Security of tenure: where next?

Paul Tonkin reacts to the Law Commission’s consultation on the Landlord and Tenant Act 1954. The Law Commission has published its long-awaited first consultation paper on reforming the Landlord and Tenant Act 1954. Following its comprehensive consideration of the legislation, in which it tested “the foundations of the 1954 Act” and even its very “reason for being”, the Law Commission has suggested four possible models for the security of tenure regime, ranging from the two extremes of mandatory security of tenure and the abolition of security of tenure, to the middle ground options of retaining the current “opt-out” regime, or introducing a new “opt-in” system. If security of tenure is to be retained in one of these forms, the Law Commission has also outlined possible changes to the scope of the 1954 Act. This could include limiting the protections under the Act to certain property uses (perhaps, as in other jurisdictions, limiting security of tenure to retail and hospitality), or to properties with certain characteristics (by floor area, location or rent payable). The Law Commission may also consider extending the current exclusion of tenancies granted for six months or less to 12 months, two years or even five years. While many of these options sound sensible in principle, the devil is inevitably in the detail and any new regime which creates uncertainty in the market would clearly be an own-goal. What comes next? The Law Commission has been clear that identifying these options is only the start of the process. It has published a comprehensive survey, and included clear questions within the consultation – which is open until 19 February 2025 – seeking, and encouraging, the views of landlords, tenants and property professionals. The Law Commission’s ultimate recommendations – to be set out in a follow-up consultation paper – will be based on the results of that survey and consultation. The Law Commission is mindful of the effects that any change could have on the commercial property market and the scope for unintended consequences so, to recommend departing from the status quo, they will need a “strong evidence base”. For example, the Law Commission points to the “empirical” evidence it has gathered during the consultation process that the average length of commercial leases has reduced, and the most common lease term is now five years. Some argue this means the scope of the 1954 Act should be changed to exclude such tenancies, or even that the change to shorter lease terms leaves the 1954 Act redundant, such that abolition would be the best way forward. However, as any change needs to be supported by strong evidence, the onus is on those who deal with the 1954 Act on a daily basis – and particularly property professionals – to set out their experiences to inform these changes. The Law Commission has not yet grappled with the many ways in which the mechanics of the current regime might be improved, but if the recommendation is to keep the current model or a version of it, this will follow in its second consultation paper. Again, this means that input from property professionals – who experience frustrations with various elements of the 1954 Act as a matter of routine – will be crucial. Is there still a place for security of tenure? The PLA’s own survey of its members ahead of the Law Commission’s Consultation identified plenty of areas within the 1954 Act where there is clear room for improvement, particularly in terms of the time, cost and procedural difficulties of the court process, and the need to simplify the contracting-out procedures. However, despite frustrations with the operation of the Act, there remained a lot of support for retaining a security of tenure regime, if brought up to date and made fit for purpose in the modern commercial property market. Given the Law Commission’s evident concerns around unintended consequences and the effect on the market, there is clearly something to be said for improving the current regime rather than starting afresh. If so, the onus is on those of us who use the 1954 Act to provide our input on how the process could be more efficient – whether by changing the forum for determining disputes, encouraging (or even mandating) the use of expert determination or arbitration, or empowering the courts to be able to grant renewal leases with up-to-date ESG provisions, or with turnover rents, for example. A call to action for property professionals The Law Commission’s first consultation paper is a clear call to action for the commercial property industry. The PLA looks forward to putting our members’ views to the Law Commission and working with them to reshape this 70-year-old legislation in a way which will hopefully stand the test of time for the next 70 years. We encourage other property professionals to do the same. Paul Tonkin is a partner at Hogan Lovells International LLP and chair of the Property Litigation Association’s Law Reform Committee Photo by Jon Moore/Unsplash