A Scottish commercial lease will usually specify an expiry date - but the lease will not necessarily end on that date. Either the landlord or the tenant must give notice of termination by a certain period (usually at least 40 clear days) prior to the expiry date. If notice is not served correctly and on time, the lease will continue for a further year on the same conditions and rent will continue to be payable at the same rate. If the original lease duration was less than a year, the lease will continue for the same duration again.

This continuation of a Scottish commercial lease is known as tacit relocation. The rules about tacit relocation and how to prevent it from operating are subject to many uncertainties, including doubt as to whether the landlord and tenant can agree at the outset of a lease that tacit relocation will not apply. Issues also arise when landlords or tenants are not aware of the tacit relocation rules, and when mistakes are made in termination notices. At the expiry date of a lease, a landlord might seek to let their premises to a new tenant (often at a higher rent), or a tenant might plan to relocate to other premises, only to find that tacit relocation has operated and they are stuck with the old ones for another year.

Proposed changes

Recognising these issues, the Scottish Government has introduced the Leases (Automatic Continuation etc) (Scotland) Bill, which aims to demystify and simplify the rules which apply at the expiry of Scottish commercial leases. The basic principle would still be that a Scottish commercial lease will continue automatically after its stated expiry date unless a valid termination notice is served by the landlord or tenant. However, the detailed rules would be set out clearly in one piece of legislation and certain changes are proposed, including that:

  • The phrase tacit relocation would be dropped in favour of automatic continuation.
  • The parties could agree in writing that automatic continuation will not apply.
  • There would be changes to the amount of notice that needs to be given to prevent automatic continuation, and some new rules about the service of termination notices.
  • Certain types of mistakes would not invalidate a termination notice.

Note that the Bill does not deal with residential or agricultural leases, as these are subject to their own legislation. Student lets and holiday lets are also specifically excluded from most of the proposed new rules.

Proposed new notice periods

Unless the parties agree in writing that automatic continuation will not apply, the amount of notice that the landlord or tenant would need to give the other to prevent automatic continuation would be:

  • For leases of six months or longer: at least three months’ notice prior to the stated expiry date
  • For leases of between three and six months: at least one month's notice prior to the stated expiry date
  • For leases of less than three months: no notice required.

The Bill would allow the landlord and tenant to agree different notice periods to those set out above, so long as the agreed notice period is put in writing and is the same for the landlord and the tenant.

As per the current law, if the required notice is not given but the landlord and tenant both act as though the lease ended on the expiry date (e.g. tenant vacates, returns keys and stops paying rent; and landlord does not object), this would prevent automatic continuation.

Proposed new requirements for termination notices

A termination notice served by a landlord would always have to be in writing, and a termination notice served by a tenant would have to be in writing for any lease of longer than one year. The Bill permits notices to be served by recorded delivery, sheriff officers or, if the landlord and tenant agree, electronically. Overseas parties to Scottish commercial leases would have to provide a UK address for the purpose of receiving notices.

Notices would not have to be in a particular format, but the Bill would require certain essential details, slightly different for landlord and tenants, to be included. Most importantly, a termination notice by a landlord must specify the expiry date.

Proposed continuation periods

If automatic continuation takes place, the continuation period would depend on the original length of the lease, as it does under the existing rules:

  • Leases of one year or longer: the lease continues for one year
  • Leases of less than one year: the lease continues for a period equal to the original length of the lease.

The landlord and tenant could agree to reduce these default continuation periods, but this would be subject to certain minimum continuation periods.

Proposed transitional rules

The Bill proposes a transitional period of six months during which the old rules would continue to apply to existing leases. After that, existing leases would become subject to the new rules. Transitional rules would also deal with situations such as if tacit relocation is running under an existing lease when the new law comes into force.

The Bill's progress

The Stage One Report from the Delegated Powers and Law Reform Committee was published on 23 June 2025. The Committee heard evidence from lawyers, academics, the Scottish Property Federation and the Federation of Small Businesses. Whilst there was support for the consolidation of the rules relating to terminating commercial leases in Scotland for the sake of certainty and clarity, many giving evidence were critical of the drafting of some aspects of the Bill and called for a rethink on approach on some matters.

As far as the Committee members were concerned, some supported the general principles of the Bill but some questioned whether it is the right approach. Indeed the Committee asked the Scottish Government to set out its response to those stakeholders who consider that a rethink or different approach to reform of tacit relocation is required.

The Committee concluded that it could not make a recommendation on the general principles and reserved its position until it has received a response from the Scottish Government.

Next steps

The Scottish Government will now consider the Report and decide how to respond. The Bill may then be referred back to Committee for a supplementary report before MSPs in the Scottish Parliament get their say on whether the Bill should be taken forward for more detailed parliamentary consideration with a view to potentially becoming law. With the Scottish Parliament breaking up for summer recess at the end of June, it will be after the summer before all becomes clear.

Please get in touch with your usual Brodies contact should you wish to discuss the Bill.

Contributors

Lisa Cruickshank

Practice Development Lawyer

Catherine Reilly

Director of Knowledge (Real Estate)