Last November I covered recent developments in the drive towards modernising the Landlord and Tenant Act 1954. For many years, there have been concerns that the existing right to security of tenure under the Act is no longer fit for purpose in the modern business and economic landscape.
The Law Commission has now issued an interim statement setting out its initial conclusions following a significant consultation.
The consultation document focused particularly on the right to renew business tenancies, as well as its scope. It has been reassuring to see that it reveals just how seriously the Commission was taking the concerns. It clearly remains committed to modernising the commercial leasehold market. The consultation closed on 19 February.
It set out four possible options for change:
- No security of tenure – effectively abolishing the 1954 Act, though the landlord and tenant could still agree an option
- A contracting in regime – to the effect that the parties could opt in to give a tenant security of tenure
- A contracting out regime – the parties can opt out, maintaining the status quo
- Mandatory security of tenure – compulsory security of tenure. The parties may not agree to an opt out
The Commission received in excess of 160 detailed responses from a wide range of stakeholders, ranging from landlords and tenants, to professionals and other organisations.
Those responses have formed the Commission’s provisional conclusions which are to “shape” the next phase. This will culminate in a second consultation in the near future.
Interim conclusions
For now, the Commission’s provisional views are that:
- The existing contracting out model is the right model of security of tenure. The Commission said it strikes the best balance between landlords and tenants and several consultation responses expressed concern that change could unnecessarily disrupt the commercial leasehold market
- The existing list of excluded tenancies is appropriate. The 1954 Act excludes certain tenancies, including agricultural tenancies. For the most part, those responding to the consultation wanted no change to the list and the Commission agrees for now
- The 6-months duration limit for tenancies that are excluded will be increased. Generally, tenancies for up to six months have no security of tenure. With support among respondees to the consultation for an increase to enable greater flexibility in the short-term lettings market, the Commission intends consulting on increasing it to two years.
What’s next?
The second consultation is expected later this year and will focus on the technical detail of potential reform. The Commission will then publish its final report and recommendation.
In the longer term it appears doubtful that the 1954 Act will be consigned to history. That said, these interim conclusions suggest meaningful change is coming which will support modern business practices; and strike a better balance between the parties’ respective powers and responsibilities.
If you need more information and support concerning commercial business tenancies, please contact Phil Hutsby-Hunt by emailing phil.hutsby-hunt@mfgsolicitors.com or calling our Birmingham office on 0121 2367388.
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