On 19 November 2024, the Law Commission published its much-anticipated consultation paper on its proposed reform to the Landlord and Tenant Act 1954.
Under current legislation, tenants of business premises have a right to continue to occupy their property, and obtain a renewal tenancy, when their existing tenancy would otherwise come to an end. This right is known as “security of tenure” and can be excluded if the parties follow a set procedure before the tenancy begins – a process known as “contracting out”. If the security of tenure is not contracted out and the lease comes to an end, the landlord is able to oppose a renewal tenancy on a limited number of grounds, for example, if tenant has breached the terms of the lease or the landlord intends to redevelop the property. However, landlords need to ensure that the correct procedure is followed when opposing a renewal tenancy, which normally involves sending a notice on the tenant within a set timeline.
The Law Commission noted that the current law was last updated approximately 20 years ago, and in that time the commercial leasehold market and the world in general have changed significantly. In this consultation paper, the Law Commission has therefore asked if the current model of security of tenure (“contracting out”) remains the correct approach, or if a different model of security of tenure is perhaps needed. The paper outlined four potential models, as follows:
- A “contracting out” regime – in principle, the current model.
- A “contracting in” regime – the default position would be that tenants have no security of tenure, and the parties can “opt in” so that the tenant does have this security.
- No security of tenure – this would provide the least protection out of all four models.
- Mandatory security of tenure – security of tenure would be compulsory, and the parties would not be able to agree to “contract out” of the security of tenure.
This consultation is open until 19 February 2025 following which the Law Commission will consider responses, a second consultation paper will then be published.
At Buckles, we regularly deal with commercial property. Our Property department advises property developers and commercial landlords on all aspects of leases, while our Property Litigation department can assist in the event of a dispute. If you need advice on your commercial lease, do contact us for further discussion.
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