Review of the Landlord and Tenant Act 1954

The iconic Landlord and Tenant Act 1954 looks to be set for change, nearly 20 years since it was last reviewed.  

The legislation provides occupying tenants with the right to remain in occupation at lease expiry, known as ‘Security of Tenure’. It was originally put in place to rebalance the power between landlords and tenants which had been created by a shortage of commercial property following World War II.

The decades old legislation has remained mostly unchanged and some in the industry feel that it no longer reflects the realities experienced in the market today. The market has changed significantly in the last 70 years and with the growth in online retailing, the prominent focus on ESG, amongst other market trends, its argued that the leases which businesses currently operate under are no longer fit for purpose and restrict space in high streets and other commercial property from being occupied efficiently.   

It is reported by the people using the legislation, that its now become over complex, inflexible, outdated, bureaucratic and out of sync with the current market. Not only that, but the court system was much quicker in 1954, whereas now resolving a contested lease renewal in court can take years. Many argue that it sometimes causes more unnecessary delay and cost for landlords and tenants, as opposed to solving disputes.

As such the Government are reviewing the legislation with the view that it will provide a more modern framework. A consultation was due to be published in December 2023, however the Law Commission is now promising to publish its consultation paper in Autumn 2024. In the meantime, we understand there are some expectations being discussed within the commercial market:

• Contracting out

Security of tenure is not going anywhere but some believe it needs to be improved and simplified. The current procedure requires a landlord to serve a warning notice on the tenant and the tenant must either make a simple or statutory declaration. There is a view as to whether contracting out is appropriate in the modern market and a likely change is to remove the requirement to obtain declarations and ‘opt into the Act’ as opposed to ‘contracting out of the Act’. 

• Grounds for opposition

The 1954 Act allows landlords to oppose lease renewals on certain grounds to enable them to regain possession of a property. Ground F enables a landlord to terminate a lease on the basis that they intend to demolish or redevelop, however it is felt that this ground no longer aligns with the MEES regulations and the Government’s ESG targets. A landlord cannot oppose a lease renewal on the ground that the property does not meet minimum EPC standards or include a landlord’s intention to conduct energy efficiency upgrades within it. There is thought that ground F should include energy efficiency upgrades or allow the court to be given the power to order renewals but require the tenant to provide the landlord access to undertake energy upgrade works.

• Turnover rents

Turnover rents are usually based on a percentage of the tenant’s turnover, and they enable landlords and tenants to share the risks and rewards of a business. They have become more common in the retail sector, particularly following the pandemic. As it stands, the provisions within the Act don’t allow the court to order turnover rents on a protected renewal, therefore it may be considered appropriate that a more modern Act accept turnover rents where there might be a convincing and justified argument.

There is a worry that the changes might make things more complicated which leads to further litigation, but overall most people seem to agree that the Act is in need of some moderate tweaks and updating at the very least. Whilst we await further information on the proposed changes, if you require advice in respect of a commercial lease and wish to discuss your options in respect of security of tenure, please get in touch with our lease advisory experts.

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