The ongoing consultation on the Landlord and Tenant Act 1954

Current position

At present, most business tenancies in England and Wales automatically have the benefit of security of tenure under Part 2 of the Landlord and Tenant Act 1954 (“the Act”). This means that even upon the expiry of the fixed term of a commercial lease a tenant has the statutory right to request a renewal lease from the Landlord so long as they are in business occupation at the end of their lease.

Please note certain business tenancies are exempt from the security of tenancy provisions in the Act e.g. if a tenancy has been granted for a period of less than six months or is classed as a ‘Tenancy at Will’ or if the landlord and tenant have specifically agreed to the exclusion of the security provisions (to which see below).

If a landlord does not wish to grant the tenant a renewal lease in these circumstances, then there are only a few strict statutory grounds upon which they will be able to rely upon as grounds to refuse to grant their tenant a renewal lease. These grounds include matters such as the landlord requiring the property back for their own use (for which there is a 5-year ownership requirement) or to carry out a wholesale redevelopment of it.

Please note even where a landlord can prove such grounds, they will likely be liable to pay the tenant compensation as set out under the Act. This is calculated by reference to the rateable value of the property.

Furthermore, until such time as the terms of a renewal lease are agreed, or a landlord has been able to prove grounds why they should not grant the tenant a new lease, the tenant is permitted to remain in occupation of the property whilst the matter is deliberated.

Whether the tenant is seeking a statutory renewal or a landlord is relying upon statutory grounds to not grant the tenant a renewal lease there are formal legal notices that must be served, such notices are subject to very strict timelines and procedures under the Act.

If the relevant statutory notice is not served in the correct timeframe, or in the prescribed format set out by the Act, then this could have serious consequences on the relevant party serving the notice.

Currently, landlords and tenants are able to agree at the outset to ‘contract out’ of the security of tenure provisions contained in the Act. This involves a process by which a landlord must serve formal notice of its intention to contract out the lease and the tenant having to sign a simple declaration, or indeed a more formal statutory declaration in the presence of an independence solicitor, acknowledging that they are being offered a lease without security of tenure.

Consultation progress

Recent matters affecting the landlord and Tenant market (such as the COVID-19 pandemic and the subsequent growth of working from home) have led to the above mentioned consultation by the Law Commission to assess the ongoing suitability of Act in the current land and tenant environment. Indeed, one of the matters under consideration is reversal of the current position so that by default all new commercial leases would be granted without security of tenure.

The deadline for submissions for the Law Commission second consultation is 19th February 2025. A link to a relevant website is Business Tenancies Survey - Ministry of Justice - Citizen Space.

The debate over the future of the Act is likely to run on for sometime yet. In the meantime, whether you are a landlord or tenant, if you would like any advice on security of tenure or any other commercial leases related issues then please contact Amit Bhangham in our Commercial Property team or David Hacker in our Dispute Resolution team on 020 8290 0440. Our firm has many years’ experience in acting for both landlords and we are able to provide clear and concise advice on navigating this often complex area of law.