Advocate Robert Sutherland explains the law governing automatic renewal of a lease: tacit relocation.

A lease requires there to be an agreement between parties that the agreed subjects of the lease will be available for the occupation and use by the tenant in return for a rent and for an agreed period of time. The common shorthand way of stating this is that agreement as to parties, subjects, duration and rent are the cardinal elements of a lease.

In relation to duration, it is an implied term of many leases that the agreed period for the lease can be extended tacitly. This means that if nothing is said by the parties, the lease will automatically continue beyond the original stated duration. This implication can be overcome in a number of ways. There may be an express agreement to prorogate or renew the duration of the original lease for a further specified period. It has been held that it is possible to contract out of the implied term, although commentators make clear that to be effective there requires to be very clear and express provision to that effect, either in the lease itself or in another document. Tacit relocation does apply to the original lease where there has been a new lease entered into. There are also certain types of lease where the implied term does not apply due to the nature of the original lease. The classic examples are seasonal lets for grazing or mowing and sporting leases, where the essence of the agreement involves a subject matter which is not continuous or permanent. There have been many cases, however, where a grazing lease is able to continue operating all year round, and what originally started as a grazing lease for part of a year has become a grazing lease for a whole year.

It is important to bear in mind the point in time when tacit relocation takes effect, and how it can be stopped from operating. Since (in the absence of a contrary provision) it is implicit in the agreement that the lease will continue unless the parties take steps to prevent that from happening, either the landlord or the tenant will have to make clear to the other party their intention not to continue the lease. In practice this usually means that tacit relocation operates unless either the landlord or the tenant have given written notice to the other of their intention to bring the lease to an end. The landlord would do this by serving a notice to quit, and the tenant by serving a notice of intention to quit. The period of notice will usually depend on the subject matter of the lease. Where a notice is not given in sufficient time for it to be treated as a valid and effective notice to quit, the lease will continue for a further period of time. The form and manner of service of the notice will usually be spelt out in the lease, or in any legislation applicable to the tenancy.

Where neither party has given notice to the other in sufficient time for it to be a valid and effective notice, the lease will continue to bind both parties for the extended period. This means that if the tenant does not want to continue with the lease, and it is a lease to which the implied term of tacit relocation would apply, the tenant will require to notify the landlord. The period of notice for the tenant will usually be the same as the period of notice for a valid notice to quit given by the landord. By way of example, if the period of notice for an effective notice to quit was forty clear days before the termination date of the lease, any notice served by either the landlord or tenant which gave less than forty clear days notice would not prevent tacit relocation from operating, and the lease would continue to bind both landlord and tenant for a further period.

The continued period for the operation of the lease will depend on whether there is any statutory provision applicable (as with agricultural tenancies), and the original period of the lease. At common law, if the original duration of the lease was a year (or more), the lease is deemed to continue for another year. If the lease is for less than a year, the lease will be deemed to continue on for the same period again. The same principles apply at the end of each and every continuation period.

It is often assumed that tacit relocation operates to the benefit of tenants, and to the detriment of landlords. This is because it is assumed that the landlord is likely to want to recover possession of the lease subjects, whilst the tenant wants to remain in the property as long as possible. That assumption may be true for certain types of property, but it will not be true for all types of property or in every case. A tenant might not want to find themselves stuck with paying the rent for another year if they are already struggling to do so. A landlord looking to rent will want to avoid the loss of income and other potential costs of an empty property.