Landlord and Tenant Act 1954: Consultation

Overview

The Law Commission has published its consultation paper examining Part 2 of the Landlord and Tenant Act 1954. It focuses on the renewal of business tenancies, known as Security of Tenure, and evaluates whether it still works as intended and meets the needs of both business tenants and landlords.

Security of Tenure

Under the current law, commercial tenants have the right to renew tenancies when they expire. However, tenants can choose to “contract out” of the right for a lease renewal when they are granted their tenancy.

The landlord has the right to oppose a renewal of the tenancy based on a few limited grounds. These grounds are:

• Premises are in disrepair;
• Arrears of rent;
• Other breaches of covenant;
• Suitable alternative accommodation;
• Tenancy was created by a sub-letting;
• Landlords’ intention to redevelop; and
• Landlord’s intention to occupy.

The landlord and tenant can alternatively agree to “contract out” of the Security of Tenure provisions. If this process is followed, when the lease comes to its natural expiry, the tenant will have no automatic right to renew the tenancy. If the tenant wishes to remain at the property, they will have to negotiate a new lease with the landlord. 

Consultation

The consultation is looking to consider the pros and cons of the current “contracting-out” model and whether three alternative models could be more beneficial to business tenants and landlords.

No Security of Tenure – The tenant will have no security of tenure and the abolition of security of tenure provisions.

• Pros: 

1. This would provide landlords with certainty that the tenancy will expire at the end of the term:
2. This will give freedom to the landlord to decide what they wish to do with the property after this;
3. This may reduce the costs and time spent at the end of the term as tenants and landlords, as there is no statutory process to deal with.

• Cons:

1. This will offer a lot less protection for tenants than the current position and the alternatives; and
2. This will grant the landlord significant strength when it comes to negotiating new terms at the end of the lease.

Opting in – “Contracting in” as opposed to the current position. The default position would be that the tenants do not have Security of Tenure. The landlord and tenant would have to opt in to the provisions so that the tenant does have Security of Tenure.

• Pros:

1. Landlords and tenants would have the flexibility to enter into leases with or without security provisions;
2. Would remove the requirement to deal with the contracting-out provisions that are currently in force.

• Cons:

1. This will offer less protection for the tenants as they will have to negotiate a lease that opts in to the security provisions.

Mandatory Security for Tenants – Making Security of Tenure compulsory. The landlord and tenant would not be able to agree to contract-out of the provisions.

• Pros:

1. This position will provide tenants with the greatest level of protection and certainty when it comes to entering into a lease. The tenant will have the ultimate decision to remain at the end of the term.
2. Less negotiation involved on leases because there would be no negotiation over whether there are Security of Tenure provisions.

• Cons:

1. This could weaken the landlord’s negotiating position when it comes to the end of the term.
2. Landlord’s may look to offer very short term tenancies due to the mandatory Security of Tenure provisions.

Conclusion

While still in the consultation stage, it will be interesting to see how the reform progresses and what impact those reforms may have. It is hard to ignore that the options being considered will have impact on the strength of each parties position when it comes to negotiations between landlords and tenants. 

The Caw Commission’s consultation was closed on 19 February 2025. The Government will now consider the consultation and publish a second consultation paper. For more details, you can visit the Law Commission’s page on the consultation here.

If you have any questions and/or would like advice on the above topic, please contact us at: hello@dixcartuk.com, or your usual Dixcart contact.