Over twenty years on from the last review of the Landlord and Tenant Act 1954, the Law Commission has recently published a statement on the direction of reform following the first of two consultations looking at Part 2 of the Act.
Part 2 gives business tenants the right to renew their tenancies when they would otherwise come to an end (often referred to as “security of tenure”). Under the Act, most business tenants automatically have the right to renew. Since 1954 the Act has been updated to improve its flexibility, but it hasn’t been reviewed for many years. Many landlords and tenants now claim that aspects of the law are burdensome, unclear and out-of-date, causing unnecessary cost and delay and preventing commercial space from being occupied quickly and efficiently.
The first consultation was launched in November last year and addressed the fundamental question of whether a security of tenure regime should be retained or whether a different model should be adopted. The consultation, which ran until 19 February this year also asked whether the scope of the Act captures the right types and duration of tenancy that should benefit from security of tenure under the 1954 Act (assuming the security of tenure regime is retained).
The Law Commission launched the consultation to make sure that the Act continues to be fit for purpose in a post COVID-marketplace and the subsequent shifts in the commercial property market. The consultation provided an opportunity to modernise the current regime to ensure it reflects current market conditions, while remaining workable for both landlords and tenants.
The Commission has now issued an interim statement setting out its provisional conclusions, based on responses that it received from a range of stakeholders, including tenants, landlords, professionals and representative organisations. These conclusions will now be used to shape the content of the second consultation.
The provisional conclusions from the first consultation perhaps indicate limited appetite for change.
On the model of security of tenure, the Law Commission has provisionally concluded ‘that the existing “contracting-out” model is the right model. The arguments in favour of retaining this model were powerful, and it received the broadest support among consultees.’ It goes on to state that a ‘notable numbers of consultees were also concerned that a change in model would cause unwarranted disruption to the commercial leasehold market.’
On the question of whether the existing list of excluded tenancies (such as agricultural tenancies) is appropriate, the Law Commission provisionally agrees with consultees to keep the current law.
On whether the 1954 Act exclusion of tenancies of up to six months is appropriate, consultees called for greater flexibility in the short-term lettings market and the Commission has provisionally concluded that the six-month threshold should be increased and plans to consult on increasing this threshold to two years in the second consultation.
So, nothing particularly substantial has come from these provisional conclusions which will now form the basis of the second consultation paper and ‘will focus on the technical detail of how the 1954 Act might be reformed, in light of the provisional conclusions reached on our first consultation.’ The timings of the second consultation have not been confirmed, but it is expected later this year.
While we will await the running and the outcome of the second consultation, but from the provisional conclusions of the first it seems that any substantial changes to the 1954 Act may not be forthcoming. We will continue to monitor the situation, but even if final recommendations are made, they will be some way from becoming law.
If you have a query concerning a dispute, please contact our expert Litigation & Dispute Resolution team by emailing litigation@bishopandsewell.co.uk or by calling (0)20 7631 4141
The above is accurate as at 20 July 2024. The information above may be subject to change. The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis. The information above may be subject to change.
