On 28 March 2023, the Law Commission of England and Wales announced that it would review Part 2 of the Landlord and Tenant Act 1954 (“the 1954 Act”) as part of the Governments’ Antisocial Behavior Action Plan.
Modern businesses, including small high street shops, restaurants and cafes to office buildings and warehouses, often occupy premises via a lease rather than taking ownership of the freehold. The 1954 Act allows business owners to remain on the premises by renewing their commercial lease on similar terms when the lease would otherwise have come to an end. This is referred to as “security of tenure”.
What is a security of tenure?
Security of tenure was introduced for the protection of business tenancies to protect goodwill that a tenant had obtained during the period of the lease. The Landlord and Tenant Act 1927 enabled a tenant to obtain a new tenancy if there was adherent goodwill which could not be formulated by monetary compensation. This could only be exercised at one time.
The Landlord and Tenant Act 1954 was then introduced following the Second World War. This provided a tenant with a repeated right to renew a lease which the landlord would only be able to refuse in limited circumstances.
Whether or not a business has the right to renew its commercial lease would depend on whether the lease was contracted out of the 1954 Act. This would have been discussed at an earlier stage before the lease was entered into. There is a procedure which would need to be followed before a lease can be contracted out of the 1954 Act, which is beyond the scope of this article.
There is now a consensus that the legislation is unclear, burdensome and outdated causing unnecessary delays and costs for both the landlord and tenant illustrating that the 1954 Act is not in line with the modern commercial leasehold market. The market has since evolved with the development of technology, online retail businesses, takeaway apps, the financial crisis, the ever-changing global environmental politics and the COVID-19 global pandemic back in 2020.
The Law Commission are looking to carry out a wide review of the 1954 Act with the following aims:
- Creating a more modern up-to-date legal framework that is clear, easy to understand and broadly used rather than opted out.
- Ensuring that commercial premises are in use rather than left empty to ensure that business can continue for both the landlord and tenant and government proposals are met, such as net zero and levelling up.
- Encouraging a productive and collaborative relationship between the landlord and tenant.
The aims of the review seem positive and the current legal framework is in desperate need of modernisation. It will be interesting to see what the Law Commission’s consultation paper will reveal. This aims to be published in 2024, so watch this space for further updates.
If you have any queries arising out of this article or require advice with any commercial property matter, please do not hesitate to contact Manny Thandi by email at mkt@swinburnemaddison.co.uk or by telephone at 0191 384 2441.
This article is for general information only. It does not and is not intended to constitute legal or professional advice. The law may have changed since this article was published and we would always recommend that you seek specific advice on any legal issue.
