Security of Tenure – could change be on the way?

Associate, Stacey Rees

Security of Tenure

The Landlord and Tenant Act 1954 grants commercial tenants a statutory right to obtain a renewal lease and continue to occupy a property when their original tenancy comes to an end. This right is known as “security of tenure”.

The landlord and tenant can however follow a procedure prescribed within the legislation before the tenancy begins to exclude the security of tenure rights – this is a process known as “contracting out”.

If a landlord and tenant have “contracted out” a tenancy from the legislation, when the original tenancy ends, the tenant will have no statutory right to seek a renewal lease. If the tenant wished to remain in their property, the tenant would need to enter into negotiations with the landlord who may (or may not) decide to grant one.

The Law Commission Consultation

The Law Commission has published an initial consultation on the right to renew business tenancies under the Landlord and Tenant Act 1954. This is open for comments until 19 February 2025. Options being considered include the complete abolition of the legislation, substantial reform or no change at all.

This initial consultation is the first of two consultation papers – the first consultation deals with whether business tenants should have security of tenure and, if so, how it should operate.

The second consultation exercise will either:

1. focus on how the legislation should be reformed if it is decided that the legislation should be retained; or
2. focus on how the security of tenure regime may be achieved if it is decided that the legislation should be abolished.

First Consultation

The first consultation also sets out in detail four possible approaches to the reforms. These being:

1. keep the Landlord and Tenant Act 1954 but abolish contracting out – so all tenancies would be protected and the parties cannot chose to contract outside the legislation;
2. keep the Landlord and Tenant Act 1954 but the default position is that there is no statutory security of tenure – the parties however may “opt in” to the security of tenure regime;
3. no statutory security of tenure at all – with the legislation being abolished entirely; and
4. keep the current Landlord and Tenant Act 1954 position – with contracting out being permitted.

Additional considerations

The consultation document also considers the scope of the current legislation and whether certain types of tenancies should benefit from the security of tenure regime over certain other types of leases, depending on:

• the duration of the tenancy;
• use of the premises;
• other characteristics of the tenancy or property – for example the size, location or rent payable.

Second consultation

It is reported that the second consultation (which is also expected during the course of 2025) will focus on the contracting out process itself, possible changes to the grounds for a landlord to oppose a renewal, the terms of a renewal lease and streamlining the current litigation process.

Timescales for change?

Given the potential wider impact on business tenancies and the potential for uncertainty whilst any new model is introduced, both Landlord’s and Tenant’s will be watching closely for the outcome of the consultations. It is worth highlighting however that substantial legislative reforms can take many years to come into force so if there are going to be significant changes to the security of tenure regime it may be some time before they take effect.

Queries?

If you have any queries or require any advice concerning security of tenure or any other landlord and tenant matter, please contact info@kuits.com or 0161 832 3434.