The Scottish Parliament is currently scrutinising the Leases (Automatic Continuation etc.) (Scotland) Bill that, if passed, would bring about major changes to the law on ending commercial leases in Scotland. This potential reform is of significant interest to landlords, tenants and real estate advisers in Scotland.
What’s in the Bill?
The main element of the Bill is to reform the law on how commercial leases are terminated at their contractual end date (not any break dates). Put generally, the present position is that if a party wants a lease to end on its contractual end date then one party must indicate to the other that the lease is not to continue on its current terms or is to come to an end. That needs to be done no less than 40 clear days before the contractual end date.
The purpose of doing this is to prevent a legal rule called “tacit relocation” operating. “Tacit relocation” is a default rule, which applies in the absence of any timeous indication mentioned above. If it operates, it means the lease continues on its current terms for a further year (in most cases). As such, a commercial lease in Scotland does not automatically come to an end on its contractual end date simply because the lease states the lease is to terminate on that date – something more is required.
The Bill proposes to change the present position in several ways. The main way is by replacing tacit relocation for the leases to which the Bill applies with a similar but different concept, named using modern language, called “automatic continuation”. The fundamental point that “something more is required” for a commercial lease to end on its contractual end date is retained as a default position; however, what that “something more” comprises is different.
Automatic continuation in practice
What, then, are the key changes that would be brought about by “automatic continuation” in the Bill as drafted? There are many, of which the below are some of the key ones:
- Stricter, formal requirements to be included in a notice when a notice needs to be given (to exclude automatic continuation from operating).
- Distinguishing between what is required to be contained in a landlord’s “notice to quit” to the tenant and a tenant’s “notice of intention to quit” to the landlord.
- For the most part, requiring written notice to be given (other than if a tenant is ending a lease of less than a year), when notice needs to be given.
- Confirming that a lease can have a legally effective clause stating that parties have opted out of “automatic continuation” (which resolves uncertainty on the position under the current law of tacit relocation).
- Changing the deadline for the last date to give timeous notice to be three months before the contractual end date, unless otherwise agreed by the parties.
Other provisions
In addition to the above, there are proposed reforms dealing with other distinct aspects of commercial leases. These are within a separate part of the Bill and include the following:
- Requiring non-UK incorporated landlords to, in certain circumstances, provide a UK address to which “termination documents”, ie including break notices, can be sent by the tenant (and if the landlord fails to provide such an address, the tenant is entitled to withhold rent until the landlord provides the address).
- That the holder of a standard security over the relevant lease is in most cases to be served with a copy of any notice by the landlord relating to the possible termination of the lease for monetary breaches of the lease by the tenant (known as the law of “irritancy” in Scotland).
- Setting out a default position obliging a landlord to repay a tenant in respect of any payments that relate to the post-lease end date period, where the lease is ended other than by irritancy.
The passage of the Bill
The Bill is currently being scrutinised by the Delegated Powers and Law Reform Committee of the Scottish parliament at Stage 1 of the three-stage legislative process, following a consultation period. The committee has engaged thoroughly with this process, receiving responses from a range of stakeholders. Many of the responses raised important points about the substance and drafting of the Bill as introduced to parliament.
On 29 April 2025, I had the privilege of giving evidence at the Scottish parliament on the Bill. Reflecting on that, my impression is that if the Bill is to progress further, several important, rather than technical, amendments are likely to be proposed, as the committee is very keen to ensure that the Bill provides legal certainty so far as possible.
Kieran Buxton is an associate in the Scottish dispute resolution team at Burges Salmon
