Business Tenancies: Time for Change?
The Law Commission has recently published its first consultation paper, the first of a two-stage review, upon whether Part 2 of the Landlord and Tenant Act 1954 (“the Act”) remains appropriate in today’s commercial leasehold market.
Why Now?
It is now almost 20 years since there were any significant updates made to the Act, and it has been reported by those affected by the Act that aspects of it are inflexible and out of date. With the so called “death of the high street”, it has also been reported that the Act poses burdens which prevent premises from being occupied quickly and efficiently.
Stage One
Part 2 of the Act gives business tenants the right to remain in occupation of a property after the expiry of the fixed term. This right is known as “security of tenure”.
Where Part 2 of the Act applies to a business tenancy, provided that a tenant is in occupation of the Property for the purposes of its business as at the end of the lease, the tenant will enjoy security of tenure, unless the landlord and tenant agreed before the lease was completed that Part 2 of the Act would not apply (known as “contracting out” of the Act).
The Law Commission has highlighted pros and cons of four different possible models, and is now seeking responses from consultees to establish the preferred model. The four different models are:
- No security on tenure
- A “contracting in” regime
- A “contracting out” regime (the current system)
- Mandatory security of tenure
Interested parties can provide details of their own experiences with the current framework and proposed reform here. The deadline for responses is 19 February 2025.
The full consultation paper can be found here.
Stage Two
Following consideration of the responses received during the initial consultation, the Law Commission will then publish a second, technical paper. That second paper will set out the Law Commission’s conclusions as to whether any change to the Act is required and if so, which model it recommends. In the absence of clear and persuasive evidence requiring change, it is likely that the Law Commission will be loathe to recommend a change to the current “opt out” procedure.
Should you have any queries regarding the application of the Act, or wish to discuss this article, please feel free to contact Millie Bird or Chris Drinkall, who will be happy to assist.