Tacit relocation is a quirk of Scots law that can easily catch out landlords and tenants if they aren't prepared.

Despite parties agreeing a lease duration at the outset, a Scottish lease will not automatically terminate at the agreed expiry date unless 40 clear days' prior notice is given by either party to the other. We have written previously about a recent decision on how notice should be given.

Tacit relocation might seem unfair. If parties have agreed an expiry date, why should they have to take another step to end the lease on that date? The consequences of failing to give notice could mean a tenant is forced to occupy a premises it no longer has use for, continuing to pay rent, service charge and insurance for another year. Equally, a landlord could have a new tenant lined up for a premises it expects to be vacant, only to find that they aren't able to remove the tenant whose lease has continued on tacit.

Review by the Scottish Law Commission (SLC)

The SLC certainly considers tacit relocation an area of law ripe for reform. Commercial lease termination is the first topic to be addressed by the SLC in its review of the Scottish law of leases, as they say "The present law about the ending of commercial leases is anything but clear, and risks expense, delay and inconvenience for entrepreneurs planning their businesses, large or small."

The result of the SLC's review is the draft Leases (Automatic Continuation etc) (Scotland) Bill. The draft Bill was published for consultation in December 2021, with a final draft Bill and report due to be published in Spring 2022.

What is proposed?

The Leases (Automatic Continuation etc.) (Scotland) Bill applies mainly to commercial leases. If enacted in its current form, some of the key changes for commercial landlords and tenants to be aware of include the following:

  1.  A commercial lease will end on its termination date if:
    1. the landlord gives the tenant valid notice; 
    2. the tenant gives the landlord valid notice; OR
    3. the tenant gives up possession of the subjects with the landlord's agreement and in circumstances that indicate both parties intend to end the lease. This last ground for termination is new – however agreement is essential for this approach to be effective. Tenants won't be able to just vacate at expiry and claim the lease is terminated without the landlord's agreement.
  2. Parties can contract out of the above by making express provision in the lease. That is not new, although rarely seen. The Bill makes further provision for those requirements that can be contracted out of by parties and those that cannot.
  3. Termination will be of no effect if the tenant remains in possession of the leased subjects after lease expiry and the landlord doesn't take action to remove the tenant within a reasonable period, or otherwise acts inconsistently with the lease having ended (for example, by continuing to invoice and accept payment of rent). Parties cannot contract out of this provision.
  4. Notices to quit given by a landlord would have to be in writing and contain a number of specified details. Writing is not currently required, although commonly used. Writing includes 'electronic means', so notice could be given by email or fax. Provision is also made about the validity of notices where certain errors are made, although this largely reflects the current law. 
  5. Notices to quit given by a tenant would have to be in writing for leases of more than one year, but may be given in writing or orally for leases of one year or less. There is no verbal option for shorter leases for the landlord. Again, certain specifics are included along with similar provisions about the validity of the notice where any errors are made.
  6. The required notice periods will change. If the lease duration is 6 months or longer, 3 months' notice before the termination date is required. If the lease duration is less than 6 months, the notice period will be half the duration of the lease, rounded up to the nearest whole day. Care will need to be taken to ensure notice periods are calculated correctly in accordance with the Bill.
  7. Where a lease has been terminated (other than by irritancy/forfeiture) and before the termination date rent has been paid for a period past termination (e.g. a full quarter has been paid and the lease ends halfway through the quarter), there will be a statutory obligation on the landlord to refund the rent for the period post termination, within 10 working days of lease expiry.

Various other provisions are made in the Bill, covering requirements where there are multiple landlords or tenants, how notices should be delivered and when they will be treated as being received, what happens with head and sub-leases, amongst other issues. 

While the Bill states that the common law of tacit relocation will no longer apply to the leases covered by the Bill, it is essentially a reformulation of the existing rules. The concept of automatic continuation of Scottish leases is therefore not being extinguished in its entirety. 

We have yet to see the final version of the Bill, however what is certain is that both landlords and tenants will have to remain diligent as to both the provisions of their lease and any legislative requirements that are brought in, in order to correctly terminate a lease.


Clare Kelly

Senior Associate