ARTICLES OF INTEREST
THE LAW COMMISSION CONSULTATION PAPER: BUSINESS TENANCIES AND THE RIGHT TO RENEW
On 19 November 2024, the Law Commission published its first consultation paper considering whether a tenant's right to renew a business tenancy (security of tenure) under Part 2 of the Landlord and Tenant Act 1954 (the LTA 1954) is still fit for purpose. This is the first of two consultations, and it looks at the fundamental question of whether business tenants should have security of tenure and, if so, how it should operate. The scope of the second consultation will depend upon the outcome of the first.
The current position allows business tenants to renew their tenancies, provided that Part 2 of the LTA 1954 is not excluded or "contracted out" of the tenancy. The paper sets out the following alternative models and considers their advantages and disadvantages:
1. No Security of Tenure
This model would abolish Part 2 of the LTA 1954, thereby depriving tenants of their default right to renew a tenancy. However, a landlord and tenant could still decide to contractually agree on an option for renewal.
This gives landlords certainty on the tenancy's expiry date and lowers the expenses associated with the statutory security of tenure process. However, tenants receive the least protection under this model, as the market and the landlord's willingness will determine their ability to agree on a renewal option.
2. A "Contracting in" Regime
As with the first alternative model, the default position under the "contracting in" regime is that tenants will not benefit from security of tenure. However, the landlord and tenant can agree to opt into Part 2 of the LTA 1954 so that a tenant has security of tenure.
This model allows tenants and landlords to maintain the flexibility to choose whether or not to include security of tenure, as is the case under the current "contracting out" regime in the LTA 1954. However, the absence of default security of tenure provides tenants with less protection compared to the current regime. This may pose a challenge for tenants, as landlords will have more bargaining power when negotiating whether a tenancy should be "contracted in."
3. A "Contracting Out" Regime
This model would resemble the current law, so that the default position would be that the tenant would have security of tenure but the parties may contract out.
4. Mandatory Security of Tenure
This model would make a tenant's entitlement to renew a tenancy a mandatory right for all business tenants. The parties would be prohibited from "contracting out."
This provides the highest level of protection for business tenants and could simplify the process of entering into business tenancies, as parties would not have to negotiate on whether a tenant security of tenure applies. However, this model would significantly weaken the bargaining power of landlords and provide them with no certainty as to when a tenancy will come to an end.
The Law Commission is also consulting on the scope of the LTA 1954. Currently, certain types of tenancy are excluded from the scope of the LTA 1954 (such as agricultural tenancies), and most tenancies granted for six months or less are also excluded. The consultation paper suggests that it would be possible for tenancies to be excluded from the LTA 1954 based on (for example) the use made of the property, the duration of a tenancy, the existence of another regime performing a similar protective function or other characteristics of the tenancy or the property, such as the floor space, the location of the property or the rent payable. The paper indicates that the Law Commission's current view is that the most likely areas for change are where there are overlapping regimes or (presumably extending) the six-month period referred to above.
The Law Commission has not yet published its second consultation paper on the reform of Part 2 of the LTA 1954.
UK INTRODUCES NEW RIGHT TO MANAGE REGULATIONS FOR MIXED-USE BUILDINGS
In March 2025, new regulations came into effect as part of the Leasehold Reform Act 2024, which marks a significant milestone for property management in mixed-use buildings. These changes aim to clarify and extend the right to manage (RTM) principles previously applicable primarily to residential properties, thereby enhancing tenant control and improving operational transparency in buildings combining residential, commercial and retail spaces.
Under the new framework, qualifying mixed-use buildings can now benefit from a streamlined process to obtain RTM status. This empowers leaseholders to form RTM companies, enabling them to assume responsibility for managing essential services, such as maintenance, insurance and security. The rationale behind this legislative update is to level the playing field and ensure that all stakeholders—regardless of the nature of occupancy—have a fair opportunity to influence the management and upkeep of their buildings. The previous threshold, whereby the RTM could not be exercised if the internal area of any nonresidential part of a building exceeded 25% of the total floor area, was increased to 50%.
Advocates for the reform highlight the potential for increased accountability and cost efficiency, as leaseholders take an active role in governance. However, critics caution that mixed-use properties often involve more complex arrangements than purely residential buildings, which could lead to challenges in harmonising the interests of diverse occupants. In response, regulatory bodies have provided detailed guidance and support to facilitate smooth transitions and resolve potential conflicts.
Overall, the new regulations are a progressive step towards modernising property management in the United Kingdom, fostering better communication between tenants and managers, and ultimately ensuring that mixed-use buildings are run in a transparent and equitable manner— all while adapting to the evolving needs of urban environments.
