Gemma Smith and Ben Cowdry, in our Commercial Property team, discuss the potential impact of the Law Commission’s upcoming review of the Landlord and Tenant Act 1954 (“the Act”).
The Security of Tenure (“SoT”) provisions detailed in sections 24-28 of the Act regulate whether a Tenant is statutorily entitled to request a new lease once the existing term has expired. However, parties can ‘contract out’ of these provisions, meaning the tenant will not benefit from such a right.
For reasons detailed below, there have been many calls for the Act to be revisited and it is intended there will be a review of the Act last this year, with a paper set to be issued in December 2023.
Potential changes
The Government have acknowledged that many parties consciously ‘contract out’ of the SoT and they instead wish for a more practical use of the Act. Suggestions for reform include for SoT to be automatic for all business tenancies and for leases over a certain number of years. This could encourage longer term investments but it would also reduce the Landlord’s freedom to ‘contract out’.
The arguments put forward in favour of the reform are that ‘contracting out’ can be lengthy, complex and inaccessible with the requirement to provide warning notices and for a Tenant to make a statutory declaration adding a layer of bureaucracy to this practice. Consequently, many have called for a more streamlined and simplified lease renewal process to reduce avoidable delays. One recommendation included actioning warning notices via email and replacing statutory declarations with electronic signatures.
Post COVID, delays are also apparent in the courts. An objective of this forthcoming review is to alleviate this problem and one of the suggestions to do this is for specialist judges in the First Tier Tribunal to deal with claims under the Act.
Assisting the review
A report following a survey by the Property Litigation Association for its members will guide the review. The results from this survey showed that: 90% said security of tenure must stay; 76% want guidance notes/protocols to help agree lease renewals; 80% said the contracting out process could be simplified by using emails and electronic signatures; 70% said tenants should have right to renew leases based on turnover rents; and 87% said leases should be renewed on existing lease terms.
These recommendations albeit not binding, will likely impact the approach to the review.
Conclusion
This highly requested review could attract additional complexities, unintended consequences and increased litigation. However, the common consensus from property litigators is that not only is this opportunity to deal with delays and create a simpler process widely welcomed; it is long overdue.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
