The Landlord and Tenant Act 1954 : Government Review

Introduction to the proposals to reform the Landlord and Tenant Act 1954

In March 2023, the Law Commission revealed its plan to review the Landlord and Tenant Act 1954 (“the 1954 Act”) as a result of the Government’s Department for Levelling Up, Housing and Communities’ wider initiative to “revitalise high streets and town centres, creating thriving spaces landlords, businesses and communities choose to invest in and use”.

The review aims to bring the legislation up to date with the current commercial leasehold market, with a focus on three main elements:

1. Making sure the legislation is clear and user friendly with the goal of discouraging opt-outs;
2. Ensuring leasing relationships between commercial landlords and tenants are fair and beneficial for both parties; and
3. Aligning current regulations with the needs of today’s commercial property market and supporting the use of high streets and town centres, whilst promoting the Government’s “net zero” and “levelling up” agendas.

Current law

As things currently stand under the 1954 Act, a tenant has an automatic right to remain in occupation at the end of the lease term and renew their tenancy. This is known as the tenant’s security of tenure.

• This statutory right applies unless it has been mutually agreed between the original parties to the lease that the tenant’s statutory right to security of tenure is excluded from the lease by the 1954 Act contracting out procedure.
• The 1954 Act contracting out procedure requires the landlord to serve a notice on the tenant confirming the contracting out and in response the tenant must make a formal declaration confirming that they accept that they are giving up their rights to security of tenure under the 1954 Act.

A landlord has the right to oppose the renewal of a protected lease on certain specified statutory grounds only. The common grounds cited when a landlord tries to oppose a renewal lease are:

• landlord’s intention to occupy the property;
• landlord’s intention to redevelop the property; and
• the tenant being consistently in arrears for the rent.

However, it has been notoriously difficult in practice for landlords to successfully rely on these criteria and oppose a renewal of a protected tenancy.

Concerns under review

The following concerns are currently under review.

Contracting out procedure

It is argued that the contracting out procedures are expensive, complex and there are major risks if the procedure is not correctly followed.

• Smaller tenants, particularly where they are unable to obtain legal representation, must be advised to ensure they are aware of the rights that they are forfeiting if they enter into a contracted out tenancy.
• The requirement for the tenant to make a declaration can cause issues and delays to lease completion, particularly where a tenant party is not represented by a solicitor who understands the requirements.
• Often parties will opt for the tenant to swear a statutory declaration in front of an independent solicitor as this allows for immediate completion of the lease, rather than having to wait out the 14-day cooling off period required when using a simple declaration (which need not be sworn before an independent solicitor).

It is thought that The Law Commission could consider any or all of the following:

• streamlining the contracting out procedure;
• service of notices by email and electronic signatures;
• removal of the notice and declaration procedure altogether; and
• allowing the parties to simply include a statement on the front of a contracted out lease confirming the intention of the parties that the tenancy thereby created is to be contracted out of the 1954 Act.

Landlord’s grounds

It is expected that the landlord’s grounds of opposition will be scrutinised if the 1954 Act is reformed.

One of the grounds of contention which many hold should be reviewed and updated by the commission is ground (f), which relates to a landlord’s right to oppose a renewal lease where they have an intention to redevelop the subject property.

• It is widely felt that this provision is largely outdated, with the term “redevelopment” shifting over the decades.
• For a landlord to oppose a renewal lease on this ground, case law on this topic has lead to a requirement on landlords requiring that they have to prove a settled intention to carry out substantial works which may include major structural works like demotion or reconstruction.
• This now leaves landlords who want to carry out lighter touch works to improve or repurpose the property unable to satisfy this ground to necessitate vacant possession.

Right to statutory compensation

The Law Commission’s review may also look to reform the tenant’s right to statutory compensation.

Currently, tenants under commercial leases have a right to statutory compensation if a landlord successfully opposes the tenant’s right to renew the lease at the end of the term on the basis of one of the grounds within the 1954 Act and does not grant a renewal lease.

• This can result in the landlord being required to pay significant sums in compensation to the tenant (i.e. one or two times the rateable value of the property depending on length of occupation).
• This is often felt to be an unsatisfactory position and many wish for this to be reviewed.

How this affects you

At present, the Government has indicated it will publish the consultation paper later this year. The existing legislation regarding the renewal of business tenancies continues to apply until any revisions are implemented.

Nonetheless, the 1954 Act has not been reviewed since 2003 and so legal representatives of landlords and tenants are optimistic that the review will lead to a more efficient procedure by which commercial leases can be excluded from the security of tenure provisions of the 1954 Act in the future.

If you would like to discuss any of the points raised in this blog or have any other commercial property enquiries please contact a member of the Commercial Property team.

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