Previously, we reported on the first consultation paper that the Law Commission published in November 2024. The consultation paper was part of the proposed reform to the Landlord and Tenant Act 1954 (“1954 Act”). The consultation had closed in February this year, following which the Law Commission considered responses. Recently, the Law Commission published the second consultation paper which builds on the first consultation paper.
The Law Commission provisionally recommends keeping the core model of security of tenure and the ability for the parties to contract out. The paper questions the qualifying threshold, namely whether the current six-month threshold below which tenancies do not benefit from protection under the 1954 Act should be increased to one or two years. The Commission has provisionally concluded that the six month threshold should be increased.
Currently, if the parties wish to contract out of the 1954 Act, they must follow a strict procedure which results in the tenant giving up the automatic right to renew the lease once it expires. First, the landlord must serve a warning notice on the tenant explaining that it is intended that the lease has no renewal protection. The tenant must then make a declaration and the executed lease must record the dates of the warning notice and declaration. The proposal now suggests the two following options:
1. An improved warning notice procedure which amends the current process but generally retains the exchange of documents.
2. Contracting out within the lease. There would be a prescribed warning stating that the landlord and tenant agree the lease is contracted out and explaining the implications of doing so. The Law Commission provisionally noted that it is in favour of this option.
In terms of the lease renewal process, currently if there is a dispute between the parties on the terms of the renewal lease, the court can impose the terms of a renewal tenancy with reference to the provisions of the original lease and “all relevant circumstances”. This is provided by section 35 of the 1954 Act and relates to terms other than the duration of renewal lease and the rent payable under the new lease. The leading authority on how the courts approach the application of section 35 is the 1983 decision in O’May v City of London Real Property Co Ltd. The Commission recognises that the case was decided more than 40 years ago and that the commercial property market has changed significantly since then – an example mentioned in the paper are “green lease” clauses.
The provisional conclusion is that the test used by the courts to decide the “other terms” of a renewal tenancy (which is, essentially, that set out in section 35 of the 1954 Act and interpreted in O’May) should be retained. However, the Law Commission is exploring a market-based approach whereby terms of the renewal lease are based upon the terms typically agreed in the market at the time.
This is just a brief glimpse into the various aspects of the 1954 Act that the Law Commission is looking to change – the second consultation paper runs to 524 pages across 14 chapters and 7 appendices. The paper concludes by asking 67 consultation questions to which stakeholders can respond by 16 September 2026. After this, the Commission will review responses and publish a final report setting out its conclusions and recommendations. These proposals are part of a significant overhaul of the commercial lease market, which includes the prohibition on upwards-only rent reviews in commercial leases.
At Buckles, we regularly deal with various landlord and tenant matters. Our Property Litigation department can assist in the event of a dispute involving commercial property, while our Property team can assist with leases, transfers and advice on your property portfolio. If you need advice on your property matter, do contact us for further discussion.
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