The Law Commission is conducting a comprehensive review of how current security of tenure provision’s function. It has proposed four possible models for reform:
- Abolishing the 1954 Act entirely
- A ‘contracting in’ regime, where security of tenure applies only if the parties opt in
- A ‘contracting out’ regime, where security of tenure applies unless the parties opt out (the current system)
- Mandatory security of tenure
The second consultation, due later in 2025, will collate industry feedback and explore potential legislative changes.
The Law Commission seeks views on commercial security of tenure
Under Part 2 of the Landlord and Tenant Act 1954, most business tenants in England and Wales have the right to renew their tenancy when the current lease ends, with limited grounds for landlords to refuse. With 55% of UK commercial property rented, the Law Commission is consulting on whether this system remains effective for today’s commercial lease market.
Flexibility, fairness, and clarity
Propertymark supports the overall framework of the 1954 Act but argues that reform is necessary. In our response to the consultation, we advocate for a contracting in model, where tenants with leases of seven years or more are automatically included in the Act’s protections. Those with shorter leases should have the option to opt in if they need security.
To prevent unfair claims against tenants at the end of their lease, Propertymark recommends landlords should be required to provide an inventory at the start of the tenancy. This would help resolve disputes over maintenance and dilapidations fairly. In addition, with non-domestic properties needing to meet an EPC rating of B by 2030, the law must clarify who is responsible for compliance—landlord or tenant, to ensure fairness.
Commercial agents
NAEA Commercial members will find a wide range of valuable resources specifically tailored to support their efforts in commercial property sales and lettings.
Supporting SMEs
Propertymark believes that smaller businesses should be able to negotiate security of tenure where needed rather than be subject to an inflexible system. By modernising contracting methods, the government can strike a balance between supporting business growth and protecting property owners’ rights.
Furthermore, the lease renewal process under the current system is slow and costly, leading to unnecessary court cases. Reforming the Act could reduce disputes and support more efficient negotiations between landlords and tenants.
Auctions to help solve problem of vacant commercial properties
Regulations come into force on 2 December 2024 which will allow local authorities in England to auction off the leases of persistently empty high street shops. The UK Government states that the scheme will breathe life back into town centres and drive local growth and opportunities. Propertymark welcomes the move, but we would like to see more detail on which areas will benefit the most, how the powers will be funded, and how they will be used in practice by councils.
What’s next?
Propertymark will continue engaging with the Law Commission and the UK Government to advocate for a balanced, modernised approach to commercial lease security.
The 1954 Act has stood the test of time and remains vital for many commercial tenants. However, in its current form, it is costly, outdated, and does not meet the needs of modern businesses. Our consultation with commercial property agents across our membership has made it clear that reform is essential. We call on the UK Government to consider meaningful changes to improve flexibility while maintaining essential protections.
