The age of legal reform in the property sector – is the 1954 Act next?
On the 19th November 2024, the Law Commission published its Consultation Paper (the “Paper”), which concerns Part 2 of the landlord and tenant Act 1954 (or as it is well known : “the 54 Act”).
The Law Commission considers, for a variety of reasons, that it is critical for it to regularly consult on the 54 Act (noting that it has already twice carried out consultations leading to changes, in 1969 and in 1992), given that it is such an important piece of legislation and heavily impacts the commercial property sector (a multifaceted and complex sector, worth £900 Billion). It has been over 20 years since the law in this area was considered and this is a sector that has seen great political and economic challenges as well as social change. The Law Commission considers that its reviews are essential, particularly so following periods of change in the commercial leasehold market and trends in the lengths/terms of commercial leases (e.g. following the Pandemic).
The Paper can be found here: Law Commission Documents Template
A summary of the Paper can be found here: Business Tenancies: the right to renew: Summary of Consultation Paper 1
Call for comment from the industry stakeholders:
Given the importance of the sector and potential impact on the economy, any departure from the existing regime would have to be carefully considered and justified based on strong evidence.
The Paper therefore encloses a detailed questionnaire aimed at landlords, tenants and other interested property professionals.
The Questionnaire appears at Annex 4 of the Paper.
The paper considers four potential models of security of tenure:
The “fundamental issue” being examined by the Paper is whether tenants of business premises should have statutory security of tenure and, if so, how it should operate.
It examines the Pros and Cons of four potential models of security of tenure:
No Security of Tenure:
- Tenants have no security of tenure;
- A Landlord/Tenant can still agree an option.
Security of Tenure which parties can contract in to (A “Contracting In” model)
- The default position is that tenants have no security of tenure.
- The Landlord and Tenant can opt in so that tenant does have security of tenure.
Security of Tenure which the parties can contract out of (A “Contracting Out” Model)
- The default position is that tenants have security of tenure.
- The landlord and Tenant can “opt -out” so that the tenant does not have security of tenure
Mandatory security of tenure (note: the Paper examines the regimes of other jurisdictions and notes that no other country operates such a system in regards to the commercial property sector)
- Security of tenure is compulsory;
- The landlord and tenant cannot agree to “contract out” of the security of tenure regime
The Paper also considers, if security of tenure is to be maintained, whether the protections could be limited according to certain property uses or the features of the subject premises (e.g. by rent payable, location and floor area).
Deadline to comment
The consultation closes on 19th February 2025 and will be followed by the Law Society’s recommendations in a follow up consultation paper.
2025 will prove to be yet another highly significant year for the Property Sector, with ever evolving legislation impacting a variety of sectors and practices (including the Right to Rent, Building Safety, Energy Efficiency and also High Street Rental Auctions).
If you would like to discuss any of the matters raised in this article please contact Adam Vidler
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Adam Vidler
Senior Associate