Tacit Relocation of Leases
The lease states that it terminates on Friday 13th February 2004. Well it will, won't it? Not necessarily. In Scotland, we have under common law something called tacit relocation. Colin Morrison explains.
Tacit relocation is a little doctrine that will automatically extend the duration of a lease for up to a year depending upon its original term. If neither the landlord nor the tenant has served, within the appropriate time frame, the appropriate notice terminating the lease on the contractual termination date, and the conduct of the parties has failed to rebut the presumption that renewal of the lease was intended – then tacit relocation can kick in.
Potentially Friday 13th could live up to expectations. Just imagine:-
- You are a Tenant who not only wants to close but has pressed the button triggering the mechanism for closing down – explain that to your human resources and public relations colleagues.
- You are a Landlord who has redevelopment plans for the property. They're going to have to be placed on hold and indeed may be jeopardised.
- You are a Landlord who had entered into an agreement for lease involving the re-letting of the premises at a more favourable yield. For whatever reason the appropriate notice has not been served. Tacit relocation applies. The deal is lost. There may even be damages payable in respect of the collapsed deal.
How to avoid creating your own horror story
Here are some key points to be aware of when it comes to tacit relocation and lease renewal in Scotland:
To ensure that termination occurs, Notice to Quit should be given in prescribed statutory form. The length of the notice period depends upon the type of property being let and the duration of the original lease.
Unlike the English doctrine of "holding over", tacit relocation will apply even where the tenant has physically vacated the premises. The tenant will remain liable for rent and all other tenant obligations. This will include the obligation to comply with any enforceable keep open obligation!
Parties should avoid conduct which is consistent with the intention to renew. Landlords should apportion the rent to the contractual termination date and ensure that the tenant only pays up to that date. Similarly, the Tenant should ensure that they only pay an apportioned amount.
A Notice to Quit is considered to be personal to the party serving it. If you are buying an investment property a notice served by the sellers of the property should not be relied on. Likewise someone acquiring the tenant’s interest in the lease should not rely upon a Notice to Quit served by the existing tenant.
As a Landlord a Notice to Quit should be served on authorised sub-tenants as well as tenants, and whether or not they are in actual occupation.
Statutory rights of renewal are restricted to the rather limited application of the Tenancy of Shops (Scotland) Act 1949 as amended. This Act enables a tenant of a shop (the courts consider that this should contain a substantial retail element) who is in actual occupation, and who has been unable to negotiate satisfactory renewal terms with his landlord after (i) receipt of a Notice to Quit; (ii) before the notice takes effect; and (iii) not later than 21 days after service of the notice, to apply to the Sheriff Court for a lease renewal. The powers of the Sheriff are discretionary, however he is prohibited from determining that a tenancy may be renewed in specified circumstances. These are quite numerous and advice should be sought if it is intended to invoke the provisions of the Act. However, while the scope of the Act is fairly restrictive, its use should not automatically be discounted.
One final thought. Each case will be different. If you would like advice on lease renewal - it is best to seek it at an early stage.
This article was written by Colin Morrison of Brodies.
It is used with permission.
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