The Landlord and Tenant Act 1954 Is Under Review by the Law Commission - What Does this Mean for Business Tenancies?

Areas Impacted by the Proposed Review

The review links to the Government's wider strategy to revitalise high streets and town centres and to improve the environmental sustainability of commercial properties. Three key aims have been identified for the Law Commission to review:

1. Creating a legal framework to be used widely (presently legislation is often opted out of, see more below), and which does not limit the rights of parties to reach their own agreements.
2. How to best support the efficient use of space in high streets and town centres.
3. Enabling the leasing relationship between commercial landlords and tenants to be productive and beneficial.

Current Law

All property lawyers will be well versed in the current law which gives the tenant 'security of tenure' when entering into a commercial lease. This means that when the fixed term of the lease ends the tenant has the statutory right to remain in occupation and apply to the court for the grant of a new lease. The landlord has limited specified grounds to object to the tenant's renewal in order to regain possession of the property. The most common grounds are:

• if the landlord intends to occupy the property themselves or conduct substantial work that necessitates possession of the property
• if the tenant is often delayed in paying rent
• if the tenancy is of part of the property and renting out the whole would result in a more favourable rent

The most common method by a landlord to terminate a lease with security of tenure is through a section 25 notice. This has certain restrictions, and the tenant may still apply to the court for the grant of a new tenancy. A section 25 notice also cannot be served if the tenant has already served a section 26 request under the 1954 Act to request a new lease. Alternatively, the tenant can bring the tenancy to an end through a section 25 notice.

If the landlord is concerned about granting security of tenure it is possible to exclude the statutory protections when the lease is being entered into. The process for this is outlined in the Act and includes service of formal notices and the tenant making a formal declaration, confirming they are aware they are giving up their statutory protection, both of which have a prescribed form.

Next Steps

The initial stage of the review involves pre-consultation engagement with interest groups and experts. It is understood that this stage has already begun. The Law Commission has indicated that it aims to publish a consultation paper later this year.

Following the consultation paper, the usual process is for stakeholders to be invited to comment on the paper. If you have feedback or thoughts on the findings, you will have the opportunity to have your say and inform the Law Commission at this stage.

What This Means for You

In the meantime, the current law on the right to renew business tenancies remains in force until any changes are enacted, however solicitors acting for both landlords and tenants are hopeful that the review will mean a more streamlined process for contracting out leases in future.

Whilst we await further news of the proposed reforms, if you are entering into a commercial lease and would like further information on your options in relation to security of tenure, or to discuss nay aspects of your lease please contact Rachel Williams in our Commercial Property team on 0117 314 5676, or complete the form below.