Tacit relocation, the silent re-letting of commercial leases in Scotland
The Scottish Law Commission published a “Discussion Paper on Aspects of Leases: Termination” in May 2018 (“the Paper”). The Paper deals predominantly with commercial leases and covers six issues relating to the termination of commercial leases in Scotland. This article will briefly cover the principle of tacit relocation, also known as “silent re-letting” or “silent consent” and will outline the two proposed options for reform in the Paper.
The principle of tacit relocation is that a commercial lease continues beyond its contractual termination date, unless either party gives the required notice to the other that the lease is to end and that notice is followed by the tenant giving vacant possession to the landlord.
If the lease does continue to operate by way of tacit relocation, then the lease will continue at the same rent and on the same terms until either party gives a valid notice to terminate.
Many legal systems across the world recognise the concept of tacit relocation but Scots law is unique in that the principle can operate through an omission rather than a positive action.
As a general rule, for premises let for 4 months or longer, 40 clear days’ notice of termination is required unless the lease provides otherwise. The Sheriff Courts (Scotland) Act 1907 provides different periods of notice in cases where premises are let for less than 4 months and for larger properties which extend over 2 acres.
It is important to note that the legislative requirements for a valid termination notice are interpreted strictly. In the case of Signet Group plc v C & J Clark Retail Properties Ltd, the tenant sent a notice to terminate the lease to the landlord on the 40th day before the lease was due to terminate and it was held that 40 clear days notice was not given and therefore tacit relocation operated.
You should proceed with caution when serving notices in relation to commercial leases as even minor errors can result in the notice being invalid.
The Paper discusses the historic development of tacit relocation including its roots in Roman law and questions whether or not it is appropriate for it to be applied to commercial leases in a highly developed commercial leasing market. It is clear from the Paper that businesses have pushed for reform. Examples are given of businesses suffering hardship from assuming that their lease automatically terminates after the fixed duration specified in the lease, unaware of the notice requirement.
There are two options for reform discussed in the Paper:-
1. The first is that tacit relocation is disapplied entirely in relation to commercial leases. It is proposed that the landlord and tenant can chose to contract into tacit relocation if it is set out in the lease. It is suggested that a new statutory equivalent of tacit relocation could be drafted to allow changes to the existing law of tacit relocation. For example, continued occupation could operate for 6 months rather than 12.
2. The second option is to clarify the law of tacit relocation, specifically the right to contract out of tacit relocation. If there is a contracting out clause included the lease, there should also be a clause which addresses how the lease will operate if the parties continue to fulfil their obligations under the lease after the fixed period as tacit relocation would not operate.
Submissions in response to the Paper were requested for 14th September 2018.
If you require any advice in connection with commercial leases, please contact one of our offices and ask to speak with one of our commercial conveyancing solicitors.