Solicitor Edward Williams, in our Commercial Property team, explains.
The Law Commission is conducting a detailed consultation on Part 2 of the Landlord and Tenant Act 1954 (“The Act”). The purpose of the consultation is to determine if the current law works for commercial leases and to consider other options for reform (if needed).
What is Part 2 of the Act?
Part 2 of the Act gives business tenants a statutory right to remain in occupation and to renew their tenancy at the end of the contractual term subject to a limited range of exceptions. This right is commonly referred to as “security of tenure”. Most business tenants automatically have the right to renew under the Act unless, as is often the case, they agree to contract out of that right before they enter into the lease.
The process of contracting out can be dealt with either by a simple or a statutory declaration following service of a statutory notice by the Landlord. If correctly followed this process removes the tenant’s statutory right to renew. The process of contracting out does have various formalities that must be followed. If they are not followed the tenant could obtain security of tenure, which would not be ideal for the landlord if this was not part of the agreement.
What is the Problem?
The legal framework for the 1954 Act has been in place for nearly 70 years. Since its inception after the Second World War, the leasehold market has seen significant changes, such as COVID-19, the rise of online retailers and the decline of the high street. It is therefore felt by some that the Act is hindering landlords and tenants, rather than helping them. It is argued that it causes unnecessary cost and delay for both landlords and tenants and that is preventing the tenants from entering into leases quickly.
Conclusion
Whilst some worry that updating the 1954 Act may lead to increased complexity, it's widely acknowledged that modernisation is necessary. Balancing the needs of landlords, tenants, and contemporary market practice will present numerous challenges for the Law Commission. It will therefore be interesting to see their conclusions in the consultation paper (which is due to be published in Autumn 2024).
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
