On 19 November 2024 (the 70th year of the Landlord and Tenant Act 1954 (“the 1954 Act”)), the Law Commission of England and Wales (“the Law Commission”) (who recommends law reform to the Government) opened a public debate by publishing a consultation paper to ascertain whether the purpose of the 1954 Act is still being sufficiently achieved, with regards to security of tenure.

Who has security of tenure?

Currently commercial tenants have the statutory right under Part 2 of the 1954 Act to renew their commercial lease when their tenancy expires (referred to as security of tenure), on the condition that they did not contract out of the 1954 Act when the original lease was entered into.

When a tenant has security of tenure, there are only limited circumstances in which the landlord can oppose a lease renewal. These grounds are set out in Section 30 of the 1954 Act and include a tenant’s failure to pay rent and/or the landlord’s intention to redevelop the property or occupy it themselves.

Is security of tenure a good thing?

The purpose of the 1954 Act could be described as an attempt to strike a balance between commercial tenants having security of tenure and landlords being able to regain control of their own property, if justified by the circumstances.

Arguably security of tenure is more beneficial for the tenant for the following reasons:

1. Tenants can plan long term and invest in the premises;
2. Tenants can spend less time and money looking for alternative premises;
3. It simplifies the renewal process; and
4. Can use the contract out option as leverage when negotiating other lease terms, such as in exchange for reduced rent.

In comparison, security of tenure can cause the following issues for the landlord:

a. Lack of flexibility once a tenant is in;

b. Uncertainty as to when the tenancy will end; and

c. Timely and costly applications needed to reclaim a property.

Whilst the above consequences have been mostly accepted for the last 70 years, the commercial market has vastly changed since Covid-19.

Firstly, more people are shopping online or working from home which has resulted in reduced footfall for retail. This means the impact of the consequences has changed. For example, relocating more frequently may have less of an impact on businesses if they ensure they keep their website updated.

Secondly, the cost-of-living increasing means that the restrictions on landlords could be seen to be tightening. For example, more landlords may now be priced out of repossessing their property for a valid reason given the formal application which is timely and costly. 

Changes to the commercial market is likely what sparked the debate of whether change in legislation is also needed.

What alternatives are there?

The consultation paper requests the public to review the current contracting out model to determine if another model would be more desirable. The paper then outlines three alternative models which are described below.

1. Mandatory security of tenure

All tenants must have security of tenure and cannot contract out. This method provides the greatest protection for tenants but reduces their bargaining power when negotiating other terms of leases.

2. Abolition of security of tenure

The tenant would have no security of tenure and would need to negotiate a renewal after their lease expires. This would provide the lowest protection for tenants as the landlord would no longer be compelled to only oppose the request based on the limited grounds which they have to rely on now. Moreover, landlords will likely be influenced by market forces when deciding if to renew a lease.

3. A contracting in method

The default position would be that tenants do not have security of tenure and would need to opt in to gain this protection. This is the opposite of the current contracting out method and would likely remove the cost and time currently required to contract out.

If security of tenure remains – what tenancies should it cover?

The current scope of the 1954 Act excludes certain tenancies such as, those less than 6 months in length and agricultural tenancies. The consultation paper raises the debate as to whether the current scope should be changed from a one-size fits all approach, to instead a determination based on factors such as, the use of the property and/or the existence of another instrument to perform a similar protective function.

The two examples given above, if implemented, would reduce confusion regarding overlapping instruments of protection and would help to ensure security of tenure is only provided when necessary and desired.

Although, there is a risk that an updated scope may increase confusion and give way to a rise in litigation if there is a dispute about if a property falls within the new scope or not.

What next?

The deadline to respond to the consultation paper and survey is the 19 February 2025. You can have your say using the links below:

• https://consult.justice.gov.uk/law-commission/business-tenancies-survey/consultation/intro/
• https://consult.justice.gov.uk/law-commission/business-tenancies-consultation-paper-1/consultation/

Once all responses have been reviewed, the Law Commission will rely on the responses as evidence for their conclusion as to whether the law should be reformed. Subsequently, a second Consultation Paper will be published outlining which model of security of tenure they deem most appropriate and how it should work. Finally, a report will be published displaying their final recommendation for reform.

Ultimately, it is for the Government to decide if their recommendations should be implemented or not.