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Landlord and Tenant Act 1954 – proposals for reform

An iconic piece of legislation which has remained largely unchanged since it was passed almost 70 years ago is to be reviewed under Law Commission proposals.

The Landlord and Tenant Act 1954 (“1954 Act”) affects business owners and occupiers throughout England and Wales and is relevant to the vast majority of commercial lease transactions.

Why now?

A large number of businesses rent their properties, whether industrial, offices, retail or otherwise.  The Law Commission states that “those who rely on the [1954] Act report that it is inflexible, bureaucratic and out of date, causing extra cost and delay for both landlords and tenants resulting in empty properties that cannot be quickly relet.

Many leases are “contracted out” so tenants lose their right to renew a lease and the Law Commission wants to achieve a “modern legal framework that is widely used rather than opted out of”.

A reminder as to what “contracted out” means?

For those leases to which it applies, the 1954 Act allows tenants to stay in occupation after expiry of the initial lease term and gives tenants a statutory right to request a new lease.  However, landlords and tenants can agree that these statutory rights will not apply to a lease by following a procedure widely known as “contracting out”.  In other words, tenants will be entitled to the statutory rights under the 1954 Act unless their lease is “contracted out”.

This is the aspect of the 1954 Act with which landlords and tenants are perhaps most familiar and it is often discussed at the outset of a transaction, at the heads of terms stage.  However, the 1954 Act can also have significant implications at the end of a lease if it is not “contracted out”.

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What are the proposals?

Whilst it is not clear what parts of the 1954 Act will be reviewed it is likely the Law Commission will consider key aspects of it including:

  • A tenant’s ability to stay in occupation beyond the initial lease term and right to request a new lease.
  • The “contracting out” procedure and whether it is appropriate in the modern market.
  • A landlord’s grounds to terminate a protected lease and regain possession of its property.
  • The various notice procedures, including a landlord’s notice to terminate the lease, a tenant’s notice requesting a new lease or a tenant’s notice terminating its lease.
  • The court’s ability to settle the lease terms if the landlord and tenant cannot agree.
  • Compensation payable by a landlord to its tenant where the landlord opposes the grant of a new lease.

When can changes be expected?

This review is at a very early stage.  The Law Commission will undertake a pre-consultation review of the 1954 Act and identify any possible changes.  It intends to publish its consultation paper by December 2023.  There will then be a consultation period before a final report is made to the relevant government department so it may be some time before we see any changes. It will be interesting to see how the property market reacts.

If you have any questions about any this topic, or any other matters relating to commercial property please do get in touch with Richard Noble or another of our expert Commercial Property lawyers.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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Richard Noble

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