The Law Commission’s project, looking to reform Part 2 of the Landlord and Tenant Act 1954 (Act), has produced its second consultation paper. This focusses on modernising the 70-year-old Act’s security of tenure regime to adapt to the ongoing transformation of the commercial leasehold sector, including changing tenant expectations, flexible occupancy models, and sustainability considerations.
Their first paper recommended that there should be no change to the existing ‘contracting-out’ model, on the basis that this strikes an appropriate balance between landlord and tenant, but that the threshold for tenancies to be included in the scheme should be increased from 6 months to two years, to provide greater flexibility in the short-term lettings market.
What is set out in Part 2 of the Landlord and Tenant Act 1954?
- Statutory security of tenure for tenants (the right to remain in occupation) after the lease expires).
- The right to renew a business lease.
- Limited statutory grounds for landlords to oppose a renewal lease.
- This is being reviewed through the lenses of efficiency, ease, wide usage, and desire to establish greater landlord-tenant relationships.
Headline proposals in the second paper:
- As above increasing the threshold, currently 6 months, from which tenancies can benefit from security of tenure – the consultation considers two options, Option A 2 years and Option B 1 year.
- Excluding most periodic tenancies from the protection granted by the Act.
- Simplifying the contracting-out process.
- Rent determination for renewal tenancies to be reflective of the modern market – with discussions over ‘rent-free fit-out’ periods and turnover rents (where rent is based on revenue generated).
- Amending Ground F (redevelopment) in the grounds to oppose a renewal tenancy, to include refurbishment and retrofitting, in order to allow works that comply with MEES Regulations.
- Improving the dispute resolution mechanism. It has been noted that dealing with disputes in the county courts has led to concerns over costs and delays. Three options, focused on court, tribunals, or a combination of the two, are being considered.
Potential impact on tenants:
- Raising the threshold from 6 months may mean greater difficulty for start-ups and growing businesses in gaining renewal protection without committing to longer leases.
- The alteration of Ground F may mean it is easier for landlords to oppose a renewal lease, but alternatively, could lead to greater building standards in line with improved environmental requirements.
- Processes could be cheaper – whether this is simplified contracting-out or more efficient dispute resolution.
Potential impact on landlords:
- Increased flexibility in the short-term lettings market.
- Increasing the 6 month threshold could mean landlords are better able to offer longer short-term leases without giving the tenant statutory protection.
- Exclusion of periodic tenancies could mean a reduction in inadvertent grants of protected leases.
- Proposed widening of Ground F may make it easier for those planning redevelopment or retrofitting.
- Processes could be cheaper – whether this is simplified contracting-out or more efficient dispute resolution.
The consultation will remain open for responses until 16th September 2026 if you would like to add your views.
If you would like more information on any aspect of the proposed changes, please contact us.