What's happening?
- For the Landlord and Tenant Act 1954’s (“the 1954 Act”) 70th birthday, the Law Commission celebrated by undertaking an initial consultation in respect of Part 2 of the 1954 Act regarding security of tenure for business tenants.
What does it do?
- Part 2 of the 1954 Act gives business tenants a right to continue to occupy their property and renew their tenancies once their existing tenancy came to an end. This legal right is known as “security of tenure”.
What's the problem?
- Since the 1954 Act was last reviewed, the world and commercial leasehold market have changed considerably and have faced new challenges such as the Covid-19 pandemic and a sharper focus on the environmental sustainability of commercial properties.
- There have been real questions and concerns about parts of the 1954 Act that are incompatible with modern commercial practices. As a result, the government commissioned a review into modernising commercial leasehold legislation. In particular, the whole contracting out process is cumbersome and time consuming for landlords, tenants and their lawyers.
What's happened about it?
In their recent Consultation Paper, the Law Commission consider options for reform and present four different “models” of security of tenure on whether tenants should have security of tenure and, if so, how it should operate. The four models are:
- NO SECURITY OF TENURE – this would mean that there would be certainty as to when a tenancy would end as the Tenant would not have a right to renew. On the flip side, it may not be attractive to Tenant’s who need the certainty that they can renew a lease;
- A “CONTRACTING IN” REGIME – the default position would be that a Tenant does not have security of tenure unless the parties opt-in. This would leave it to the bargaining strength of the parties to determine what would be the best option for the situation;
- A “CONTRACTING OUT” REGIME – the default position would be that that the Tenant does have security of tenure automatically unless the parties opt out. Again, This would leave it to the bargaining strength of the parties to determine what would be the best option for the situation;
- MANDATORY SECURITY OF TENURE - security of tenure is compulsory and so, the parties cannot contract out. This would provide a Tenant with the greatest protection.
How does this change the scope of the 1954 Act?
There could be a change to the type of tenancies that the 1954 Act applies to. At present, certain tenancies are excluded from the 1954 Act i.e., agricultural tenancies and tenancies granted for six months or less). If there are to be changes to the scope of the 1954 Act, a tenancy might be excluded based on:
- The use of the property;
- The duration of the tenancy;
- The existence of another regime offering a similar protective function; or
- Other characteristics of the tenancy or the property such as:
- The floor space;
- The location of the property; or
- The rent payable
Reform to the scope could avoid the confusion of overlapping regimes or even remove tenancies for which security of tenure is unwanted or unnecessary.
What's next?
- Any reform of the 1954 Act and its scope will have a significant impact on the commercial leasehold market and on landlord and tenant relations and negotiation positions.
- We will have to await a response and a second, more detailed and technical, consultation paper before the Law Commission outlines its final recommendations to the government and even so, any changes will not be implemented in the near future.
- The consultation is open until 19 February 2025. If you would like to respond to the consultation, please see the links here and here
Keep a look out for our updates to stay in the loop. In the meantime, if you have any questions or queries please feel free to contact one of the Legal Clarity team.