has not always been clear whether the notice periods under the 1907 Act are compulsory or not, the case of M7 Real Estate Investments Partners VI Industrial Propco Limited v Amazon UK Services Limited [2019] CSOH 73 found that the process under the 1907 Act was optional (and only required if the landlord wanted to rely on the special removal process under the 1907 Act). If the landlord is not looking to rely on the removing process under that Act (or the tenant is looking to serve notice), then based on the conclusion in this case they do not need to comply with this longer notice period.
- It is therefore still open for the tenant (and the landlord) to take the common law route and terminate by serving 40 clear days’ notice.
That said, the matter has not necessarily been definitively settled.
The law was seen as unclear enough that in the M7 Real Estate case it was thought worth going to court over. This case was not appealed. In theory at least there is a risk that this issue comes to court again, and another court reaches a different conclusion.
Landlords and tenants are advised to proceed with caution. The belt and braces approach, and the recommended approach, would be to serve at least one years’ notice in accordance with the 1907 Act if at all possible.