Review of the Right to renew Business Tenancies

On 19 November 2024, the Law Commission published the first of two consultations on the right to renew business tenancies.

The law affecting the relationship between commercial landlord and tenant has been governed by the Landlord and Tenant Act 1954.  The purpose of the Landlord and Tenant Act 1954 was to address the imbalance of power between landlords and tenants following World War 2.  A fundamental part of the Act was to provide security of tenure for business tenants, which meant they could remain in their premises unless the lease was terminated or renewed in accordance with the law set out in that Act.

The Need for Modernisation

A lot has changed in the 70 years since 1954. It is perhaps not surprising then that the Law Commission will be reviewing the way in which the law operates on commercial landlord and tenant relationships which are still governed by the 1954 Act.

The covid 19 pandemic had a huge impact on the relationship between commercial landlord and tenant as both were encouraged to work together and the long-established rights of landlords to enforce payment of rent arrears were temporarily removed by pandemic specific legislation. Although this is no longer in force, there remains a changed landscape in which landlords and tenants operate. 

Another of the significant changes of the covid 19 pandemic has been the increase in remote working and less demand for commercial premises by the likes of hybrid working and hot desking.

Potentially, a review of the way in which the Landlord and Tenant Act 1954 operates may result in delivering an arena in which the commercial landlord and tenant relationship can more closely reflect modern commercial practices and expectations.

Security of Tenure: Key to the Consultation

One of the most significant t aspects of the 1954 Act to be reviewed is security of tenure and is the first aspect of the current law to be reviewed.

Currently, unless specifically contracted out, tenants have security of tenure.

The Law Commission is considering four different “models” of security of tenure and has asked for views on which model those being consulted prefer: –

• No security of tenure (abolish the Landlord and Tenant Act 1954)
• A “contracting in” regime
• A “contracting out” regime (this reflects the current position)
• Mandatory security of tenure.

Looking Ahead to Further Consultations

It is this important issue of security of tenure and whether it is to be retained, and if so, in what form which will affect the other aspects of the Landlord and Tenant Act 1954 that will be reviewed in the second consultation. This will include the grounds on which a renewal lease can be opposed, when compensation is payable to Tenants, the terms (including rent) of a renewal lease and the more technical issues that practitioners refer to as the “registration gap”. 

The registration gap is increasingly a problem where commercial premises are owned by pension investment companies which buy and sell property frequently so that there is sometimes a difference between who the registered proprietor is stated to be at Land Registry compared to the company to whom the tenant is paying rent.

The law and practice around lease renewals and service of notices is fraught with difficulty and special care is needed in all respects of drafting the notices, serving them and in complying with the 1954 Act provisions. What might the future hold for Landlords and Tenants after the Law Commission has completed its review?

How Pinney Talfourd can help?

Pinney Talfourd are experts in Commercial Property Litigation and can advise you on changes to the law so you are given up to date advice.

Please do not hesitate to contact Lisa Eastwood on 01708 463 215 should you wish to discuss anything further.