The Law Commission’s review of Part 2 of the Landlord and Tenant Act 1954

The Law Commission published its first Consultation Paper on “Business Tenancies: the right to renew” on 19 November 2024, but what are the key points to take away? We have provided a high-level overview of the Consultation Paper, below.

What does the Consultation Paper consider?

The Consultation Paper considers part 2 of the Landlord and Tenant Act 1954 (the 1954 Act). In particular, security of tenure; whether business tenants should have it and, if so, how it should operate.

Business tenants who have "security of tenure" can continue to occupy their business premises or obtain another tenancy when their existing tenancy ends, subject to the landlord being able to oppose on a limited number of grounds.

What does the Consultation Paper propose?

 The Law Commission have presented four different "models" of security of tenure:

1. No security of tenure (abolish the 1954 Act) – tenants have no security of tenure/cannot opt-in.

• Pros: Certainty as to when tenancies would end. Costs and delay reduced as no statutory processes to deal with security of tenure.
• Cons: Least protection for tenants. Whether tenants could obtain a renewal tenancy and on what terms would be governed by market forces and the willingness of the landlord.

2. A "contracting-in" regime – tenants have no security of tenure but the landlord and tenant can opt-in so the tenant does have security of tenure.

• Pros: Flexibility. Lessens time and cost of contracting out.
• Cons: Less protection to tenants than the current position. Tenants would have to persuade landlords to opt-in (which they may not agree to).

3. A "contracting-out" regime (the current position) – tenants have security of tenure but the landlord and tenant can opt-out so the tenant doesn’t have security of tenure.

• Pros: No unexpected or undesirable changes. Flexibility.
• Cons: Costs in opting out (if no security desired)

4. Mandatory security of tenure – security of tenure is compulsory and there is no opting-out.

• Pros: Greatest protection for tenants. Simpler to enter into leases.
• Cons: No flexibility. Weakens landlords' negotiating position and choice. May result in landlords looking for ways to avoid security of tenure which could be detrimental to tenants.

What tenancies should be covered by the 1954 Act?

If a model is recommended that provides security of tenure (ie not the model abolishing the 1954 Act altogether), the Consultation Paper suggests there could be a change to the type of tenancies security applies to (or it could remain as it is now). For example, the Consultation Paper considers whether tenancies could be excluded from the 1954 Act based on the use of the property, the duration of the tenancy or other characteristics of the property (e.g. floor space, location and rent payable).

What to do next?

The Law Commission invites all interested parties to respond to a range of questions designed to gauge the market's views on the issues the Consultation Paper covers. The Commission also invites responses to a survey concerning how parties interact with the 1954 Act as it stands, e.g. on issues such as costs and timescales. If you would like to respond to the consultation and/or survey, you should do so via the following links by 19 February 2025:

• Consultation Paper (to have your view on the Consultation Paper/Law Commission's proposals): here 
• Survey (to help the Law Commission understand the impact of Part 2 of the 1954 Act on the current commercial leasehold market): here.

Alternatively, you can respond by email to: BusinessTenancies@lawcommission.gov.uk or by post to: Business Tenancies Team, Law Commission, 1st Floor, 52 Queen Anne’s Gate, London, SW1H 9AG.

If you would like to attend an in-person event to hear about the project or ask any questions , please keep an eye on the Law Commission website here for more details. To register for an online event, please click the following links: 9 December 12pm – 1pm or 4 February 6.30pm – 7.30pm.

After the Law Commission have analysed the responses received and reached conclusions on the issues the Consultation Paper raises, the Law Commission will publish a second, technical Consultation Paper.