Landlord and Tenant Act 1954 – time for a change?

In March 2023, the Law Commission of England and Wales announced that it would review a key piece of legislation used by businesses who lease shops, offices, warehouses and other commercial premises.

The review, commissioned by the Department for Levelling Up, Housing and Communities (DLUHC), will examine Part II of the Landlord and Tenant Act 1954 – a central piece of legislation that gives businesses “security of tenure”, or, to put it plainly, the right to remain in their premises at the expiry of the fixed term of the lease.

In essence the Act protects Goodwill – businesses operating in high streets, towns and other commercial centres rely heavily on securing the right premises to grow and meet customer needs and once trade is established from a particular location, the 1954 Act protects the tenant’s right to remain at the property, even after the fixed term lease has expired.

The issue

It is now nearly 20 years since the legislation was last reviewed. There is a feeling that it is inflexible, bureaucratic and out of date, causing extra cost and delay for both landlords and tenants – as well as preventing space in high streets and other commercial centres from being occupied quickly and efficiently.

Today, many landlords and businesses entering into leases decide to exclude “security of tenure”, leaving businesses without their longstanding right to a new lease.

In order to exclude security of tenure, a landlord either has to serve a 14 day warning notice on a tenant, or a tenant has to swear a statutory declaration in front of another solicitor, thus leading to delays and additional costs. The procedure has to be repeated if the documentation changes in the period between service of the landlord’s notice and legal completion of the lease.

The aims

The Law Commission’s review will look at issues with the existing law with a view to developing a “modern approach” that is adopted rather than “opted out of”, and that helps businesses to grow and communities to thrive.

The review will also “seek to support the long-term resilience of high streets, by making sure current legislation is fit for today’s commercial market, while also considering Government priorities, including net zero and levelling up”.

Professor Nicholas Hopkins, the Law Commissioner for Property, Family and Trust Law, said:

“The right to a new lease has been available to many business tenants for over half a century. Whether they operate in shops, cafes, or factories, many businesses have been afforded the security of being able to continue in the same premises after their lease runs out.

“But it’s clear that the law is in need of modernisation. Parts of the current legislation are overly complex and bureaucratic, which is holding back businesses and the high streets and town centres they operate in.

“Our wide-ranging review of this aspect of the Landlord and Tenant Act 1954 is a fresh opportunity to ensure that the law is simple and works for landlords, businesses and communities.”

Minister Dehenna Davison, Parliamentary-Under Secretary for Levelling Up, said:

“For too long commercial tenants and landlords alike have been held back by a legislative framework that is outdated and out of sync with the realities of the sector today.

“With this review of the legislation, we hope to remove the barriers that inhibit growth by modernising the legal framework and making sure it is fit for today’s market, supporting the efficient use of space and fostering a productive, beneficial leasing relationship between landlords and tenants.

“In achieving these goals this review will help to create a leasing framework that supports the Government’s priorities of growing the economy and aiding the regeneration of our town centres. The review will also help to make leasing clearer and more easily accessible to small businesses and community groups, reducing the growing number of vacant properties on our high streets and the anti-social behaviour that comes with it.”

The outcome of the review remains to be seen, but with a market moving more definitively toward protecting tenants’ interests rather than landlord ones and with a focus on getting more tenants into empty units and helping business thrive, the writer wonders whether sweeping changes can and will be made.

Next steps

The Law Commission aims to publish a consultation paper by December 2023. At that point, all stakeholders in commercial property will be invited to comment, and given the potential significance of reforms, we would encourage interested parties to do so. We will monitor any updates and will publish further information when it becomes available.

Kate Palmer is a Partner in Keelys Real Estate team.

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