The Law Commission Review Of Business Tenancy Security Of Tenure

• Law Firm: Gatehouse Chambers
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Contracts and Commercial Law, Landlord & Tenant - Leases
• Author: Mr Carl Brewin
• Published date: 10 May 2023

Part II of the Landlord and Tenant Act 1954 (the Act), in force for nearly 70 years, gives most business tenants the valuable right to renew tenancies which would otherwise come to an end, known as security of tenure. S.24 of the Act protects a tenant by providing that their existing tenancy will continue unless terminated in accordance with the Act. A tenant is given the right to renew through service of a statutory notice either from the landlord (s.25 notice) or the tenant (s.26 notice). A landlord can only oppose a new tenancy by establishing one or more of the seven grounds of opposition (s.30(1)(a) to (g), which are: (a) tenant's failure to repair, (b) persistent delay in paying rent, (c) other substantial breaches by the tenant, (d) availability of suitable alternative accommodation, (e) the tenant is a sub-tenant of part of the property originally let and the landlord can obtain a better rent by re-letting the property as a whole, (f) the landlord's intention to demolish or reconstruct the premises, and (g) the landlord's intention to occupy the premises himself either for the purposes of his business or as a residence.) A tenant is entitled to statutory compensation from the landlord if grounds (e), (f), or (g) are made out.

The last significant update to the legislation came into force in 2004, when, amongst other things, it became easier to contract out of the Act's provisions as the need to obtain a court order was removed. Contracting out of the Act's provisions is attractive to a landlord. If a tenancy is contracted out of the Act's provisions then the tenant has no right to stay in the premises at the end of the term, no right to compensation from the landlord, and no right to ask the Court to fix the rent or the terms of a new tenancy if the landlord offers one.

In March 2023 the Department for Levelling Up, Housing and Communities asked the Law Commission to review the Act's provisions, as aspects of it are thought to be burdensome, unclear, out-of-date, causing unnecessary cost and delay, and they are getting in the way of modern commercial practices. The Law Commission's terms of reference seek to create a legal framework that is widely used rather than opted out of, that is, not limiting the rights of parties to reach their own agreements, supporting the efficient use of space in high streets and town centres, and fostering a productive and beneficial commercial leasing relationship between landlords and tenants. The consultation paper...