Nick Hopkins outlines the Law Commission’s role in helping shape the Landlord and Tenant Act 1954 to meet society’s changing needs.
In March, as part of government’s Anti-Social Behaviour Action Plan, it was announced the Law Commission would be undertaking a review of Part 2 of the Landlord and Tenant Act 1954.
There are a number of articles which explain how the right of business tenants to renew their leases when they would otherwise come to an end operates, its peculiarities and pitfalls, and what might be done to reform it. We heard some of the calls for the commission to undertake a review when we consulted about what might be included in our 14th programme of law reform. While the commission has extended the timetable for finalising that programme, we are able to take on this important work immediately as it comes to us on a reference from the government.
I could write about the issues we heard about, including questions around whether the Act makes provision for modern rent arrangements and concerns about how the contracting out regime operates. But as these are well-covered – including in the pages of EG – I would instead like to give my perspective on the work the commission has done previously, how our current work fits into that, and its importance.
The road so far
Business tenancies are commonplace – they galvanise our high streets, enabling businesses – small and large – to focus on their trades rather than the buildings and estates they trade from, to acquire appropriate accommodation when their needs change, and to finance their properties out of income rather than making significant capital investments. Almost all tenants and landlords of business premises must engage with Part 2 of the 1954 Act, whether to understand what the effect of the tenant’s right to renew its lease means to it, or to take the necessary decision and steps to contract out of that right.
It follows that Part 2 of the 1954 Act is a, if not the, key piece of commercial leasehold legislation. However, the Act is nearly 70 years old, and, like everything, it needs care and maintenance as time goes on – over the years, the commission has played a large part in that.
The commission was established in 1965 and, four years later, as part of its first programme of law reform, it made recommendations to reform Part 2 of the 1954 Act. One of the principal outcomes was a change to the Act to enable a court to approve agreements made by the landlord and tenant to exclude the right of a tenant to a new lease. That arose from a concern that landlords may, in some circumstances, prefer to leave premises unoccupied rather than let a property to a tenant with the right to a new lease once the original lease has expired.
In 1992, following fresh consideration by the commission, we published a report that made further recommendations. A key recommendation was that the court-based contracting out procedure should be replaced by one the parties could control (without any role for the court) by following a process aimed at ensuring a tenant has the information it needs to understand the right it would be giving up and clarity that it had agreed to do so. That followed from our highlighting that the court-based procedure “[did] not in practice provide the safeguard which was originally intended”.
Reform followed by way of a 2003 regulatory reform order, and, in 2006, the government undertook a review of the impact of those reforms, which resulted in some further recommendations for targeted reform, although none were enacted.
Which brings us to today. We see our current work not as a path well-trodden, but one with more still to tread. Each review – and the 1954 Act itself – is a milestone. And each milestone has been shaped by the needs of tenants, landlords and the commercial letting market leading up to it. Those needs may change over time, as experience of new iterations of the Act develops, and in response to the market context in which the Act is operating.
The next step
We have reached another milestone, and the path between this one and the last has been trying for both tenants and landlords. There have been significant changes in the commercial leasehold market, not least the enormous increase in online retail and services and the impact of world events, including the financial crisis of 2008 and the Covid-19 pandemic. The difficulties being experienced by our town centres and high streets feature regularly in the news, and there is an increasing – and necessary – focus on energy efficiency and the environment.
It is the commission’s job to keep the law under review, and it is more than a quarter of a century since the commission last undertook what it described at the time as a “periodic” review of Part 2 of the 1954 Act. Now is the right time to hold up this critical piece of legislation for inspection and to make sure it is working as it should in the modern world; in a market with a huge number of business tenancies and, on average, relatively short lease terms, anything that can be done to reduce costs, delay and uncertainty before a lease can commence and, later, on its renewal, has the potential to provide significant benefits.
The commission’s review is now under way. We have started the underlying research that will form the foundation of our review. However, as with all our projects, we rely heavily on those who use the law day-to-day, including business tenants and their landlords, their legal and surveyor advisers, and the organisations that represent those groups, as well as academics and the judiciary, to guide the way to our final recommendations.
Our next step will be to publish a consultation paper, which we aim to do later this year. We look forward to the thoughts and comments of as many of you as possible at that time to ensure the law is fit and ready for the next stage of its journey.
Professor Nick Hopkins is law commissioner for property, family and trust law
