Law Commission backs ‘contracting-out’ model of security of tenure

The Law Commission has issued an interim statement in the wake of the first phase of its consultation on potential reform of commercial leasehold and the Landlord and Tenant Act 1954, indicating its support for retention of the current “contracting-out” model of security of tenure. The statement says the Law Commission has “provisionally concluded that the existing ‘contracting-out’ model is the right model” of security of tenure for commercial property. It had consulted on three alternative models: a “contracting-in” alternative, abolishing security of tenure altogether, or making it mandatory with no opportunity to contract out. However, explaining the commission’s provisional conclusion, the statement says: “The arguments in favour of retaining this model were powerful, and it received the broadest support among consultees. “A significant number of consultees told us the current model strikes the best balance between landlords and tenants. Notable numbers of consultees were also concerned that a change in model would cause unwarranted disruption to the commercial leasehold market.” The interim statement sets out the commission’s provisional conclusions following its first consultation on the 1954 Act, carried out between 19 November 2024 and 19 February 2025. These provisional conclusions will shape the next phase of its work, and provide the basis of the second consultation paper at a later stage. During its first phase consultation, the commission also asked whether the existing list of excluded tenancies under the 1954 Act (which includes agricultural tenancies) is appropriate. Its interim statement adds: “Consultees generally favoured keeping the current law, and the Commission provisionally agrees.” In addition, the 1954 Act excludes tenancies of up to six months. The consultation asked whether this is appropriate, and, according to the interim statement, the commission has “provisionally concluded that the six-month threshold should be increased”. In its forthcoming second consultation paper, it expects to consult on increasing the threshold to two years. The second phase will focus on the technical detail of how the 1954 Act might be reformed, including potential reform to the contracting-out procedure. The commission’s final recommendations for reform, aimed at ensuring the 1954 Act works for the modern commercial leasehold market, will then be set out in an eventual report. The commission received more than 160 responses to the first consultation, from a wide range of stakeholders, including landlords, tenants, professionals, and representative organisations.  Read more on the project here.  The Law Commission is advertising for up to two lawyers to work on its high-profile commercial leasehold law reform project. The closing date for applications is 9 June, and full details are available here.