THE TERRORISM (PROTECTION OF PREMISES) ACT 2025
The Terrorism (Protection of Premises) Act 2025, commonly known as Martyn's Law, received Royal Assent on 3 April 2025. This legislation mandates that certain venues and events in the United Kingdom implement measures to reduce vulnerability to terrorist attacks.
Scope and Requirements
- Applicable venues: The Terrorism (Protection of Premises) Act 2025 targets venues with a capacity of 200 or more people, including shopping centres, hotels, schools and stadiums.
- Standard duty (200–799 capacity): Responsible entities must assess terrorist risks, train staff, establish emergency procedures and inform attendees of security measures.
- Enhanced duty (800+ capacity): In addition to standard requirements, venues must implement alert mechanisms and publicly visible security plans.
Implementation Timeline
The Terrorism (Protection of Premises) Act 2025 will come into force after a 24-month implementation period, providing time for venues to comply with new obligations.
Enforcement and Penalties
Noncompliance can lead to significant fines: up to £10,000 for smaller venues and up to £18 million for larger venues.
This legislation aims to enhance public safety by ensuring venues are prepared for potential terrorist threats—reflecting lessons learned from past incidents.
GOVERNMENT PROPOSALS AIM TO TIGHTEN RULES ON EPCS AND MEES COMPLIANCE
The UK government has outlined new proposals to strengthen compliance with Energy Performance Certificates (EPCs), Energy Performance of Buildings (England and Wales) Regulations, and Minimum Energy Efficiency Standards (MEES), which target landlords of commercial properties.
Under the suggested changes, landlords will be required to submit valid EPCs and accompanying recommendation reports to a new digital compliance database upon letting or selling a property. This marks a shift toward greater enforcement and transparency, addressing concerns that EPC obligations have historically lacked robust oversight.
In parallel, proposed MEES reforms would require all nondomestic rented buildings to reach a minimum EPC rating of "B" by 2030, with interim milestones—including a proposed minimum "C" rating by 2027. The proposals include tougher penalties for noncompliance, potentially reaching £150,000, and improved data sharing between enforcement bodies.
These changes reflect the UK government's broader strategy to decarbonise the built environment and meet net-zero targets. For landlords, they signal the need for urgent investment in energy efficiency upgrades and a closer review of property portfolios.
While industry groups welcome the clarity and ambition, concerns remain around the cost and feasibility of retrofitting older stock—especially amid economic uncertainty. However, the direction of travel is clear: Sustainability is no longer optional, and regulatory momentum is building.
If implemented, these reforms will reshape commercial property strategy in the United Kingdom, placing energy efficiency at the forefront of both compliance and value preservation.
BIODIVERSITY: A GROWING REQUIREMENT FOR DEVELOPERS
INTRODUCTION
The importance of looking after our planet is a real and necessary focus in today's world. It is for this reason that the UK government made the bold move in 2024 to introduce into legislation a requirement aimed at ensuring that when new developments occur in England, the overall state of wildlife habitats is left in a measurably better condition than before. The required gain in biodiversity is known as the "Biodiversity Net Gain" (BNG).
The legislation catches almost all developments from residential, commercial, institutional, retail and, later this year, infrastructure. For developers, complying with BNG requirements presents both challenges and opportunities, contributing positively to environmental sustainability while aligning with evolving legal frameworks and making a profit while factoring in the additional cost.
This article will explore the legal dimensions of BNG compliance for developers, outlining key requirements, available options for developers and the strategies they can employ to meet these obligations.
THE LEGISLATION
The concept of BNG emerged from international commitments, such as the Convention on Biological Diversity and various national policies. In England; Schedule 14 of the Environment Act 2021 amended Schedule 7A of the Town and Country Planning Act 1990 to insert the requirements on BNG. The legislation came into force on 12 February 2024.
The biodiversity objective in the legislation is to ensure that the biodiversity value attributable to a development exceeds the predevelopment biodiversity value of the on-site habitat by at least 10%. The government reserves the right to change the percentage from time to time.
The biodiversity value is calculated in units known as "Biodiversity Units." The calculation for any development site is made by the sum of the biodiversity value: (a) on-site after the development, (b) offsite but allocated to the development, and (c) any biodiversity credits purchased from the government known as "Statutory Biodiversity Credits." This sum must represent a BNG of 10% compared to the biodiversity at the site prior to the development.
Compliance with the obligation is a precommencement planning obligation, meaning that no work can commence on the development until the condition is satisfied.
