As mentioned in our November 2024 Real Estate Focus, on 11 November 2024 the Law Commission published the first of two consultations on its wide-ranging review of Part II of the Landlord and Tenant Act 1954 (the LTA) (the Consultation). The Law Commission has now issued an interim statement on its proposals in the Consultation for reform of the LTA. Whilst not final, the proposals suggest that any reform to the LTA is likely to be limited in scope. 

Security of tenure 

As it currently stands, the LTA gives most business tenants (depending on the type of tenancy) an automatic right to renew their tenancies following expiry of existing tenancies (known as “security of tenure”). The LTA contains an ability for the parties to “contract-out” of security of tenure by following a specified process prior to the tenancy being entered into. 

The first part of the Consultation considered whether business tenants should have security of tenure and if so, how this should operate. The Law Commission examined four models: 

• Mandatory security of tenure; 
• No security of tenure; 
• The current contracting-out model; and 
• A contracting-in model where the default position is that tenants do not have security of tenure but can choose to contract into a statutory scheme if they wish.

It also considered whether certain types of business tenancies should remain eligible for security of tenure under the LTA. 

Provisional conclusions

The Law Commission’s has set out its provisional conclusions in its interim statement which can be summarised as follows: 

• Having received the broadest support among consultees, the existing “contracting out” model is the right model. A significant number of consultees noted that the current model strikes the best balance between landlord and tenants. Also, notable numbers were concerned that change to the current model would cause unwarranted disruption to the commercial leasehold market. 
• The list of tenancies excluded from the scope of the LTA (such as agricultural tenancies) is appropriate. Consultees generally favoured retaining the current law and the Law Commission agrees. 
• The six-month threshold for excluding tenancies from the scope of the LTA will be increased and the Law Commission intends to consult on increasing the threshold to two years in its second consultation. While consultees gave mixed views on the duration of the tenancy that should benefit from security of tenure, there was generally support for increasing the threshold to provide greater flexibility in the short-term lettings market. 

What next?

The Law Commission intends to publish a second consultation paper which will focus on the detailed and technical operation of the security of tenure regime, although its publication date is yet to be confirmed. Following this, the Law Commission’s final recommendations will be set out in a report.

This article was co-authored by Katie Phipps, an Associate in London.