Part 2 of the Landlord and Tenant Act 1954 (the 1954 Act) is a staple of commercial landlord and tenant transactions. It has transactional and litigation elements and often involves solicitors, surveyors, and valuers. Therefore, any potential reform of the 1954 Act is potentially a big deal , and the Law Commission has just launched a consultation on doing just that.
As the Law Commission says: “Part 2 of the Landlord and Tenant Act 1954 gives business tenants the right to renew their tenancies when they would otherwise come to an end, allowing businesses to remain in their premises. This legal right to a new tenancy is often referred to as “security of tenure””.
The Consultation
There will be two consultation papers. The first looks at whether security of tenure should continue at all and, if it should, whether it should do so in the same way as currently or should it be changed; the focus of the second paper will then depend on the outcome of the first.
For example, rather than a tenant having security as a default and parties having to agree to “contract out”, might the position be reversed so that the default is that a tenant does not have security of tenure as the default, but the parties could decide to “contract in” to obtain the benefit? If the outcome of the first paper was to retain contracting out, the second paper would then look at possible changes to how this is done along with other elements of the security of tenure regime. But, alternatively, if the outcome of the first paper was to abolish security of tenure, then the second paper might consider the best way to achieve this, given the possible effects on the commercial leasing market.
The scope of security of tenure is also being considered. For example, at present, all business tenancies are covered unless they are specifically excluded, and this would (for example) include farm business tenancies and mining leases; the consultation will ask whether other categories should be excluded or included. In addition, tenancies of less than 6 months are generally excluded, but the consultation will ask if this is the correct time period.
Impact on serviced offices?
I would expect an examination of the scope to consider the role of serviced offices and co-working, which arrangements sometimes can cause 1954 Act issues for operators. The introduction to the consultation alluded to this, saying that stakeholders had commented on the “potential inflexibility in the 1954 Act in terms of the renewal lease, including that it does not accommodate modern rental models”.
Do you want to take part?
Everyone is welcome to respond to the consultation and complete an on online survey. Fladgate intends to do both, but we would welcome the views of our clients in the sector so that we can provide as well-rounded a response as possible. So please get in contact with your usual contact in the Real Estate team if you would like to contribute; we would love to sit down with you for a chat to discuss it.