Exemptions do exist but are limited; these are listed on the government website as: developments with planning permission granted prior to 12 February 2024, small-scale developments (less than 25 square metres), small home extensions, and developments exclusively of dwellings of nine or less on a site which has an area no larger than 0.5 hectares.
ASSESSMENT OF THE BNG NEEDED
The development site needs to be assessed by an ecologist and an impact assessment report produced to calculate the "Biodiversity Units" (including the 10% gain) that will be needed for compliance with the planning condition.
Once a developer knows the Biodiversity Units required, a plan can be developed (the Biodiversity Gain Plan) to set out how the Biodiversity Units are to be provided. It is this document that will need to be submitted to the local planning authority (LPA) and approved before the development work can begin. The LPA has eight weeks from receipt to review the Biodiversity Gain Plan to confirm that the planning condition has been satisfied. Once the LPA confirms the approval of the Biodiversity Gain Plan and all the other pre–commencement conditions, only then can work commence on the development.
It should be noted that in Europe there are similar requirements. The EU Habitats Directive was adopted in 1992, which sets out obligations to protect species and habitats across its member states.
OPTIONS FOR DEVELOPERS TO ACHIEVE BNG COMPLIANCE
The legislation acknowledges that it is not always possible to obtain the required BNG on-site and allows the developer to purchase Biodiversity Units or Statutory Biodiversity Credits as an additional and alternative means of compliance. There are therefore the following three options for developers to comply with the BNG requirements:
- Option 1: Increase the biodiversity on the development site.
- Option 2: Increase the biodiversity through the purchase and allocation of Biodiversity Units on alternative sites.
- Option 3: Purchase Statutory Biodiversity Credits from the government.
The order is important, as it sets out the BNG hierarchy. The developer must try to satisfy the BNG through options 1 and 2 before it applies for the purchase of credits in option 3; if necessary, all three options can be combined, but the order must be followed.
Option 1: On-Site Increase in Biodiversity
Increasing on-site biodiversity is the method of compliance that the government would like to see, as this retains the biodiversity of an ecosystem in the location that the development is being built. The design of the development will be important, and the size of the site will determine how possible it is to use this option.
We anticipate seeing an increase in the use of green infrastructure: introducing green roofs, green walls and permeable surfaces to reduce habitat loss; restoring degraded habitats to enhance biodiversity; establishing wildlife corridors and green links to connect fragmented habitats; and implementing sustainable drainage systems to improve water management while enhancing biodiversity.
Cost
The cost associated with the on-site increase in biodiversity will depend on the type of habitat that needs to be developed. It is anticipated that the initial cost would be lower than the purchase of Biodiversity Units or Statutory Biodiversity Credits, but the ongoing management costs would need to be factored into the project.
Process
The developer is to include in its Biodiversity Gain Plan the details of the maintenance and management of the BNG on-site for at least 30 years from completion of the development. It is also to enter into a planning condition or legal agreement with the LPA as part of the planning process to provide a binding covenant in respect of the provision of the BNG on-site.
Unlike the process outlined in relation to option 2, where careful contracting and timing of actions taken between the developer and unit provider are required, option 1 requires less coordinating, thanks to the self-management/creation of the units, and no registration of the site or allocation of units. Option 1 could therefore be a quicker process.
Option 2: Purchasing Biodiversity Units
The sale of Biodiversity Units generates funding for those charities, organisations or individuals developing the biodiversity of land. The land being increased in biodiversity is referred to as the "Biodiversity Gain Site."
Biodiversity Units can be purchased from habitat banks (where an organisation already owns land which is being developed to increase its biodiversity, thus generating Biodiversity Units) or from bespoke projects (where an organisation tailors the Biodiversity Unit need for a development to a specific site).
The providers of the Biodiversity Units have to provide a 30-year plan for the Biodiversity Gain Site showing the creation and maintenance of the biodiversity. The land on which the biodiversity is improved, or a new habitat is created, will be subject to covenants provided to the LPA to comply with the 30-year plan.
The relationship between the developer and the habitat creator exists in respect of the agreement to purchase the Biodiversity Units and the allocation of them to the development. It can cease to exist once the Biodiversity Units have been purchased and the planning condition has been satisfied.
Cost
The cost of Biodiversity Units will be determined by the open market and are expected to fluctuate between areas and be affected by availability and nature of the biodiversity. The average price of one Biodiversity Unit is currently considered to be approximately £30,000.
The legislation uses multipliers to determine the effect of the spatial or temporal impact on the creation of the new biodiversity. For example, if the Biodiversity Gain Site and the development site are not in the same or the neighbouring LPA or National Character Area, then the number of units needed will be increased under the spatial risk multiplier. The intention is clear: Biodiversity enhancement as close to the development location as possible should be prioritised where on-site enhancement is not achievable.
