6 October 2023 by Bradley Ali & Keegan Williamson

Towards Modernisation: Potential reforms on the way for the Landlord and Tenant Act 1954

Part 2 of the Landlord and Tenant Act 1954 (‘the Act’) was, and still is, a significant piece of legislation. It governs the relationship between a commercial landlord and tenant.

The Act was a post Second World War measure brought in to deal with the inequality in bargaining power that existed between landlords and tenants caused by the shortage of commercial property.

Security of Tenure

Generally, the Act gives a business tenant protection from the risk of immediate eviction automatically, with a statutory right to renew the lease when it comes to an end. This is one of the most important aspects of the Act and is known as “security of tenure”.

A business tenant will benefit from the Act’s protections, provided they are in occupation of the premises for business purposes under a tenancy (unless the tenancy falls within one of the exceptions). Some exceptions include fixed term tenancies not exceeding 6 months, agricultural tenancies (these have their own form of protection under the Agricultural Holdings Act 1986), mining leases, farm business tenancies and service occupancy tenancies (for example staff accommodation where an employee is required to live at their place of work).

The parties can also agree to exclude the tenancy from the protections of the Act, a process known as “contracting out”, provided a 14-day cooling off period is observed (unless the tenant provides a sworn statutory declaration waiving the cooling off period).

If a business tenant qualifies for security of tenure, the lease will continue beyond its contractual expiry date, on the same terms, until it is terminated in one of the ways specified by the Act. For example, a friendly (renewal) or hostile (termination) statutory notice would have to be served, although the parties are also free to surrender the lease by mutual agreement.

Upcoming Reforms

Now, nearly 70 years later, Part 2 of the Act (the section that gives business tenants protection) is currently under review by the Law Commission as part of the Government’s Anti-Social Behaviour Action Plan. The reason cited by the Law Commission for the review is that, while there have been some updates since the introduction of the Act to improve flexibility, the current legislation is said to be outdated, unclear, and prevents the commercial market from moving at an efficient rate, potentially obstructing the Government’s plan to revitalise high streets and town centres.

We expect the Law Commission’s review will place emphasis on the following:

  • Creating a “Contracting Out” process that is clearer, easier and faster to administer;
  • Reconsidering the grounds where a landlord can oppose a renewal, for example a landlord cannot refuse to renew a protected business tenancy even if it is required to carry out energy efficiency upgrades to its building to meet minimum energy performance standards;
  • Recognition of turnover rents (courts do not currently have powers to order turnover rents in protected lease renewals) notwithstanding they are becoming increasingly commonplace in the market as a genuine way for the parties to share in the risk and rewards.

The Law Commission aims to publish its consultation by December 2023. The modernisation of the Act is a vital step toward creating a more efficient legal framework for commercial property leases. By making the legislation clearer, reducing administrative burdens, promoting flexibility, and aligning with government objectives, it is hoped the Act will be better placed to serve the modern interests of both landlords and tenants while contributing to the revitalisation of high streets and town centres across the UK.

If you are a commercial landlord or tenant and would like further advice on how the Act affects your lease, please contact our Commercial Real Estate team.

14 September 2023 by Melanie Carroll

Get Exchange Ready

Complete your sale with the minimum amount of stress and fuss by getting ‘exchange ready’. A new coalition of legal, […]

19 September 2023 by Timothy Lucas

Contract signed by only one director – is it binding?

Our Corporate & Commercial team has recently advised a number of clients, both UK-based and international, on questions surrounding the […]

Signup To Our Weekly e-News

"*" indicates required fields

We’ll never share your details with any third party in line with our privacy policy.