An Overview of the Consultation
The Law Commission has begun a two-stage consultation process to reform Part 2 of the Landlord and Tenant Act 1954, which governs security of tenure for commercial tenants. When enacted in 1954, the Act provided businesses stability in leased premises but is now often criticised for being outdated in the current leasehold market and overly complex. This is unsurprising, given the significant shifts in the leasing market. These changes include the rise of remote work, economic downturns and the pandemic, which have all increased the demand for more flexible leasing.
The first consultation paper “Business Tenancies: The Right to Renew”, published on the 19 November 2024, examines statutory renewal rights for commercial tenants and outlines four options for reform, which we consider below.
- No Security of Tenure: The 1954 Act would be abolished, meaning tenants would no longer have any statutory rights to security of tenure. Any agreement on renewal would be a contractual arrangement between the parties.
- Contracting-In System: Tenants would not automatically be granted security of tenure. Landlords and tenants could however mutually agree to grant the tenant security of tenure.
- Contracting-Out System (Current Approach): Tenants are automatically granted security of tenure, but landlords and tenants could mutually agree to opt out which would remove the tenant’s right to renewal.
- Mandatory Security of Tenure: Security of tenure would be a compulsory right for tenants, with no provision for either landlords or tenants to opt out.
What happens when the first consultation closes
The first consultation closes on 19 February 2025. If you are interested in submitting feedback, the Commission directs interested parties to their website:
- To give your views on the Consultation Paper please do so here.
- Alternatively, please complete the survey to help the Law Commission understand the impact of Part 2 of the 1954 Act here.
The second consultation paper, due later this year, will build on the preferred option identified in the first consultation and provide detailed recommendations on process, opposition grounds (if applicable), and implementing the chosen model.
Implications of the proposed reforms
The proposed reforms have the potential to significantly impact the commercial real estate market and beyond. For tenants, it would provide a simplified renewal process and improve security of tenure. Landlords could benefit from having more flexibility in negotiating lease terms. It could also have the potential to make the UK property market more competitive by aligning it to international standards.
How Moore Barlow can help
If you are not fully verse in the commercial implications of security of tenure or your legal rights under the current framework, Moore Barlow can help.
Our Commercial property lawyers specialises in various landlord-tenant matters. If you need assistance or have questions regarding your lease, reach out to Richard Hughes for expert guidance.
