The Landlord and Tenant Act 1954 oversees business tenancies in England and Wales. The Law Commission has recently argued that the Act is outdated as commercial property needs in the UK evolve.
Consultations launched in November 2024 propose reforming the Act, focusing on modernising its provisions for security of tenure. Below, we examine the key proposals and the potential implications for commercial landlords and tenants.
Security of Tenure Models
Currently, business tenants can automatically renew their lease at the end of the term, subject to certain conditions. This security protects tenants from sudden eviction but also imposes restrictions on landlords.
Proposals by the Law Commission include introducing more flexible tenure models to provide greater freedom for parties to negotiate terms suited to their needs.
Scope of the Act
Questions have been asked about whether the Act’s scope should be modified. The Act applies to most business tenancies, with certain exceptions (leases lasting six months or less). It has been argued that the current Act does not account for the unique requirements of diverse industries. For instance, small retail outlets have very different needs from large office occupiers.
Proposals include narrowing the scope of the Act depending on the type of tenancy. This would allow more tailored solutions in line with modern commercial realities. Four different models are being presented by the consultation:-
- Mandatory Security of Tenure
One option under review is making security of tenure mandatory for all qualifying leases. This would eliminate the current ability to contract out of the Act’s provisions. This arrangement would provide greater stability for incoming tenants. However, some suggest this may discourage commercial landlords from offering leases in high-demand areas. Mandatory security could also increase administrative costs for landlords, which may be passed on to tenants.
- Complete Removal of Security of Tenure
At the opposite end of the scale, the complete removal of security of tenure has been discussed. Advocates of this approach suggest that the market should dictate lease terms without statutory interference. This would allow landlords and tenants to negotiate agreements tailored to their circumstances.
However, such a move could leave smaller tenants vulnerable to exploitation, particularly in markets where demand outstrips supply. Critics argue that removing security of tenure could create instability in the commercial property market and undermine tenant confidence.
- The Contracting In Model
Under a contracting in model, the default position would be that tenancies are excluded from security of tenure unless explicitly agreed otherwise. This would reverse the current system, where security is automatic unless specifically contracted out. Proponents of this approach argue that it reflects the realities of modern business, where flexibility often outweighs long-term security. This approach could streamline lease negotiations, reducing the time and cost associated with contracting out.
- The Current Contracting Out Model
The existing contracting out model, where landlords and tenants can agree to exclude security of tenure, remains a key point of discussion. While this approach provides flexibility, critics argue that the process could be streamlined.
Reforms include simplifying the contracting out process while retaining its safeguards. For example, the introduction of a standardised digital form for agreements has been discussed.
Next Steps
While there are varied opinions on different proposals, there is a consensus that the current framework requires an overhaul. The needs of businesses and property owners have changed since the introduction of the Act. These proposed reforms present an opportunity to modernise business tenancy law in the UK.
The consultation has been closed in February 2025, and the Law Commission will consider responses and expects to publish a second consultation paper at the time to be confirmed.
How 3CS Can Help
If you have questions regarding the Law Commission's proposals, our experienced team of commercial solicitors is here to help.
Contact us for support on any aspect regarding landlord and tenant matters.
