The Law Commission has recently finished the first part of its consultation on options for reforming the security of tenure provisions in the Landlord and Tenant Act 1954 – a cornerstone of commercial property law.
At the heart of the consultation was a fundamental question: should business tenants have security of tenure (ie a legal right to renew their leases)? If so, should that right be automatic? Should parties be able to opt out, as they can now — or should the system shift to opt in? Or should we leave the whole thing as it is?
It will be interesting to see what the Law Commission ultimately recommends. However, it is probably safe to assume it will opt for keeping security of tenure in some shape or form. If it does, there are various ways the current statutory processes and protections could be improved, and the second part of the consultation will ask for views on the detail of how any proposed structural reforms will work in practice.
In the meantime, we have already seen two high-profile cases go to court this year over the question of whether a tenant should be entitled to a renewal lease – MVL Properties (2017) Ltd v The Leadmill Ltd [2025] EWHC 349 (Ch); [2025] EGLR 9 and Spirit Pub Company (Managed) Ltd v Pridewell Properties (London) Ltd (Claim No K02ED95). The first case saw a decision handed down in favour of the landlord. The second was a win for the tenant.
The principles laid down by the 1954 Act are finely balanced, and there is a vast body of case law that provides guidance to owners and occupiers of commercial property. The recent, contrasting, decisions in MVL Properties and Spirit provide support for the proposition that the Act is neither too tenant-friendly nor too landlord-friendly; whether this statement is true or not is open to debate. But most people would agree that the processes in the Act would benefit from modernisation and increased flexibility.
An easy win
One change that I would advocate for is more flexibility in relation to the way: (a) tenancies are terminated by landlords; and (b) new tenancies are requested by tenants. In particular, the timescales within which a section 25 notice or a section 26 request can be served. This would be a relatively minor change, requiring minimal amendments to the 1954 Act, but it would, I think, have a disproportionately large and positive overall effect.
Currently, a notice must be served “not more than 12 nor less than six months before” the proposed termination date of the tenancy in question. Therefore, the earliest a landlord can give a tenant notice to terminate their tenancy is 12 months before the expiry of the lease’s contractual term. Similarly, the earliest that a tenant can formally request a renewal lease is 12 months before their current lease is due to expire.
The above situation is an anomaly in that, generally, where leases contain a break right, or option to renew, they usually stipulate a minimum amount of notice that must be given to exercise the right in question (such as, “not less than six months”). However, they will rarely specify a maximum amount of notice, which, if exceeded, would invalidate the notice. If a landlord or tenant is clear about their plans for the future, and they wish to give the other party a long period of notice, there would not ordinarily be anything to stop them from doing so. This is not the case with the 1954 Act.
The problem with this is that only once a notice has been served can the parties commence court proceedings to enforce their rights. For example, if a landlord requires vacant possession of a property for redevelopment, it can only issue court proceedings to terminate the tenant’s occupation in the 12 months immediately preceding the end of the tenant’s lease.
Contested lease renewal cases will usually take at least 12 to 18 months to get to trial from the date of issue. Therefore, landlords tend to be under pressure to commence court proceedings very soon after serving notice, if they wish to ensure that they regain possession of a property on a date which is near the expiry of the contractual term of the lease in question.
Similarly, if a tenant knows they want to renew at the end of their contractual term, they should be able to formally request a new lease more than 12 months before the end of their term, and, if renewal negotiations break down, they should have the ability to apply to the court for a determination at an earlier stage.
Therefore, my recommendation would be to amend the 1954 Act to allow notices to be served “not more than two years nor less than six months before the date of the termination”. This should reduce the amount of litigation relating to lease renewals under the Act, as it would alleviate some of the inevitable time pressure caused by the need to commence proceedings soon after giving notice. It would also bring the statutory renewal process more in line with commercial practice.
Plotting the way forward
Would this change have made a difference in either MVL Properties or Spirit? It is impossible to say with certainty, as the parties in each case will have had their own commercial drivers. Either way, providing both landlords and tenants with greater clarity as to their positions at the expiry of a lease’s term cannot be a bad thing.
Other aspects of the existing regime that are ripe for reform include:
Contracting out – the procedures for contracting out of security of tenure could be simplified. For example, it seems especially archaic, given modern remote working practices, to have solicitors attending each other’s offices to swear statutory declarations.
Turnover rents – it is bizarre that the court cannot impose a rent which is based on a tenant’s turnover at a particular property, when this is common practice in many parts of the market, and it would be good to see greater flexibility in the renewal terms that the court is able to award.
Environmental standards – clear guidance is needed as to how the rights of both landlords and tenants should appropriately be balanced in relation to duties arising under the Minimum Energy Efficiency Standard legislation, green leasing practices and other environment obligations.
Forum for disputes – the courts are not best placed to facilitate quick and cost-effective dispute resolution, and bespoke arbitration or proceedings in the First-tier Tribunal would be far more suitable in many cases moving forward.
There are many possible directions for reform, and the above represent just a few ways the 1954 Act could be updated. The next stage of the Law Commission’s consultation will offer an early glimpse into its thinking, and where it is likely to land on key issues. The first consultation saw strong engagement across the market, and it would be great if that momentum continues.
Commercial landlords and tenants have their own perspectives on the Act and its impact on their respective markets. It is important their voices are heard. This is a rare – perhaps once-in-a-generation – opportunity to help shape the future of commercial leasing.
Michael Duncan is of counsel at RPC
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