Arguably, one of the most significant principles governing Business Tenancies in England and Wales, is the legal right for tenants to occupy and renew their tenancies following the contractual expiry of their existing one. This is known as security of tenure, the regime for which is provided for by statute under Part 2 of the Landlord and Tenant Act 1954 (the “1954 Act”).

It has been quite some time since the 1954 Act has had any substantial updates, yet the commercial leasehold market, and the way in which people generally work today, has changed significantly over recent years. 

As a result, on the 19 November 2024, the Law Commission published the first of two consultations, as well as a survey, which considers whether the current model for providing a tenant with security of tenure is appropriate and what impact the 1954 Act has on the modern-day commercial leasehold market. A copy of the full consultation paper can be found here.

Currently, the 1954 Act provides that a business tenant will automatically have security of tenure on commencement of their lease unless the parties specifically contract out of that right. In order to determine whether this right is still suitable for the market today, the consultation has proposed alternative models for reform and has sought feedback from relevant stakeholders such as landlords, tenants, lawyers etc. 

The models currently proposed are:

  • No security of tenure – this model proposes that the right be abolished altogether meaning all business tenants (who are not protected by any other statutory regime) will be required to vacate the property on contractual expiry of the lease;
  • A ‘contracting out’ regime – the model used today and one which provides all business tenants with an automatic right of security of tenure but with the ability to contract out of the provisions in the 1954 Act which provide that right;
  • A ‘contracting in’ regime – the mirror image of the current position. This model proposes that business tenants have no right of security of tenure unless the parties agree to specifically opt in to the regime; and
  • Mandatory security of tenure – this model proposes that all business tenants obtain security of tenure at the commencement of their leases and there be no ability for the parties to contract out.


In addition to the above proposals, the consultation also explores the scope of the 1954 Act and considers whether a better solution would be to limit the types of tenancies that are protected by security of tenure, rather than whether security of tenure is available at all.

NEXT STEPS

Following the conclusion of the first consultation, the Law Commission will consider the responses before releasing the second consultation on how to refine the proposed reform. 

It is anticipated that, if retention of security of tenure is recommended, the second consultation will consider whether other aspects of the 1954 Act should be reformed. However, if it is recommended that the right should be abolished, the second consultation will consider how best to do that.

COMMENT  

The Law Commission has made it clear that unless there are compelling reasons to move to a different model, they are unlikely to recommend this is done.

If it were, however, to recommend reform of the 1954 Act, there are some suggestions within the report that this would focus on changes to the contracting out procedure or excluding tenancies based on their location, use or other characteristics. However, this in itself could lead to less clarity than exists under the current regime. A move to further uncertainty in a market which currently requires stability is therefore not a decision the Law Commission will take lightly. 

The deadline for responses to the consultation and survey is 19 February 2025. Anyone wishing to submit a response can do so here and here.

This article has been written with the assistance of Rachel Heveran, Solicitor, Real Estate Disputes.