Decades-old laws affecting business tenants to be reviewed

The Law Commission of England and Wales has today announced that it will review the key piece of legislation used by businesses who lease shops, offices and other commercial premises.

The new review, commissioned by the Department for Levelling Up, Housing and Communities (DLUHC) and forming part of Government’s new Anti-Social Behaviour Action Plan, will examine part of the Landlord and Tenant Act 1954 – a central piece of legislation that gives businesses the right to stay in their premises for longer.

Businesses operating in high streets, towns and other commercial centres rely heavily on securing the right premises to grow and meet customer needs. A large proportion of businesses rent their warehouses, factories, shops and office spaces, rather than owning the freehold. Estimates have suggested that around half of all UK commercial property is rented.

For over half a century, the Landlord and Tenant Act 1954 has given businesses the right to acquire a new lease of their premises after their existing one has run out – known as “security of tenure”.

It is now nearly 20 years since the legislation was last reviewed. Those who rely on the Act report that it is inflexible, bureaucratic and out of date, causing extra cost and delay for both landlords and tenants – as well as preventing space in high streets and other commercial centres from being occupied quickly and efficiently.

Following the rise of online retail, the 2008 financial crisis and recent pandemic, the landscape for businesses has also shifted significantly – leading to growing calls for laws to be modernised.

Today, many landlords and businesses entering into leases decide to exclude “security of tenure”, leaving businesses without their longstanding right to a new lease.

The Law Commission’s review will explore problems with the existing law with a view to developing a modern legal framework that is widely used rather than opted out of, and that helps businesses to grow and communities to thrive.

The review will also seek to support the long-term resilience of high streets, by making sure current legislation is fit for today’s commercial market, while also considering Government priorities, including net zero and levelling up.

Commenting on the review, Professor Nicholas Hopkins, the Law Commissioner for Property, Family and Trust Law, said:

“The right to a new lease has been available to many business tenants for over half a century. Whether they operate in shops, cafes, or factories, many businesses have been afforded the security of being able to continue in the same premises after their lease runs out.

“But it’s clear that the law is in need of modernisation. Parts of the current legislation are overly complex and bureaucratic, which is holding back businesses and the high streets and town centres they operate in.

“Our wide-ranging review of this aspect of the Landlord and Tenant Act 1954 is a fresh opportunity to ensure that the law is simple and works for landlords, businesses and communities.”

Minister Dehenna Davison, Parliamentary-Under Secretary for Levelling Up, said:

“For too long commercial tenants and landlords alike have been held back by a legislative framework that is outdated and out of sync with the realities of the sector today.

“With this review of the legislation, we hope to remove the barriers that inhibit growth by modernising the legal framework and making sure it is fit for today’s market, supporting the efficient use of space and fostering a productive, beneficial leasing relationship between landlords and tenants.

“In achieving these goals this review will help to create a leasing framework that supports the Government’s priorities of growing the economy and aiding the regeneration of our town centres. The review will also help to make leasing clearer and more easily accessible to small businesses and community groups, reducing the growing number of vacant properties on our high streets and the anti-social behaviour that comes with it.”

Next steps

The Law Commission aims to publish a consultation paper by December 2023.

Visit the project page for further information.