Property Section: Business Tenancies, the right to renew, and the proposed reform of Part 2 of the Landlord and Tenant Act 1954.

Harshinder Hundal
Dec 10, 2024
2 min read

The Law Commission has commenced a review of the current approach to giving tenants of commercial leases security of tenure.

Under Part 2 of the Landlord and Tenant Act 1954, commercial tenants automatically benefit from security of tenure unless this is contracted-out of prior to completion of the lease. Security of tenure gives tenants certainty of occupation beyond the termination of the contract term granted under leases. At present a tenant of a commercial lease which benefits from security of tenure can rely on the Act to either request a new lease from the landlord or be offered a new lease by the landlord on termination of the term, subject to certain grounds that the landlord is able to rely upon to object to a lease renewal.

The Law Commission is considering four different models of security of tenure:

Model	Meaning	Impact
Abolish security of tenure	To eliminate automatic lease renewals.	Give landlords more control but potentially destabilising tenants’ business plans.
A new regime to contract-in	A new default position whereby tenants would not have security of tenure unless they contract-in as opposed to contract-out as per the current process.	Avoid the time and costs of contracting-out of the process but the cost of contracting-in could potentially be as time consuming and expensive as the contracting-out process, and depending on the bargaining strength of the tenant, could leave them dependent on the landlord agreeing to opt in.
Retain the current contracting-out process	Tenant benefits from security of tenure unless contracted out.	Impacts time, and costs also dependent on the bargaining powers of the parties.
Mandatory security of tenure	Neither the landlord nor the tenant can agree to contract-out so that security of tenure will apply regardless.	Tenants gain protection but landlords have less options when dealing with their properties.

The Law Commission consultation paper summarises the pros and cons of each model in the link below and invites stakeholders, including tenants, landlords and advisors, to respond to the consultation survey by 19 February 2025, after which the Law Commission will publish a second consultation paper setting out the technical implications of any reform. If it deems it necessary following consultation to make recommendations for a change in the law, it will make such recommendations to the Government to decide whether to implement the reforms.

If you wish to discuss any aspect of commercial leases please do not hesitate to get in touch with Harshinder Kaur Hundal at harshinderh@fgsolicitors.com, call on 0808 172 93 22 or complete our quick contact form .

Law Commission Consultation Paper