For commercial tenants looking to end leases, there can be no more stomach-churning moment than when it is pointed out to them that either no notice has been served to end the lease, or that the notice is not valid for whatever reason.  A new case in Scotland which is just out, involved a successful argument on behalf of a commercial tenant that, notwithstanding the lack of formal written notice, the lease was not continuing, and thus they were “off the hook”, at least in respect of the principle of “tacit relocation”.

Tacit relocation is a principle of Scots Law, stemming originally from Roman Law, in terms of which, (broadly speaking) if the parties have not served notice of the intention that the lease will end, and have made no other alternative arrangements, then the lease automatically continues upon the same terms and conditions for a further year.  This actually makes commercial sense in many ways, but it can lead to iniquities, as the case law bears out.

In the case just decided today, Rockford Trilogy Ltd v NCR Ltd [2021] CSOH 49, NCR had not given formal written notice, but they had, in the view of the court, made it sufficiently clear that they were not intending to stay on under the terms of the existing lease by email, in which they said that “the only way they [the tenant] would consider remaining at the building is if the dilapidations are capped at £300k together with the nil rent proposed for 12 months”.  The court concluded that this meant that, unless the landlord were to agree with this proposal, the tenant would end the lease.  That intention overrode the assumption on which the doctrine of tacit relocation is based, namely that the parties have silently agreed to continue the lease.  Because the email was sent within the required notice period, it prevented the operation of tacit relocation.

Given the annual rent was noted as amounting to some £800,000, there was a lot at stake for NCR.

The judge was quite properly at pains to point out that: “As is obvious, the prudent means of giving proper notice is by a notice to quit drafted by an appropriate adviser. Other means of intimation can create a risk of insufficient notice…”

Good news for commercial tenants seeking to argue against tacit relocation where no notice has been served - but this of course does not take away from the strong and sensible recommendation that advisors draft (carefully) written notices to quit wherever possible.

Alan McMillan at Burness Paull acted for NCR, and counsel was Jonathan Lake QC.

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