Encouraging start to the 1954 Act consultation

Cluttons lease advisory team reflect on its submission to the Law Commission’s 1954 Act consultation.  

On 19 November 2024, the Law Commission published the first consultation forming part of the review of the 1954 Act.  

We believe it is an encouraging start in order to help assess whether the current legislation reflects the commercial leasehold market today.  

The first paper aims to understand how the 1954 Act is operating in the current commercial leasehold market and what sort of security business tenants should have today.  

The paper considers four models:  

1. Mandatory statutory security of tenure – meaning there would be no ability to contract out. Whilst this provides greater protection to tenants, it may be more problematic for landlords.   

2. No statutory security of tenure (abolish the 1954 Act) – this means no tenancies have security of tenure, although parties could still agree a contractual option to renew.  This may help avoid the costs and time incurred by the statutory procedure, but any loss of security of tenure would be alarming to business tenants.  

3. A ‘contracting in’ regime – where the default is no security of tenure but the parties could contract in. This would be the reverse of the current process.  

4. A ‘contracting out’ regime – this retains the current model in place today, where the default is that tenancies have security of tenure but the parties can contract out. 

This stage of the consultation focuses on the opting in and opting out process and the Law Commission invited all landlords, tenants, professionals and other stakeholders to complete a survey by 19 February 2025.  

Our lease advisory team completed the survey which asked a number of questions. For example; 

• Does the decision to contract out affect the rent payable?  

• Does the existence of the 1954 Act affect the willingness of landlords to let premises? 

• What are the costs and disadvantages or renewing protected and unprotected tenancies?  

• How much does it cost?  

• How long does it take?  

• What difference does it make to the duration of a renewal claim if the claim is opposed or unopposed?  

The answers to these questions in our view very much depend on the specific asset type, market conditions, supply and demand factors, landlord’s intentions, and overall complexity of the lease renewal. Additionally, important considerations would also include, the level of rent in question, whether it’s a protected tenancy, when negotiations are triggered and whether its opposed or unopposed. In our answers we were able to provide specific detail to cover these circumstances.  

Currently, the 1954 Act requires all leases to be within the security of tenure provisions unless a lease is specifically excluded. Some of the models being explored by the Law Commission would reflect a major change in how leasing is undertaken and the renewal process. Any change to the legislation, however small, will impact the way we approach negotiations and the strategic advice we are able to deliver to our clients, as well as our ability to leverage on negotiations whether that be for a landlord or a tenant.  

As a lease advisory team, we are excited to follow the updates on the consultation process and would be interested to hear from our clients and colleagues within the industry on their opinions of the proposed changes.  

We are looking forward to reviewing the second technical paper when published and will continue to share our thoughts as the consultation progresses. wish to discuss your options in respect of security of tenure, please get in touch with our lease advisory experts.

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