The Landlord and Tenant Act 1954 is a polarising piece of legislation. Whether you love it or hate it, it has been a cornerstone of the commercial leasing market in England and Wales for more than 70 years. The 1954 Act provides commercial tenants with the right to remain in their leased properties after the lease expires and allows either party to trigger a renewal process.
Tenants are entitled to a renewal lease on similar terms at a market rent unless the landlord can demonstrate one of the statutory grounds of opposition. If the landlord demonstrates a no-fault ground of opposition, the tenant is entitled to statutory compensation on exit. Both parties can agree to contract out of the security of tenure regime through a notice and declaration procedure.
Models of security of tenure considered
In the first stage of its project, the Law Commission invited views on four models of security of tenure in England and Wales:
- Retain the current contracting out process.
- Implement a contracting in process where leases automatically have no security of tenure unless agreed otherwise.
- Abolish security of tenure entirely.
- Make security of tenure mandatory with no ability to contract out.
Why is the legislation under review?
The previous government’s Anti-Social Behaviour Action Plan and the Law Commission’s terms of reference for reviewing the 1954 Act suggest the Act is not widely used and that it is responsible for many vacant shops on high streets. The minister for local growth, Alex Norris, has also said the government is looking for a legal framework that is fit for purpose, boosting economic growth and productivity while making sure small businesses can occupy property more quickly and better understand their rights.
The Law Commission issued its first consultation on proposed reforms to the 1954 Act on 19 November 2024. The consultation closed on 19 February 2025. Its aim is to understand the extent to which the Act is used and the potential impact of reform on the commercial leasing market and, in particular, on our high streets. It is also looking to determine which model of security of tenure should be recommended (see box, top right) and whether the scope of the Act, and the current types of leases that cannot have security of tenure, should change.
Law Commission’s initial view
On 4 June 2025, the Law Commission announced its provisional conclusions. It confirmed, as anticipated, that a significant number of consultees were concerned about unwarranted disruption to the current commercial property market, and retaining the current model of “contracting out” received the most support. Views were mixed as to whether short-term leases (currently at six months) should be excluded from the Act.
The Law Commission’s provisional recommendation is to retain the current “contracting out” model and not expand the current types of tenancy that are excluded from the 1954 Act. However, it does recommend further consulting on extending the threshold for tenancies able to benefit from security of tenure under the 1954 Act from six months to two years.
A second consultation paper will now follow, detailing how any recommended model or change in scope would work, reviewing the current contracting out process and proposing other technical changes to the Act.
Key challenges of the 1954 Act
Landlords argue the Act restricts their ability to manage their portfolios actively and achieve effective placemaking. Securing vacant possession from a protected tenant is lengthy and difficult, requiring landlords to demonstrate “bona fide” development proposals and pay statutory compensation. This can make it harder to redevelop and improve the environmental credentials of existing buildings.
The renewal process is costly and open to abuse by either party to delay proceedings. Tenants, while benefiting from business security, also face challenges such as the high cost and slow process of lease renewals.
The industry is split on whether reform is needed. Responses from the Property Litigation Association, the British Property Federation, the City of London Law Society and the British Retail Consortium showed varying opinions on the current contracting out model and whether a move to a new model or changing the scope of the Act is needed (see table bottom right).
Tenant’s perspective
The Act was designed to protect business operators and encourage investment. Now, 70 years on, this protection remains crucial for many tenants. Many small occupiers may not be aware of the Act and instead rely on landlords to offer fair transactions. While cumbersome perhaps for well-represented landlords and tenants, the current contracting out process at least informs tenants of the potential to have security of tenure. The British Retail Consortium found only 11% of its member leases were contracted out, with reasons including the need for flexibility at major transport hubs and agreements to surrender rights early for redevelopment. In the retail and hospitality sector, which contributes more than 5% of GDP, 1954 Act security of tenure underpins retailer decision-making on store investment. Store success is not just linked to an individual retailer but to footfall, co-retailing and landlord and local authority investment in locations, such as providing free or reduced-rate parking, events and activities. This means longer-term lease commitments can be challenging to make.
It is an industry already under immense pressure from rising operating costs. Therefore, it is not unusual for retailers to reassess viability of new stores in as little as two to five years after entering a local market. Changing the security of tenure provided by the 1954 Act would prevent investment in sites and affect high streets and the wider economy. Currently, tenants can invest in promising new locations and stores where these factors come together on a speculative, short-term basis, knowing they have the right to renew their leases or receive compensation if renewal is opposed by their landlord.
Desired reforms
While most retailers wish to retain the existing security of tenure model, they recognise the need for targeted improvements. Areas for improvement include:
- Cost and time: The renewal process is costly and time-consuming. A forum dedicated to property disputes, similar to the Covid-19 rents arbitration scheme, could be more appropriate than the existing County Courts system.
- Recovery of overpaid rents: The 1954 Act does not adequately address the repayment of interim rents when market rents decrease. Delays in renewals exacerbate this issue.
- Competent landlord and tenant: Ambiguity about who is the competent landlord and tenant (and therefore legally permitted to deal with the lease) during the renewal process leads to increased legal costs. Delays in land registration contribute to this problem.
- Grounds of opposition: Greater transparency and early disclosure of a landlord’s intention to redevelop or occupy the property could avoid costly court proceedings.
- Environmental objectives: Clarity around green lease clauses and the fair apportionment of environmental responsibility between landlords and tenants would be beneficial.
Why the 1954 Act still matters
The retailer view is that the 1954 Act is not broken. Security of tenure is essential to many occupiers’ business models and often underpins significant investment in creating exciting trading spaces. Tenant statistics indicate that the Act is therefore widely used.
Any proposed changes to the Act must be fully considered. The consequences could be significant for the commercial property market, particularly for industries such as retail, hospitality and leisure. These industries deliver over £350bn in turnover and provide millions of jobs. Retailers are already under pressure from increased costs, and further disruption is unwelcome.
Nikki Powell is a partner and retail specialist at Womble Bond Dickinson (UK) LLP
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