Commercial Leases have come under the spotlight for reform in both Scotland, England & Wales with the results of consultation for substantial changes proposed for both regimes being published this year. T The focus for both the Scottish Law Commission and the English & Welsh Law Commission has been on providing clarity for landlords and tenants to reduce the potential for disputes.
Current Position in Scotland
In the Scots law of leases, the concept of tacit relocation refers to a lease at the end of its contractual term which will continue for a further period, if notice to terminate by either party is not given. The concept dates back to Roman times and is inbuilt into Scots law, applying even though the lease may not refer to it, which can therefore catch parties unaware. This can cause issues for both tenant and landlord who have acted on the (mistaken) belief that the lease has simply run its course. For example, a tenant may have entered into a lease of new premises, however, through the operation of tacit relocation, they are also still bound to pay rent on the old lease.
Current position in England & Wales
Lease renewals in England & Wales are already codified within the Landlord and Tenant Act 1954. Under the 1954 Act unless a commercial landlord and tenant specifically exclude certain provisions of the 1954 Act, via a warning notice and a statutory declaration thereby ‘contracting out’, a tenant will have security of tenure and the lease will automatically continue. Similar to Scotland, this applies even if a landlord or tenant are potentially not aware of it, with the lease itself not required to make any reference to the 1954 Act to invoke security of tenure.
What reforms are being proposed?
Scotland
A review of tacit relocation was carried out by the Scottish Law Commission in 2018 and in 2022[1] the Commission put forward various proposals for the reform, including:
- Replacing tacit relocation generally with a new statutory system.
- Adjusting the period of notice required to terminate a lease.
- Making it clear that parties can contract out of the automatic continuation.
The 2022 Report resulted in the Leases (Automatic Continuation etc) (Scotland) Bill which was introduced to the Scottish Parliament in December 2024. The Bill enacts the recommendations made in the 2022 Report by introducing a statutory concept of ‘automatic continuation’ aiming to restate and clarify the common law of tacit relocation (amongst other things).
England & Wales
In 2023, the Law Commission announced it was to review the 1954 Act with a view to modernising the position. The first consultation paper was published in November 2024 with a related consultation period ending in February 2025. It considered four possible options:
- Abolishing security of tenure in its entirety.
- Contracting in – switching the default position.
- Mandatory security of tenure – no opting out at all.
- Leave as is.
On 4th June the Law Commission published an Interim Statement[2] informing it had provisionally decided that the current contracting out model was appropriate to take forward as it avoided undue market disruption. The Commission proposes increasing the six-month minimum duration for security of tenure to apply, with some support pending further consultation for extending this threshold to two years.
What’s Next?
Scotland
The Leases (Automatic Continuation etc) (Scotland) Bill is currently at Stage 1 of the legislative process where the final scope and content of the provisions are up for debate. As it stands the Bill excludes certain agricultural and residential leases but will apply to most commercial leases, including those in the energy sector. The Stage 1 process is expected to be completed by 19 September 2025.
On 23rd June the Delegated Powers and Law Reform Committee of the Scottish Parliament published a report[3] following scrutiny of evidence from practitioners, academics and the Scottish Law Commission on the Bill. The report calls on the Scottish Government to respond to fundamental concerns expressed by some witnesses that the Bill may make the law more complicated. The Committee also requests the Scottish Government to set out, before the end of the summer recess, whether it intends to address the concerns raised through Stage 2 amendments, and if so, how.
England & Wales
The provisional conclusions published in the Interim Statement will form the basis of the Commission’s second consultation paper, which will address the technical details of reforming the 1954 Act, including potential adjustments to the contracting out procedure, with final recommendations to be published in a subsequent report. No timescale has been provided as to when the second Consultation Paper might be published. Based on the detail of the first Consultation Paper, we might expect the technical detail under review in the second Consultation Paper also to include specific lease renewal issues such as how and in what forum disputes should be resolved; the grounds on which a landlord can oppose renewal, terms of the renewal lease and the rent payable.
Will the changes be a good thing?
Codification of the common law can certainly be beneficial in terms of accessibility, provided that the legislation itself is sufficiently clear and certain. However as can be seen in England & Wales, putting tacit relocation on a statutory footing can still cause issues if a party is unaware and assumes a lease will end on a set date. From the Interim Statement referred to above the automatic continuation of a lease is considered to be the fairest route in England & Wales with the Scottish Law Commission also opting for the automatic continuation provision in the Bill giving a more unified approach across the border. If the concerns raised over the practical and legal implications of the Bill can be ironed out as it passes through the Scottish parliament there will hopefully be a clearer position for landlords and tenants in the future.
If you are a landlord or a tenant in Scotland or England & Wales and would like advice about the end of your lease, or on wider landlord/tenant issues then please get in touch with Gillespie Macandrew.
[1] Report on Aspects of Leases: Termination 2022 (the 2022 Report)
[2] Business tenancies: Interim statement on direction of reform 4 June 2025
[3] Stage 1 Report on the Leases (Automatic Continuation etc) (Scotland) Bill
