The Law Commission celebrated the Landlord & Tenant Act 1954's (the 1954 Act) 70th birthday by publishing its consultation paper on 19 November 2024.
The paper recognises that whilst the 1954 Act is '… part of the bedrock of the commercial leasehold market', it is also considered by some to be inflexible, bureaucratic, out of date and designed for the post-war era of scarce property and exploited tenants. Whichever view is taken, the 1954 Act is undoubtedly one of the most significant pieces of legislation in the history of commercial property.
Security of tenure
The consultation is the first step in a two-part review of Part 2 of the 1954 Act and is testing its foundations – its 'reason for being'. It seeks views as to whether the current status quo of security of tenure for business tenants is appropriate and suitable for a modern commercial leasehold market.
Four models
The paper puts forward four models as to how security of tenure could potentially operate in the future which we have considered below:
1. No security of tenure
Pros – greater certainty as to when tenancies would end, potential cost and time savings for both parties as there would be no statutory process.
Cons – no protection for tenants, leaving the tenant's future at a property in the hands of the landlord and market forces.
Whilst this model offers the least tenant protection, it does not preclude landlords and tenants reaching mutual agreements in relation to the continued occupation of the tenant.
2. A 'contracting in' regime
Pros – retains flexibility and, for those parties who prefer not to include security of tenure as the default position, reduces cost and time of contracting out and puts landlords in a stronger bargaining position when negotiating lease terms.
Cons – less protection for tenants and no automatic right to security of tenure both of which could impact business continuity.
3. A 'contracting out' regime
Pros – this is broadly the position now under the 1954 Act and helps lessen market uncertainty and undesirable shifts in power between landlords and tenants, retains flexibility to opt out, with comfort for tenants that security of tenure is the norm.
Cons – costs of contracting out and a weaker bargaining position for landlords than the 'contracting in' model.
There is still scope for reform if this model is to be retained, with any changes likely to address how the 1954 Act could function better in a modern commercial leasehold market.
4. Mandatory security of tenure
Pros – tenants afforded the greatest protection, process of granting a new lease is simplified as there would be no need to consider opting in or out of security of tenure.
Cons – no flexibility for the parties and would substantially weaken a landlord's negotiating position and reduce the certainty of knowing when a tenancy would end meaning landlords may explore other letting options which may ultimately be more detrimental to tenants.
Any change in the current security of tenure regime could significantly alter the equilibrium of power between landlords and tenants. It is difficult to predict at this stage how this may be seen, albeit a period of instability, unease and uncertainty would undoubtedly be felt.
What tenancies should be covered by the 1954 Act?
The consultation also considers the scope of the 1954 Act and asks if the types of tenancy that it currently applies to should change based on, for example, use of the property, duration of the tenancy, the existence of another protective regime and other characteristics of the tenancy such as floor space, location and rent.
Response to the consultation
The Law Commissioner, Professor Nicholas Hopkins, said the review of the 1954 Act "is a fresh opportunity to ensure that the law is simple and works for landlords, businesses and communities.”
Landlords, tenants and property professionals are being urged to engage with the consultation so that the Law Commission has as wide an evidence base as possible. It is open until 19 February 2025 and if you would like to respond you can use the links below:
Consultation Paper - Business Tenancies Consultation Paper 1 - Ministry of Justice
Survey - Business Tenancies Survey - Ministry of Justice - Citizen Space - Citizen Space
What happens after the first stage of the consultation?
The Law Commission will consider all responses submitted by 19 February 2025. A second, and more technical, consultation paper will follow about the detail of how any recommended model should work. Recommendations will then be made to Government who will ultimately decide whether to implement them.
We are looking forward to being involved in this consultation process and assisting our clients as this develops. If you would like to discuss any aspect of the consultation paper, please do not hesitate to contact us.
