Rewriting the Rules on Business Tenancies: The Future of Security of Tenure
Law Commission Consultation on the Landlord and Tenant Act 1954
A 70-Year-Old Framework Meets the Modern Market
In November 2024, the Law Commission launched a long-awaited consultation on proposed reforms to Part II of the Landlord and Tenant Act 1954, the legislation that grants commercial tenants a statutory right to renew their leases, better known as the right to “security of tenure”.
While often overlooked by the general public, the 1954 Act underpins a vast number of business tenancies across England and Wales. From high-street shops and salons to multi-storey offices and warehouses, the law has helped countless tenants retain stability and continuity of premises. But after nearly seven decades in force, the question is now being asked: is the Act fit for purpose in the 21st-century commercial property landscape?
The Current Position: Security of Tenure Explained
The 1954 Act was enacted in a post-war context to protect tenants from arbitrary eviction. It ensures that, unless expressly excluded, a business tenant has a right to remain in their premises at the end of their lease term and apply for a new lease on broadly similar terms.
The Act operates through two central mechanisms:
- The ‘opt-in’ default: Where the lease is silent or the statutory process has not been followed, tenants are automatically protected.
- The ‘opt-out’ process (contracting out): Landlords and tenants can exclude security of tenure by following a strict statutory procedure, usually involving a warning notice and either a simple or statutory declaration from the tenant.
While landlords may object to renewal on limited statutory grounds-such as planned redevelopment or owner occupation, these grounds are often difficult to establish, and most renewals proceed uncontested.
The Problem: Burden, Delay and Complexity
The Law Commission has recognised what many commercial lawyers and property professionals have long argued: that the 1954 Act no longer reflects the needs of a modern, flexible, and increasingly short-term leasing market.
Key issues include:
- Excessive formalities: The contracting out process is technical and error-prone. Mistakes can invalidate the exclusion and unexpectedly restore a tenant’s statutory rights.
- Administrative delay: The procedures involved often delay lease completions, frustrating transactions and causing operational disruption.
- Outdated policy assumptions: The original policy rationale for security of tenure has weakened in an era where many tenants prefer short, flexible leases without renewal rights.
The 2024 Consultation: A New Vision for Tenancy Renewal?
The Law Commission’s consultation seeks views on whether the security of tenure regime should be reformed-or scrapped entirely. Four potential models are on the table:
Mandatory Security of Tenure A return to the pre-1970 model no option to contract out, with all tenants automatically protected.
Abolition of Security of Tenure A radical departure from the current position, offering no renewal rights at all.
Contracting-In Regime The inverse of the current law-tenants would only gain protection if the lease expressly opted into the regime.
Retain the Current Contracting-Out Model (with modifications) The most conservative option, this would preserve the existing structure but potentially simplify the process.
What This Means for Landlords and Tenants
For landlords, the prospect of reform raises both risk and opportunity. Removing the complexities of the current Act could streamline lettings and reduce legal exposure. But if security of tenure becomes mandatory, they may face reduced flexibility and greater difficulty recovering possession for redevelopment or change of use.
Tenants, meanwhile, must weigh the value of legal protection against the practical burdens the Act imposes. In sectors where location stability is critical-retail, hospitality, healthcare-renewal rights can be vital. But for fast-moving businesses in technology, creative industries or serviced offices, the current law may offer more hassle than help.
Conclusion: A Law at a Crossroads
The 1954 Act has been a cornerstone of landlord and tenant law for decades-but the market it was designed to regulate has evolved beyond recognition. As the Law Commission considers its next steps, all parties would do well to review their current leasing strategies, consult legal advisers, and prepare for potentially significant changes in how business tenancies are created, managed, and renewed.
If you wish to discuss any of the above, please contact our Dispute Resolution Team below or call us on 01702 338338.
