3 things to remember about terminating a commercial lease of large premises

In Scotland, commercial leases do not automatically end on their expiry date.

Instead, a lease will continue on the same terms and conditions, usually for another year, if neither party gives notice (on time!) to the other that the lease will terminate at expiry.

Getting it wrong has serious implications for tenants: they could end up being liable for rent, service charge and insurance for another year. Equally, a landlord who has another tenant lined up or has a redevelopment planned, may find their premises unexpectedly occupied for another 12 months.

The deadline by which notice must be given depends on the terms of the lease but is usually at least 40 clear days before the expiry date stated in the lease. For leases of large premises (exceeding 2 acres), the date notice is given determines the process the landlord must follow to remove the tenant from the premises at lease end.

The law of tacit relocation has been reviewed recently by the Scottish Law Commission, who have published the draft Leases (Automatic Continuation etc.) (Scotland) Bill. Read more about their proposals here.

In the meantime, though, what three things do parties need to remember about terminating a lease of large premises? 

1. Notice must be given at least 40 days in advance of the expiry date in the lease.

The default position is that notice must be given at least 40 clear days before the expiry date in the lease (but the lease should always be checked in case a longer period is stipulated).

There was previously some uncertainty around whether a longer period of notice was required to terminate leases of premises over two acres but the decision in M7 Real Estate Investments Partners VI Industrial Propco Limited v Amazon UK Services Limited [2019] CSOH 73) confirmed that the 40-day rule does apply to those leases, at least for now. 

2. Notice can be given informally but this carries risk.

It is always safest to instruct the service of a formal notice to quit.

However, as we set out in a previous blog, the Inner House of the Court of Session confirmed in Rockford Trilogy Ltd v NCR Ltd that, where service of a formal notice isn't expressly required under the lease, informal notice can effectively overcome tacit relocation whether that notice is given verbally or in writing e.g. in an exchange of emails.

3. A landlord of large premises, exceeding two acres, can give notice earlier and avoid the need for court proceedings for removal.

Ordinarily, where a commercial landlord serves a notice to quit but the tenant fails to remove from the premises, the landlord has to raise court proceedings to remove them (the process is summarised here).

However, where certain conditions are met, a landlord can skip court proceedings altogether - and jump straight to the stage of instructing Sheriff Officers to carry out a removal - by serving notice six months in advance for leases up to three years or one year (but not more than two years) in advance for leases of three years or more. This is a rarely used procedure but might be used, for instance, where a landlord has a planned redevelopment and cannot tolerate any risk that a tenant will not vacate on time.