Landlord And Tenant Act 1954 Reforms – Securing A Change

The end of World War II brought significant commercial and economic challenges for businesses.

The government needed to provide commercial tenants protection from eviction from their premises to allow them to maintain a level of confidence and commitment to investment across the economic spectrum, from retail and hospitality to manufacturing and industry.

The Landlord and Tenant Act 1954 provided that protection in several forms:

1. It gave certain business tenants a statutory right to a new tenancy at the end of their existing tenancy.
2. Landlords were unable to terminate certain business tenancies unless they could establish one or more of seven statutory grounds of opposition (such as an intention to redevelop the premises or an intention to reoccupy for the landlord’s business).

Whilst the Act has undergone significant changes since its enactment (most notably the introduction of provisions dealing with contracting out of the Act), there have been no fundamental reforms to the regime.

That original form is now the subject of reform consultations—the key question is whether the Act remains fit for purpose in light of a new era of economic challenges.

In recent years, businesses may not have been directly impacted by a World War, but they have been forced to adapt to economic recessions, an explosion in online retail, and a global pandemic—and endeavour to address environmental sustainability.  

Empirical evidence from the Law Commission suggests that these challenges have shortened lease terms.

There is an argument that this change means that such leases should be excluded from the Act – or even that the Act is redundant.

Property professionals also provide feedback that the contracting out process creates significant time, cost, and procedural difficulties, preventing properties from being let go quickly and efficiently.

The reform consultation was announced in March 2023.

The consultation has two stages, and the first consultation paper was published in November 2024.

This proposed four potential models of security of tenure that the Act should provide. Only when the most appropriate model has been ascertained will the consultation committee move on to stage 2, which will involve the detailed technical consideration of the operation of the security of tenure regime.

Stage 1 – The Potential Models

Abolishing security of tenure

• Detail
  • No security of tenure – but parties will still be able to negotiate options to renew.
• Advantages
  • Cost savings for both parties.
• Disadvantages
  • Increased flexibility for landlords.
  • Reduced level of protection for tenants.
    

Mandatory security of tenure

• Detail
  • Security of tenure is compulsory – no ability to contract out.
• Advantages
  • Increased level of protection for tenants.
  • Certainty for both parties.
• Disadvantages
  • Removal of choice for all parties.
  • Landlords may opt to grant fewer or shorter tenancies to avoid the mandatory regime.

Contracting in model

• Detail
  • Default position – no security of tenure.
  • However, parties can opt into statutory protection.
• Advantages
  • Flexibility to enter into protected or unprotected tenancies is retained.
  • Cost savings for those that opt out.
• Disadvantages
  • Less protection for tenants.
  • The option to opt in may not be utilised.

Contracting out model

• Detail

  • Default position – security of tenure.

  • However, parties can contract out of statutory protection.

  • Likely, the regime will not be identical to that which currently exists – the second stage of consultation will address changes.

• Advantages
  • Familiar.
  • Tenants have default protection without needing to ask for it.
• Disadvantages
  • Undesirable cost and delay for those wanting to contract out.

Stage 2 – Detailed Consideration

As previously mentioned, the points to be considered in the second consultation period will depend on the outcome of the first consultation.

Although the current system clearly requires improvement, the general feeling in the industry is that some sort of security regime should still be retained.

If that is to be the case, part of the focus of the second consultation stage is likely to be how the processes under the Act can be made more efficient. The following are likely to be considered:

• Changing the forum for determining disputes, for example, by encouraging (or requiring) the use of expert determination or arbitration.
• Empowering the Courts to be able to grant lease renewals with terms fit for a modern market – for example, by allowing up to date ESG provisions or turnover rents.

The findings of the consultation are likely to have far reaching consequences which will impact the commercial property market for many years to come.

Given that impact (intentional or otherwise) any change suggested by the Law Commission must be supported by robust evidence.