On the 19th February 2025 the consultation period for the Consultation Paper on “Business Tenancies: the right to renew”, published on 19th November 2024, will come to an end.

The Consultation Paper considers, amongst other things, the security of tenure provisions under part 2 of the Landlord and Tenant Act 1954 and whether it should be granted to business tenants and, if so, how it should operate in practice.

1954 Act – Security of Tenure – What is it

When a commercial lease is granted, provided the parties haven’t ‘contracted-out/opted-out’, the tenant has a statutory right to remain in the property or issue a notice requesting another business tenancy is granted. This is subject to the Landlord not issuing a statutory notice for the tenant to vacate or successfully opposing the tenants renewal notice on limited grounds.

To contract out, the parties must specifically do so and follow the protocols of the 1954 Act with the landlord or their solicitor issuing the statutory notice which is followed by the tenant making either a:

• Simple declaration (provided the notice was issued at least 14 days before the commencement of the lease); or
• Attending a firm of solicitors to undertake a statutory declaration.

The Law Commission sees this as outdated and in need of review.

Proposals under the Consultation Paper

The Law Commission has presented 4 models for the future of the security of tenant:

1. The “Contracting-out Regime” – this is the current position as set out above

2. No Security of Tenure – the security of tenure provisions are completely abolished leaving landlords and tenants to negotiate contractual options to renew.

Pros:

• This model provides more certainty and freedom to landlords

Cons:

• This model offers the least protection and certainty to tenants, particularly those tenants whose business planning extends beyond the lease term.

3. A “Contracting-In Regime” – this removes the security of tenure by default under the current regime if the parties have not validly ‘contracted out’. The parties would instead have to contract-in.

Pros:

• This would streamline the process for contracted-out leases;
• It would provide landlords with a stronger negotiating position on other terms if the security of tenure is requested.

Cons:

• Less protection for tenants as they will not have security of tenure by default
• This may disadvantage tenants who are not aware of the need to ‘opt-in’

4. Mandatory Security of Tenure – the parties cannot ‘opt-out’ and security of tenure will be the default position of all new business tenancies.

Pros:

• Greatest level protection for tenants
• Simplification of renewals as the security of tenure will not need to be negotiated

Cons:

• This could initially weaken the Landlord’s negotiating position;
• This could lead to landlords only offering licences to occupy or other short-term options which do not have the benefit of the 1954 Act which could be to the detriment of all parties.

The consultation will end on 19th February 2025. Once the Law Commission has analysed the responses received and reached conclusions on the issues the Consultation Paper raises, the Law Commission will publish a second, technical Consultation Paper.