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Why You Can't Always Rely on Termination Dates in Leases

Posted on Aug 13, 2012 by Helen McGrath  | 0 Comments

Sometimes as lawyers we forget that rules which we are very familiar with and come across on a day-to-day basis may not necessarily even be in our clients’ contemplation. I recently had to explain to a very experienced client in the leasing market that, just because he was approaching the termination date in his lease this did not necessarily mean that the lease would come to an end at that date.

He seemed genuinely shocked, given that the parties had spent a great deal of time discussing and agreeing the termination date in the first place and setting it out in the formal lease agreement, that the only way to absolutely ensure that a lease would come to an end on its termination date would be for one of the parties to serve a valid notice to quit and then take steps to act on it (there are other means that a lease could be deemed to be at an end, but these are generally dependent on the circumstances and often open to debate). I had to point out that if no one serves such a notice, there is always the possibility that the rule of ‘Tacit Relocation’ could apply.

Tacit Relocation effectively operates to a renew a lease which has reached its termination date for a further period of time, but otherwise on the same terms and conditions. For leases which were originally under a year in duration, the renewal will be for the same duration again.  For leases which were originally a year or more, then the renewal will be for one year. There is, however, no limit to the number of times which Tacit Relocation can operate to renew a lease.

It is debatable whether it is even possible for parties to ‘contract out’ of Tacit Relocation and case-law confirms that the usual lease wording obliging a tenant to remove at the end of a lease ‘without warning or process of law’ is not sufficient to do this. The only way therefore to be sure to avoid Tacit Relocation operating would be to serve a valid notice to quit and then for a tenant to vacate the premises or for a landlord to take steps to recover possession.  

Helen McGrath

helen.mcgrath@mbmcommercial.co.uk

0131 226 8224

Senior Solicitor

Commercial Property

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