Landlord & Tenant Act 1954 – time for fundamental reform?

The Consultation Paper ('the Paper') considers matters of principle rather than detail and is primarily concerned with the fundamental issue of whether tenants of business premises should have security of tenure. If the security of tenure regime under the Act is to be retained, the Paper also considers the possibility of how its scope should be reformed i.e. what types of tenancy should be covered by the Act.

In terms of the fundamental issue, the Paper considers four different possible models of security of tenure, namely:

1. Mandatory security of tenure. Under this model, all qualifying business tenancies would have security of tenure and (as was the case between 1954 and 1970) it would not be possible to contract out of the Act.
2. No statutory security of tenure. This model would involve the abolition of security of tenure – in other words, business tenants would have no right to a renewal tenancy.
3. Security of tenure which the parties can contract in to. This model would reverse the current default position of underlying security of tenure for qualifying business tenancies and require the parties to contract in to security of tenure. If they did not, the lease would not be protected by the Act.
4. Security of tenure which the parties can contract out of. This model reflects the current law: if the parties to a qualifying business tenancy do not want security of tenure to apply, they can follow a prescribed statutory procedure to contract the tenancy out of the Act before the lease is completed.

The Law Commission makes clear that it does not favour or support at this juncture any of the above models: as its label suggests, the purpose of the Paper is for the Law Commission to consult widely on the models and ensure that it has as strong an evidence base as possible to reach a conclusion which can then be recommended to the Government in due course.

Turning to the possible reform of the extent of the Act if statutory security of tenure is retained, the Paper asks whether the existing scope of the Act is appropriate in a number of respects:

• Use. The Paper asks whether the current excluded uses (e.g. agricultural, mining) should be reduced or extended.
• Duration. As matters currently stand, an initial tenancy of less than 6 months is excluded from security of tenure. The Paper asks whether this period could be extended to 12 months or 2 or even 5 years.
• Other characteristics of the tenancy. If specific criteria are not satisfied e.g. relating to the GIA of the premises, the location of the premises (the Paper notes that in certain Australian states, statutory protection is in part linked to whether a shop is situated in a retail shopping centre) or the level of rent payable, the tenancy in question might fall outside of security of tenure.
• Competing regimes. A tenancy might be excluded from the protection of the Act on the basis of another statutory regime which performs a similar function. The Paper refers to the Electronic Communications Code, the statutory regime which protects electronic communications equipment and infrastructure. The Law Commission's previous consultation on the ECC highlighted consensus that the dual protection under the ECC and the Act was 'unacceptable' resulting in transitional provisions which see the phasing out, albeit over potentially many years, of the double layer of security of tenure.
• Energy production sites/key infrastructure. Tenancies which require significant capital investment on the tenant's part might benefit from bespoke contractual mechanisms to renew the lease rather than the one-size-fits-all provisions of the Act.

The Law Commission acknowledges that any reform of the scope of the Act which goes beyond the change of an existing exclusion should not be undertaken lightly. Its view is that the most compelling reason for change is where there is a competing statutory regime already in place – the existence of two competing regimes can create uncertainty and complexity for those who have to deal with them.

Unless the outcome of the responses given is that there should be no security of tenure regime, the Law Commission expects its second Consultation Paper to drill into the detail of the Act and consider specific lease renewal issues such how and in what forum disputes should be resolved; the grounds on which a landlord can oppose renewal ; statutory disturbance compensation and the terms of the renewal lease and the rent payable.

So what next? The consultation period for online responses to the Paper is open until 19 February 2025. We believe this is a watershed moment : the Act is a cornerstone of the commercial leasehold market in England and Wales and any reform could have far reaching consequences for all of us who deal with the security of tenure regime on a daily basis. Many stakeholders with whom we work are likely to have their own informed views on the various questions raised in the Paper. We will be very happy to discuss matters further with you and assist in shaping your responses - in the first instance, please do get in touch with one of our team below.