Tacit relocation – can it be excluded by statements made during negotiations between agents?

In Scotland, a lease does not automatically terminate at its expiry date. Where the parties remain silent, the law presumes that the parties have agreed to prolong the lease on the same terms for a further year (or, if the original lease was for less than one year, for that shorter period). This is the common law doctrine of tacit relocation. It is undoubtedly a useful concept and there are a great number of commercial properties in Scotland occupied on this basis (some for many years after the original expiry date).

Disputes about whether tacit relocation has operated can, and often do, arise. It is undoubtedly an area of law which causes much confusion. As part of its tenth programme of law reform, the Scottish Law Commission is considering what changes might be made. It published a discussion paper in 2018 and has finalised its recommendations. A draft bill is expected in 2022. The Law Commission's aim appears to be to bring greater certainty for the benefit of all market participants.

In the meantime, the existing law continues to throw up interesting cases. In Rockford Trilogy Limited v NCR Limited [2021] CSOH 49 the dispute centred on whether certain negotiations between the agents for the landlord and tenant were sufficient to exclude the operation of tacit relocation. Neither party had served a written notice to quit on the other 40 clear days prior to lease expiry. As such, the orthodox route to avoiding tacit relocation had not been followed. However, the tenant argued that sufficient notice had been given on its behalf in a statement by its agent (more than 40 clear days prior to expiry) to the effect that the tenant would only remain in occupation after expiry if certain terms were agreed (being nil rent for a further two years and a cap on liability for dilapidations). The court agreed that tacit relocation had been excluded, even though the statement had been made as part of ongoing negotiations between agents.

Rockford is the latest example of the court's willingness to accept something far short of a formal, written notice to quit. In the earlier Sheriff Court case of Brucefield Estate Trustee Company Ltd v Computacenter (UK) Ltd [2017] SC Liv 38 (in which the author acted for the landlord), the court rejected a submission that a notice to quit required to be served in accordance with the notice provisions in the lease. Unless the terms of a lease go so far as to exclude the common law entitlement to give notice to quit informally (and even verbally), it is not enough for the party seeking to rely on tacit relocation to point to the absence of a formal notice.

The well-advised party, if it wishes its lease brought to an end, will always serve written notice - in accordance with the lease notice provisions - not less than 40 clear days prior to expiry. It is likely that the Scottish Law Commission will propose reform to the effect that all notices to quit must be in writing and contain certain prescribed information. But, in the meantime, the decision in Rockford is a reminder that the court will look carefully at any correspondence, in any context, which might be said to amount to a clear statement that the lease will end.

Finally, the decision in Rockford makes it clear that, when conducting negotiations about lease extension or renewal, it is important for agents to bear in mind the legal effect that their statements can have.