Termination of commercial leases – new rules coming soon…-ish

Tacit relocation, Whitsunday, ish dates…terminating commercial leases in Scotland is, frankly, more complicated than it should be.

Modernisation has been on the cards for a while now, and a draft Bill setting out the proposed changes has just been published.

The key changes in the draft Bill are:

• “Tacit relocation” - the continuation of a lease when it has not been terminated by the parties - will be known as “automatic continuation”.
• Leases will still automatically continue by default, but, this can be avoided by (1) contracting out; (2) making it clear you do not want the lease to continue on the same terms; or (3) giving Notice to Quit.
• The minimum period for a Notice to Quit will be three months; an increase from 40 days (if the lease is for longer than one year).
• Various technical changes which should give more commercial certainty when serving notices, and reduce the scope for challenge.

There are always going to be disputes over leases. This Bill will not do away with them entirely. However, one of the main issues with the way things stand is that the law is too often hidden away in old cases and Acts of Parliament.  Having the rules clearly stated in one place at least lets parties know what the law is, which must be a good thing.

From our point of view, being regularly involved in the preparation of lease termination notices and disputes surrounding them, this reform is welcome. It should do away with many of the difficulties in the current law and make for more certainty when advising on termination. Also, the change of the minimum notice period to three months seems to be more appropriate for modern commercial leases, and for both parties, when you consider everything that may need to be done at lease-end.

The Scottish Law Commission is consulting on this Leases (Automatic Continuation etc.) (Scotland) Bill until 28 January 2022, with their final report expected some time in 2022. That means it is likely to be one or two more years until we actually see any new law come into force.  We will be keenly awaiting the changes.