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The Landlord and Tenant Act 1954 gives business tenants a statutory right to a new tenancy on the expiry of their existing tenancy and provides that a landlord can only recover possession where at least one of seven statutory grounds applies.
The Act was put in place to promote the economy and provide a secure basis for businesses to grow following the war.
Almost 70 years later, the promotion and growth of businesses remain essential for our economy – but the pressures on businesses have changed immeasurably.
From the huge growth of online retail to the essential focus on energy efficiency, businesses – and the leases under which they operate – must adapt.
Concerns
There are concerns that the processes set out in Part 2 of the 1954 Act are inflexible and hinder this adaptation.
Those concerns surround:
- The requirement for the parties to follow the “contracting out” procedure, serving notices and signing declarations if the tenancy is not to have the protection of the Act.
- A lack of provision in the Act for modern rent arrangements. Many businesses are now looking for turnover rents, but these do not sit well with the provisions of the 1954 Act.
- Difficulties in promoting green leases and furthering the “net zero” objective.
Those involved in lease renewals will no doubt be aware of the requirement to consider “reasonable updating” of lease terms on renewal.
But is it time for the Act itself to be updated?
Given the concerns outlined above (and as part of the government’s Anti-Social Behaviour Action Plan), the Law Commission has announced that it will review the processes outlined by the Act and implement changes allowing it to adapt to the changing pressures of business.
What will the review consider?
It is anticipated that the review will consider the following:
- An emphasis on “opting into” the Act rather than contracting out of it. This is with a view to removing the requirement to obtain statutory declarations and speeding up the leasing process. It is hoped that this will improve the resilience of the high street.
- Relevant considerations when settling the terms for the new lease.
- The entity with jurisdiction for considering those terms – whether that be the Court or the First Tier Tribunal.
- The grounds on which a landlord can oppose the renewal of a lease.
- The basis for calculating the statutory compensation owed to tenants where a renewal is opposed by the landlord.
The Law Commission will be taking feedback from the property sector over the course of this review, with the report on that consultation due to be released in December 2023.
There is always the risk that the implementation of new processes will result in less clarity and increased litigation. However, the hope is that any updates will be reasonable and fit for purpose for decades to come.