Taking on commercial premises is one of the biggest commitments a business makes. A lease can tie you to rent, repairs, insurance and service charges for years, and in Scotland it may not even end on the date written in it. This guide explains the terms that matter most, how Scots law differs from England, and what to check before you sign.
In brief
- Scotland has no general statutory security of tenure for business tenants. Your rights come almost entirely from the lease itself.
- Most leases are full repairing and insuring, so the tenant pays for repairs and the building insurance, even for defects that existed before entry.
- A lease does not simply end on its expiry date. Unless a valid notice to quit is served in time, tacit relocation continues it, usually for another year.
- Rent review, break options, assignation and service charge clauses are where tenants most often lose money. They can be negotiated before signing, rarely afterwards.
- LBTT may be due on the lease, and a return may be needed every three years. Non-domestic rates are payable on top of rent.
How commercial leases work in Scotland
A commercial lease is a contract between a landlord and a tenant that gives the tenant the right to occupy property for a period in return for rent. In Scotland it must be in writing and signed if it lasts for more than a year (Requirements of Writing (Scotland) Act 1995). Leases longer than 20 years must be registered in the Land Register of Scotland for the tenant’s right to be secure against a new owner of the building.
Three features of Scots law surprise businesses that are used to the English system:
- No automatic right to renew. In England, many business tenants can ask the court for a new lease under the Landlord and Tenant Act 1954. Scotland has no equivalent. The narrow exception is the Tenancy of Shops (Scotland) Act 1949, which lets a shop tenant served with a notice to quit apply to the sheriff for a renewal of up to one year at a time.
- Tacit relocation. If neither party serves a valid notice to quit, the lease continues on the same terms, for a year where the original lease was a year or longer. Reform was proposed in the Leases (Automatic Continuation etc.) (Scotland) Bill, but the Scottish Government withdrew it on 10 September 2025, so the common law rules still apply.
- Irritancy. A Scottish lease usually lets the landlord terminate it early (irritate the lease) if the tenant breaches it. For unpaid rent, the landlord must first give at least 14 days’ written warning. For other breaches, the test is whether a fair and reasonable landlord would terminate.
Many Scottish leases are based on the Property Standardisation Group (PSG) styles, which gives a familiar starting point but still leaves a lot to negotiate. Our commercial lease solicitors act for both tenants and landlords across Scotland.
Heads of terms
Before any lease is drafted, the parties usually agree heads of terms through their agents. These are not normally binding, but they set the commercial deal, and it is much harder to change a point once it appears in the heads. Make sure they cover:
| Term | What to agree |
|---|---|
| Length of lease | A start date and expiry date. Shorter terms give flexibility; longer terms give security and often a better incentive. |
| Rent and incentives | The initial rent, when it is first payable and any rent-free period or capital contribution to fit-out. |
| Break options | Whether either party can end the lease early, when, and on what conditions. |
| Rent review | How often and on what basis the rent can change. |
| Repair | Whether the tenant takes the property as it is, or repair is limited by a schedule of condition. |
| Security | Any rent deposit, personal guarantee or parent company guarantee the landlord wants. |
| Use | The permitted use, and whether it fits your plans and the planning position. |
Rent and rent review
Longer leases nearly always include a rent review, often every five years. The method matters as much as the timing.
| Type of review | How it works | Points for the tenant |
|---|---|---|
| Open market | Rent is reset to what a hypothetical tenant would pay on review assumptions. | Check the assumptions. A notional lease with no break or a longer term can inflate the figure. |
| Upward only | Rent can rise or stay the same, never fall. | Common in Scotland. Resist it in a weak market or ask for a cap. |
| Index linked | Rent moves with an index such as CPI or RPI. | Ask for a collar and cap, for example between 1% and 4% a year. |
| Fixed increases | Stepped rent set out in the lease. | Predictable, but check the steps against likely market growth. |
Reviews are usually settled by the surveyors, with an independent expert or arbiter if they cannot agree. Missing a contractual time limit can matter, so diarise every review date.
Repairs and dilapidations
Under the common law, a landlord must provide premises that are wind and watertight and reasonably fit for purpose. Almost every commercial lease excludes those duties and places full responsibility for repair, renewal and rebuilding on the tenant. That is what makes a lease full repairing and insuring.
The practical result is that a tenant can be liable to put the building into a better condition than it was in at the start. Ways to limit the risk include:
- commissioning a building survey before you commit, so you know what you are taking on;
- agreeing a photographic schedule of condition and limiting your obligation to keeping the property in no worse condition;
- excluding latent and inherent defects, especially in new or newly refurbished buildings;
- capping service charge contributions to major works.