It is for this reason that we are seeing developers seek out the availability, on a national scale, of providers of Biodiversity Units and in some cases setting up relationships with them ahead of choosing specific development sites in the hope of expediting the creation and registration of Biodiversity Units once specific developments are defined. These agreements are effectively commercial contracts for the purchase of Biodiversity Units documenting the obligations on the providers in relation to the creation, registration and maintenance of Biodiversity Units, as well as their allocation to the developer accompanied by timescales and payment terms.
Process
It is helpful for a developer to understand the process needed for the owner of the Biodiversity Gain Site in order for them to sell the Biodiversity Units, as this will affect the timeline.
1. Registration of the Site: The Biodiversity Gain Site needs to be registered on the Biodiversity Gain Site Register held by Natural England (a public body, sponsored by the Department for Environment, Food & Rural Affairs). This requires the provider to have provided to Natural England:
- a conservation covenant or S.106 obligations in respect of the Biodiversity Gain Land;
- the metrics for the Biodiversity Gain Site (how many Biodiversity Units and of what type it will have);
- the 30-year habitat plan;
- proof of ownership; and
- a plan of the site.
Assembling these required documents can take many months. The registration itself can take six weeks from submission of the application. For a developer needing a quick purchase, buying Biodiversity Units from the owner of an already-registered site will be quicker.
2. Allocation of the Biodiversity Units: The allocation of the Biodiversity Units also has to be registered on the Biodiversity Gain Site Register. This cannot be done until there is a planning permission decision notice for the development, as the decision notice needs to be provided to Natural England.
The process of the registration of the allocation can also take six weeks. It is the allocation confirmation that is needed by the developer to be included in the Biodiversity Gain Plan to be submitted to the LPA.
3. Payment for the Biodiversity Units: Once the cost of the Biodiversity Units has been agreed, the timing of the payment will need to be negotiated. There are competing demands and risks here: The developer may not want to pay for the Biodiversity Units until the allocation has been registered in case the provider does not fulfil its obligations or it changes its mind on the development. The provider will want to be paid for the Biodiversity Units as soon as possible; it may want to be paid before the application to register the Biodiversity Site or before the application for the allocation is submitted. We are currently seeing deposit payments being negotiated into contracts to split the payment and, therefore, the risk between the parties.
Option 3: Purchasing Statutory Biodiversity Credits
If there are no other viable options for the developer, as a last resort, a developer can purchase Statutory Biodiversity Credits.
Cost
To deter developers from using this as an easy way to comply with the requirements, the government has applied a spatial multiplier to the price of the Statutory Biodiversity Credits, so that for every Biodiversity Unit needed, a developer has to buy two Statutory Biodiversity Credits.
The price of one Statutory Biodiversity Credit varies depending on the type of habitat loss that needs to be replaced; it starts at £42,000 for low distinctive habitats, such as grassland, and increases for replacement of specific distinct habitats, with the replacement of peat lakes being the highest cost at £650,000. It is possible to buy part of a Statutory Biodiversity Credit if a full Biodiversity Unit is not needed. The government plans to review the table of prices at six-month intervals.
Process
There is a Government Gateway website in which the developer needs to register an account. The developer then makes an application for the purchase of the Statutory Biodiversity Credits. It needs to provide evidence of why it has not been possible to satisfy the BNG requirement through options 1 and 2. It can take up to eight weeks to approve this application.
If the application is approved, the developer will receive an invoice on the Government Gateway website for the total price of Statutory Biodiversity Credits. The developer then pays the invoice. Once they have been purchased, the developer can submit proof of purchase with the Biodiversity Gain Plan to the LPA.
CONCLUSION
The intentions behind the legislation are clear: The preservation and enhancement of local biodiversity is the priority. The biodiversity gain hierarchy clearly illustrates this.
Compliance with BNG regulations is therefore something that developers need to approach in a deliberate and meaningful manner. The BNG requirement is going to need developers to engage at an early stage of development with how the biodiversity is to be replaced and increased by 10%. It is not something that can be left to the last minute.
On-site solutions may be the best outcome if they can be designed into the development. However, we anticipate that the purchase of off-site Biodiversity Units is likely to be the most sought-after solution to satisfy the requirement. If this is the case, then a search of local providers and developing and documenting relationships with those providers will be important for securing Biodiversity Units specific for a development. The negotiation of allocation timings and payment terms with providers of Biodiversity Units will develop as more are bought in the market.
The last resort of buying Statutory Biodiversity Credits will be costly, and therefore, it is likely that developers will not want to use these due to the impact on the profitability of a development.
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