A few months ago I wrote a blog about the Landlord and Tenant Act 1954 (the “Act”), which has recently celebrated its 70th birthday. A link to that blog is here:
Landlords: Protect Yourself Against Protected Leases- mfg Solicitors
In it I discussed how the Act was created to redress the balance in a post-war market which was heavily weighted in favour of landlords, but how many now believe the pendulum has swung too far in favour of tenants. Landlords can find it difficult to remove protected tenants, with many hurdles to overcome. There have been calls to review this aging piece of legislation, with some arguing that it no longer reflects the modern market.
The Law Commission (the “LC”) has recently published its first consultation on the Act. This consultation is part of the LC’s process which will ultimately lead to the LC publishing its recommendations for changes to the law (or a recommendation that things stay the same, as the case may be). The Government will then decide whether or not to implement those recommendations.
The fundamental questions which the LC is asking are: should business tenants have security of tenure? If so, how should it operate? Four models of security of tenure have been proposed:
- No security of tenure. In other words, the Act would be abolished. Landlords and tenants could still agree an option for the tenant to take a new lease at the end of the term, but this may be unlikely to happen often in practice. This model offers the least protection for tenants.
- A “contracting-in” regime. This would reverse the current process, so that the default position is that tenants have no security of tenure. The parties would need to specifically “opt in” so that the tenant has security of tenure.
- A “contracting-out” regime. This is the current position. Tenants have security of tenure by default, and the parties need to specifically agree and follow a set procedure for the tenant to have no security of tenure.
- Mandatory security of tenure. The tenant would always have security of tenure and the parties would not be able to agree to exclude this right. This model would offer the highest form of tenant protection.
It is not possible to say for certain, but it may be more likely that the result of the consultation will fall within models 2 or 3 or somewhere in between. Models 1 and 4 seem unlikely in a system where the competing interests of landlords and tenants are being considered.
The other major issue being considered by the LC is the type of tenancies which should be covered by the Act. For example, should certain tenancies be excluded from the Act depending on the use of the property, the duration of the tenancy, the size of the property, the location, or the rent payable.
Readers can read the full consultation paper, or a helpful summary of it, by scrolling to the bottom of the page after using the following link: Business Tenancies: the right to renew - Law Commission
The LC are inviting responses to the consultation using the online response form available at: https://consult.justice.gov.uk/law-commission/business-tenancies-consultation-paper-1
The deadline to respond to the Law Commission with your views is 19 February 2025.
For now, it still remains the case that landlords who intend to redevelop or regain possession of their property at the end of a lease term should take legal advice as early as possible – discussing your next step before you serve a notice can assist in understanding the options available. Equally, landlords looking to let a commercial property should consider the consequences of whether or not a lease excludes the right to security of tenure. This is often a key negotiation point in heads of terms, and discussing future plans with a solicitor before finalising heads of terms could assist in avoiding potential issues later on.
Get in Touch
If you are the owner of commercial investment property subject to a lease, or you intend to grant a commercial lease, we can help you to understand the impact of the Act and provide advice tailored to your situation to manage its impact. Please contact Beth Margetson or Phil Hunt by calling 0121 2367388.
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