For nearly seven decades, the Landlord and Tenant Act 1954 has been a cornerstone of the relationship between commercial landlords and tenants in England and Wales. But as businesses and property markets evolve, the Law Commission is now asking: is it still fit for purpose?

In this blog, we will break down what the current law does, why it’s now being reviewed by the Law Commission, and what changes might be on the horizon.

The Current Law: A Brief Overview

The Landlord and Tenant Act 1954 gives most business tenants an automatic right to renew their lease when it ends. This is known as “security of tenure.” Please see our previous blog here for more a more in-depth look at this.

Here’s how it works in practice:

  • Automatic Right to Renew: When a lease reaches the end of its term, the tenant usually has the right to stay and negotiate a new lease.

  • Exceptions and Contracting Out: Landlords and tenants can agree to “contract out” of this right before the lease begins. This means the tenant won’t have the automatic right to renew when the lease ends.

  • Court Involvement: If the landlord and tenant can’t agree on the terms of a new lease, they can ask the court to decide. However, the landlord can refuse to renew in specific situations, like wanting to redevelop the property.

  • Scope of the Act: The law applies to most commercial leases but excludes certain types, like tenancies of six months or less or agricultural leases.

So – What’s the Problem?

While the 1954 Act has provided stability for businesses, it’s also showing its age. Here are some of the key issues:

  • Outdated Assumptions: The Act was written in a time when long-term leases were the norm. Today, short-term and flexible leasing arrangements are far more common, making some provisions less relevant.

  • Complexity: The rules around contracting out and court applications can be confusing and costly for both landlords and tenants. Tenants must follow specific legal procedures to claim renewal rights, and failure to comply can result in the loss of these rights. Conversely for Landlords, they face procedural hurdles if they want to oppose a renewal such as proving redevelopment plans which often lead to disputes and be costly.

  • Imbalance: Some argue that the law’s emphasis on tenant protection doesn’t always account for the legitimate interests of landlords, such as redeveloping or selling their properties.

  • Unclear Coverage: The Act doesn’t cover all types of commercial arrangements, and the exclusions can lead to disputes. For instance, short-term lets of under six months may fall outside the Act, but what happens when such arrangements are repeatedly renewed?

What Is the Law Commission Proposing?

The Law Commission’s consultation aims to bring the law into the modern day, making it simpler and fairer for all parties. In their review, there are four points they are considering:

  • Keep the Current System with Adjustments: The automatic right to renew would remain, but with updates to address modern leasing practices.

  • Abolish the Right to Renew: This radical option would remove tenants’ automatic renewal rights altogether.

  • Opt-In System: Tenants would only have renewal rights if they specifically agree to them with the landlord when signing the lease.

  • Mandatory Security of Tenure: All tenants would automatically have the right to renew, with no option to contract out.

The consultation is also exploring:

  • Whether the types of leases covered by the Act should be redefined.

  • How to make the renewal process less complex and expensive.

Why Does This Matter?

For tenants, the right to renew provides security and stability, allowing them to plan for the future. For landlords, flexibility is key to managing their properties and maximizing their value. Striking the right balance is critical to ensuring a thriving commercial property that is mutually beneficial to both Landlords and Tenants.

You Can Get Involved!

The consultation runs until 19 February 2025, and the Law Commission is keen to hear from anyone affected by these laws – whether you’re a business owner, landlord, or advisor. This is your chance to assist in shaping the future of commercial leasing by clicking here.

The Landlord and Tenant Act 1954 has served businesses and landlords for generations, but it’s clear that a refresh is overdue. Whether the law is tweaked or overhauled, the goal is a system that reflects today’s realities while fostering productive landlord-tenant relationships. Now is the time to have your say on what that future should look like.

If you are a landlord or tenant and would like to informally discuss anything mentioned in this blog or for any further legal information relating to commercial leases, please contact Farleys’ commercial property experts on 0845 287 0939 or complete our online contact form and a member of the team will get in touch with you.