Do you know when your lease is actually going to end?
Leases in Scotland can be subject to implied lease terms (i.e. terms which are not written down in the document), that can affect their use.
The implied term you are most likely to encounter day to day is tacit relocation. Tacit relocation is where the agreed period of the lease is extended on the same terms year on year, unless terminated by the parties. It is important to know when tacit relocation can take effect, and how it can be stopped from operating. Since (in the absence of a contrary provision) it is inferred in the agreement that the lease will continue unless the parties take active steps to prevent that from happening, either the landlord or the tenant will have to make clear to the other party their intention not to continue the lease.
In practice, this means either the landlord or the tenant will need to give written notice to the other of their intention to end the lease. The landlord would do this by serving a notice to quit and the tenant by serving a notice of intention to quit. The period of notice will usually depend on the subject matter of the lease. Where a notice is not given by either party, the lease will continue year on year as Scottish leases cannot come to a natural end. The form and manner of service of the notice will usually be specified in the lease, but if not, in legislation applicable to the tenancy. If neither party has given notice to the other in sufficient time for it to be a valid and effective notice, the lease will continue to bind both parties, often leading to situations where parties are unintentionally bound into leases for an additional year.
The Scottish Law Commission, the body responsible for promoting law reform in Scotland, have proposed that the whole doctrine of tacit relocation being entirely dis-applied or, at the least, should permit parties to the lease to contract out of the doctrine at the point when the lease is entered into. At the moment, the legal effect of doing this is inconsistent. Unless and until such legal reform takes effect, landlords and tenants of commercial property in Scotland should beware and never assume that the lease will undisputedly end on the stated termination date and should seek legal advice before signing any lease document to be aware of all of its legal consequences.
Our dedicated commercial property team can assist in relation to all aspects of commercial property, from leasing to sales and disposals and refinancing and would be happy to discuss any issues with you. You can contact our Wick office on 01955 604188 to speak to one of our specialised solicitors.
This briefing note is current as at 1 July 2021 and is our understanding of the position described at that date. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).