At the end of the lease, the landlord will usually serve a schedule of dilapidations listing the repairs it says are needed, or claim the cost instead. Our guide to limiting repair obligations in new or refurbished buildings explains these options in more detail.
Service charges, insurance, rates and tax
Service charges and insurance
In multi-let buildings, the landlord recovers the cost of running common parts through a service charge. Ask for a budget and recent accounts, check what is included, and try to exclude the cost of improvements, initial defects and major replacement. The tenant normally pays the building insurance premium too, so ask to see the policy and check what happens if the property is damaged and cannot be used: rent should stop until it is reinstated, and you should have the right to end the lease if it is not rebuilt within a set time.
Non-domestic rates
Business rates are payable by the occupier, separately from rent. Following the 2026 revaluation, the basic property rate for 2026-27 is 48.1p in the pound for properties with a rateable value up to £51,000. Smaller properties may qualify for the Small Business Bonus Scheme, which gives 100% relief where the combined rateable value of your properties is £12,000 or less (see mygov.scot).
LBTT and VAT
Land and Buildings Transaction Tax can be due on the rent payable over the term, and many leases need further returns every three years and on assignation or termination. Our guide to commercial property LBTT explains how lease tax is worked out. If the landlord has opted to tax the building, VAT at 20% is added to the rent, which matters if your business cannot recover VAT.
Use, alterations, assignation and subletting
Check that the use clause allows what you want to do now and what you might want to do later, and that planning permission is in place. Most leases require landlord consent for alterations and many require the property to be put back to its original state at the end.
If your business grows, shrinks or is sold, you may need to pass the lease on. Assignation transfers the lease to someone else, and subletting lets someone occupy under you. Ask for consent that cannot be unreasonably withheld, and avoid wording that keeps you liable after a permitted assignation. If you are buying a business through a share purchase, check whether the lease treats a change of control as an assignation.
Ending a lease
Break options
Courts enforce break conditions strictly. If a break depends on rent being paid in full, vacant possession or compliance with every repairing obligation, a small failure can make the notice invalid and leave you bound for the rest of the term. Ask for the only conditions to be payment of the basic rent and giving back the property free of your occupation.
Notice to quit and tacit relocation
To stop a lease continuing beyond its expiry, a valid notice to quit must reach the other party in time. Where the lease is silent, the common law rule is at least 40 days before the expiry date, or longer for some larger properties. Most leases set their own notice period and method, and these must be followed exactly. There is no prescribed form and even minor errors can make a notice ineffective, so take advice well before the date.
Leaving at the end
Expect a schedule of dilapidations, a final service charge reconciliation and, if relevant, an LBTT termination return. If you want to stay, start talks early: a lease extension agreed before expiry gives you more leverage than negotiating once a notice to quit has been served.
Checklist before you sign
- Survey the building. Find out the condition and likely repair costs before agreeing terms.
- Get the heads of terms right. Agree term, rent, incentives, break, review, repair and security.
- Check the costs. Service charge budget, insurance, rates, VAT and LBTT.
- Review the lease in full. Pay particular attention to repair, break conditions, assignation and rent review assumptions.
- Check the title and planning. Your solicitor should confirm the landlord can grant the lease and that the use is permitted.
- Diarise key dates. Rent reviews, break dates, notice deadlines and LBTT returns.
Frequently asked questions
Can my landlord refuse to renew my lease in Scotland?
Yes. Outside the limited protection for shop tenants under the Tenancy of Shops (Scotland) Act 1949, a landlord can usually end the lease at expiry by serving a valid notice to quit. If you want certainty, negotiate an option to renew or start extension talks well before the end date.
What happens if nobody serves notice at the end of the lease?
The lease continues by tacit relocation on the same terms, normally for another year where the original term was a year or more. It then continues year by year until a valid notice is served.
Is a personal guarantee normal for a new business?
Landlords often ask for one where the tenant company has no trading history. Try to limit it in amount and time, or offer a rent deposit instead.
Who pays the landlord’s legal costs?
Each party usually pays its own, although landlords sometimes ask tenants to contribute. This should be agreed at heads of terms stage.
Do I need a solicitor for a short lease?
Even a short lease can include full repairing obligations and onerous break conditions. A review is usually far cheaper than a dilapidations claim or an unexpected extra year of rent.
Taking on or renewing commercial premises?
Our commercial property solicitors negotiate and review leases for tenants and landlords throughout Scotland, and we explain the risks in plain English before you sign. Call 0141 471 9166 or book a free consultation.
Related services and guides
This guide reflects Scots law as at October 2026. It is general information rather than legal advice, so please speak to us about your own lease.