Security of Tenure Under the Landlord and Tenant Act 1954: Law Commission’s Proposed Changes

The Law Commission announced last year that they were looking at possible changes to the law relating to business tenancies, specifically the renewal rights granted under the Landlord and Tenant Act 1954, which we refer to below as “the Act”.

Understanding Security of Tenure Under the Act

The Act grants a right of renewal to tenants of business premises unless the parties expressly follow a procedure to contract out of this right.  This means that (unless contracted out) there is a presumption at the end of a business lease that the tenant will be entitled to a new lease on terms similar to the one that has come to the end of its term. The entitlement to a new lease is commonly known as ‘security of tenure’.   The right to a new lease is not absolute as the Act does provide a number of grounds on which a landlord can terminate a business lease without renewal, some of which relate to the conduct of the tenant (for example if the tenant has been persistently late in paying rent), and others where the landlord is looking to take the property back, for example if it wants to redevelop the property, or occupy for its use. 

The view of the Law Commission is that the security of tenure provisions do not reflect the realities of the landlord and tenant sector as it operates today.  When the Act was passed in 1954, business leases were commonly for a term of 15-25 years, and security of tenure ensured business continuity for the parties to the lease and stability in the local area.   By contrast, modern leases tend to be more flexible, and many leases are granted for terms of 3 or 5 years, particularly in the retail sector.  A high percentage of these shorter term leases contract out of the security of tenure provisions.

Why the Law Commission is Reviewing the Act

The Law Commission has said that the high number of contracted out leases in the current market suggests that the law in relation to security of tenure is less suited for the current era and is a reason to consider a review of the law.  They have also cited other reasons for doing so, including wider government priorities, such as the levelling up and net-zero agendas. The Law Commission opened a consultation period in November last year, which expired just over a week ago.  Professionals in the field of landlord and tenant law were asked to consider potential changes to the law, including removing the security of tenure provisions, or making them conditional on the parties ‘contracting in’, as opposed to the current situation, where the assumption is that the provisions will apply unless the parties contract out.  There was also the option of retaining the security of tenure provisions as they currently stand.

The Law Commission are currently looking at the results of the consultation and will launch a second paper later in the year if they conclude from the results of the consultation that there is a need for a change to the law.

Stay Updated on Future Developments

This area of the law may well change soon, and we will update this article as soon as the Law Commission makes a further announcement.

If you are a landlord, tenant, or property professional impacted by these potential changes and you need expert legal guidance, please contact Bradley Powell at bpowell@prettys.co.uk