Should your right to renew business tenancies be changed?

Businesses are being asked if they think the law relating to the right to renew business tenancies should be changed.

Stephanie Johnson, Senior Associate Solicitor, provides an update.

The Law Commission has published a consultation paper considering how the right to renew business tenancies, set out in Part 2 of the Landlord and Tenant Act 1954 (and which is called “security of tenure”), is working and whether it meets the needs of business tenants and landlords.

The current law gives business tenants the right to renew their tenancies when they expire, under certain conditions. It was introduced following the Second World War, making the legal framework nearly 70 years old.

While the law has been updated in the past – notably to allow tenants to “contract out” of the right when the tenancy is granted – it is now around 20 years since the last significant updates were made.

The Law Commission says that during that time, the world around us and the way people work has changed and so has the commercial leasehold market.

In its consultation paper, the Commission asks if the current “contracting out” model of security of tenure remains the right approach, or if a different model of security of tenure is now needed.

The Commissioner for Property, Family and Trusts, Professor Nicholas Hopkins said: “The existing model of security of tenure was introduced decades ago, when the commercial leasehold market looked very different from how it does today.

“In our first Consultation Paper we ask whether the model is still fit for purpose, or if it’s time for a change.  We are keen to hear from all of those affected by the law.”

Minister for Local Growth, Alex Norris said: “We want to give local businesses the tools they need to breathe new life into our high streets and town centres.

“That is why we have asked the Law Commission to carry out this important work so we can bring forward 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 consultation will consider:

• The pros and cons of the current “contracting-out” model of security of tenure, and three alternative models: mandatory security of tenure, abolition of security of tenure and a “contracting-in” model.

• Whether the types of business tenancy which can benefit from security of tenure are the right ones.

The Commission would like to hear from businesses, landlords, their representative bodies and advisors, and anyone else affected by the legislation. A summary of the consultation paper is available here and the full consultation paper is available here.

The consultation is open until 19 February 2025 following which the Law Commission will consider responses.

For more information about the issues raised in this article or any aspect of commercial property law please call Stephanie on 01228 516666 or click here to send her an email.