The Law Commission's project
Since last summer, the Law Commission has been reviewing the workings of the security of tenure regime within Part II of the Landlord and Tenant Act 1954 (the "LTA 1954"). Its goal was to modernise the regime so that it would become a facilitating framework to support the efficient use of space in high streets and town centres, and to foster a positive relationship between landlords and tenants.
What is the security of tenure regime within Part II of the Landlord and Tenant Act 1954?
Under Part II of the Landlord and Tenant Act 1954, a tenant that occupies premises for the purposes of its business has security of tenure. This means the tenancy will continue after its expiry provided that the tenant remains in occupation, and the tenant can apply for a new tenancy. If the parties agree that this regime will not apply to a lease, they can follow a statutory procedure to "contract out" of it before the lease is granted.
Provisional conclusions
Today, the Law Commission published an interim statement setting out the provisional conclusions it has formed as a result of its 2024 consultation exercise:
- The existing "contracting out" model will be retained. The Law Commission had previously wondered if it would be easier for both parties if a "contracting-in" model were to be used instead, but many consultees felt this would be too disruptive a change. This is contrary to the consultation response from both AREF and the BPF.
- The existing scope of the regime currently excludes certain types of tenancy (such as agricultural tenancies and periodic tenancies), and consultees generally favoured keeping the current law.
- The 1954 Act currently excludes tenancies of up to six months.
The Commission has provisionally concluded that the six-month
threshold should be increased, and plans to consult on increasing
the threshold to 2 years. By contrast, many in the real estate
investor community felt on average that the minimum lease term for
a protected lease should be 5 years.
What's next?
Firstly, the Law Commission will now embark on a second consultation exercise which will focus on the scope for technical reforms of the 1954 Act. The agenda for this part of the review will include potential reform to the contracting-out procedure and to the lease renewal process. Secondly, the Commission's final recommendations will be set out in a report. If this interim statement is anything to go by, then it appears that any reforms to the 1954 Act will be adjustments to the existing scheme rather than the overhaul for which many had hoped.
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