Member Article

The Law Commission has published its much-anticipated consultation paper on proposed reform to the Landlord and Tenant Act 1954. This consultation asks a fundamental question: should a statutory scheme of security of tenure exist and if so, how should it operate?

Commercial leases, from warehouse premises to offices and shops usually have a legal right to a new lease when the existing lease ends, unless the parties have agreed otherwise, or a landlord can meet one of a short list of exceptions.

The underlying statutory basis for this “security of tenure” is the Landlord and Tenant Act 1954. This Act was reformed in the 1970s and early 2000s following reports by the Law Commission.

Twenty years on from the last review and amid post-pandemic shifts in the commercial property market as well as criticism that the current system is out of touch, the Law Commission has launched a new two-part consultation process. The first consultation, issued on 19 November 2024, gives a deadline for responses by 19 February 2025.

The consultation details are available here:

Business Tenancies 1 Consultation Summary - Law Commission

Business Tenancies 1 Consultation Paper - Law Commission

An existential threat?

The initial consultation addresses the fundamental question of whether a security of tenure regime should be retained and, if so, how? It also asks whether, if a security of tenure regime is retained, the scope of the Act captures the right types and numbers of leases.

The outcome of the first consultation will determine the basis of the second stage, during which the Law Commission will address the functional issues of how a reformed regime will operate. For example, if the current opt-out scheme of security is retained, reform could be expected to address known difficulties.

Models of security of tenure

On the main question of security regimes, the consultation outlines four potential models for consideration:

• Mandatory security of tenure – a return to the pre-1970 model
• No security of tenure – a radical move
• An opt-in scheme – the opposite of the current scheme
• An opt-out scheme – in principle, the current scheme

The Law Commission’s position is neutral. It does not recommend any one model and seeks feedback on, in particular, whether and to what extent there is still an appetite for landlords or tenants to enter into tenancies which provide security of tenure. Views are requested on which model should operate and why, and what impact a change to the model of security would have on landlords, tenants, advisors and the commercial leasehold market generally.

In tandem with the consultation, the Law Commission seeks to develop a better understanding of the current operation of the Act and its impact on the commercial leasehold market. To this extent, it is asking all consultees, regardless of whether they have responded to the consultation or not, to complete a survey to provide industry insight.

Reform in scope

Changes to the scope of the Act only become relevant if some security of tenure regime is retained. Here, the consultation addresses the types of tenancy that currently fall outside of the regime, which are set out in section 43 of the Act, such as “Use Excluded Tenancies” and “Duration Excluded Tenancies”. The consultation paper asks if there should be any changes made to these categories.

One likely area for reform may be the current minimum tenancy term required for the Act to apply, which is currently set at six months. This means that many short-term tenancies need to go through the cumbersome ‘contracting out’ procedure. Extension of this minimum term could be a meaningful improvement for landlords and tenants alike.

Wales

The consultation specifically asks whether there is any reason for the security of tenure regime to differ in Wales. At the moment the system in England and Wales is identical. It is difficult to see enthusiasm for another separate layer of regulation, but this may be considered if there are particular considerations or experiences unique to Wales that dictate otherwise.

Next steps

The consultation has the potential to be highly impactful, presenting an opportunity to update the current regime to better align with market conditions while addressing the needs of both landlords and tenants.

If you would like to discuss the consultation, its implications or how best to submit a response, please contact one of our experts.

 

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