Welcome to the first edition of RED Alert of 2025.
Also featuring in this month's update:
Introduction
Business tenants in England and Wales currently benefit from 'security of tenure', a legal right introduced in the Landlord and Tenant Act 1954 (the 1954 Act) which provides them with the ability to continue occupying their property at the end of an existing lease, subject to certain conditions.
Decades later and amidst criticisms that the current system is outdated, the Law Commission launched a new two-part consultation process last year, the first of which was published on 19 November 2024 and can be found here.
Given that any change from the current position would have a significant impact on the commercial leasehold market, we have outlined the key alternative models and further considerations on potential reform to the law that have been proposed below.
The four models – reforming security of tenure
The consultation lines up four potential models for consideration:
| Proposed models of security of tenure |
| 1 |
No security of tenure – abolishment of the 1954 Act |
Tenants will have no security of tenure, but the parties can still agree to an option at their own discretion. |
| 2 |
A "contracting-in" regime |
The default position will be that the tenant has no security of tenure, but the parties can decide to "opt in" so that the tenant will gain security of tenure. |
| 3 |
A "contracting-out" regime (the current position) |
This is the default position at the moment, which means that the parties can "opt out" of the 1954 Act so that the tenant does not have security of tenure. |
| 4 |
Mandatory security of tenure |
Security of tenure would be compulsory and the parties cannot agree to contract out of this regime.
|
In tandem with the consultation, the Law Commission is requesting feedback from businesses to determine whether there is still appetite for security of tenure and, if so, what model should be in operation and why.
Changing the scope of tenancies to be protected?
The second part of the consultation paper looks at whether reform should be made to the type of tenancies that are currently excluded from the 1954 Act. This list currently consists of tenancies that are granted for less than six months and specific types of tenancies (eg agricultural tenancies).
The paper raises the question of whether there should be further exclusions which could be based on:
- the use of the property
- specific characteristics of the tenancy (eg rent payable, location)
- the existence of another regime performing a similar protective function.
For example, an extension or reform to the current minimum tenancy term required for the 1954 Act to apply (being six months) would provide a meaningful improvement as it means that short-term business tenants would no longer need to perform the cumbersome contracting-out procedure.
Our comments
The Law Commission's consultation into the 1954 Act was highly anticipated and demonstrates a desire for the current legal framework to be modernised.
As stated above, any departure from the current position in relation to security of tenure will likely have a great impact on the current leasehold market for both landlords and tenants of commercial premises. A different regime may better align with fluctuating market conditions to address the needs of both landlords and tenants under business tenancies.
The Law Commission has so far remained neutral on its position in terms of which security of tenure model would be best suited, which means that the responses to the consultation will be highly impactful in helping them draw conclusions as to what would be the preferred regime and any changes that need to be made to the existing law.
The second part of the consultation paper is set to be published after the consultation period closes on 19 February 2025, which will be based on the responses and feedback received. In the meantime, if you have any queries regarding the 1954 Act or the consultation, get in touch with a member of our team.
