/>iIn March 2023, the Law Commission revealed its plan to review the Landlord and Tenant Act 1954 (“the 1954 Act”) as part of the Ministry of Housing, Communities and Local Government’s wider initiative to revitalise high streets and town centres. The Law Commission, which is independent of Government, aims to create a legal framework which is easy to use and beneficial to both landlords and tenants and overall, hopes to foster “a productive and beneficial commercial leasing relationship between landlords and tenants”.
Currently, most business tenants have the right to continue to occupy their business premises and automatically renew their leases under the process set out in the 1954 Act (also known as security of tenure) unless they agree with their landlord to exclude this right through the “contracting out” process before the lease is granted. Originally enacted in the post-war era, the 1954 Act (as amended 20 years ago) provides tenants with stability by permitting a tenant to renew their lease subject to the landlord being able to oppose this on a limited number of grounds. However, the commercial property landscape has evolved, prompting a need to assess whether the 1954 Act remains effective and “fit for purpose” or whether it requires modernising.
As a result, on 19 November 2024, the Law Commission published its first consultation paper which forms part of their two-part review of the 1954 Act. This first paper focuses primarily on security of tenure, particularly what sort of security business tenants should have in today’s commercial leasehold market.
Brief Summary of the Consultation Paper
- Their first consultation report looks to the 1954 Act’s current scope and asks what tenancies should be protected; whether the list of currently excluded tenancies should be extended to include tenancies of particular property uses; the duration of the tenancy; and properties of certain levels of rent payable, etc.
- On the question of security of tenure, the Law Commission presents four different models of security of tenure and considers the pros and cons of each:
| 1. | Abolish the 1954 Act so that no tenancies have security of tenure. This would avoid the time and costs of statutory renewals, and the parties would have certainty as to when the tenancy is due to end. However, without security of tenure, the tenant would be entirely dependent on its landlord agreeing to a new lease and the terms of that new lease. |
| 2. | Have mandatory security of tenure for all tenants with no option to “contract out”. Whilst providing protection for tenants, landlords would have less choice when dealing with their properties. |
| 3. | Retain the current “contracting out” process. This would keep some flexibility for the parties, but costs would be incurred by the parties to contract out. |
| 4. | Have a “contracting in” process. This would avoid the time and costs of contracting out of the process, but the costs of contracting in could potentially be as time consuming and expensive and tenants would be wholly dependent on its landlord agreeing to opt in. |
Next Steps
The Law Commission invites all stakeholders, including tenants, landlords, and advisors to respond to this consultation by answering various questions and to complete a business tenancies survey to assist them in understanding the operation of the 1954 Act in the current commercial leasehold market.
The deadline for responding and completing the survey is 19 February 2025. The Law Commission will then publish a second, technical consultation paper based on the responses received with their conclusions regarding the preferred/recommended model of security of tenure together with their proposed changes on the scope of the 1954 Act and will later make its final recommendations to the Government for potential reform of the existing law.
