Law Commission Launches Fundamental Review of Business Tenant Rights

On the 19 November 2024, The Law Commission has embarked on its most significant review of business tenancy rights in over three decades, by publishing the first of two consultation papers. At its core lies a crucial question: should businesses have the legal right to stay in their premises when their lease expires, and if so, how should this protection work in today’s commercial world?

The current system, governed by the Landlord and Tenant Act 1954, automatically gives business tenants what’s known as “security of tenure” – the right to renew their lease when it expires. While this has been the law since 1954, since 1969 landlords and tenants have been able to agree to “contract out” of these protections before signing a lease.

“The commercial property landscape has changed dramatically since the last major review of this legislation,” explains the Law Commission. “We’re seeing shorter lease terms, new rental models, and different ways of using commercial space. It’s crucial to ensure our legal framework keeps pace with these changes while maintaining a fair balance between landlord and tenant interests.”

The Commission presents four possible models for the future. The first would make security of tenure mandatory, removing the ability to contract out. This would provide maximum protection for tenants but could potentially make landlords more hesitant to let their properties. The second would abolish statutory renewal rights entirely, leaving everything to market forces and contractual agreements – similar to systems used in some other countries.

A third option would create a “contracting-in” model where tenants would have no automatic rights but could opt into protections. The fourth option maintains the current system where tenants have rights by default but can agree to give them up.

The review extends beyond these models to examine whether certain types of business tenancies should be treated differently. Should protection vary based on property size, location, or rent levels? Should a small high street shop have the same rights as a major distribution centre?

These questions have profound implications for businesses across the country. Consider a family-run restaurant that has built up a loyal customer base over years – should they have an automatic right to renew their lease, or should this be entirely at their landlord’s discretion? Equally, should a landlord planning to redevelop their property have to navigate complex statutory procedures to regain possession?

“We recognise that this is a complex area where different stakeholders may have very different perspectives,” the Commission notes. “That’s why we’re conducting this review in two phases. This first consultation focuses on the fundamental model we should adopt. Once we’ve established that, we’ll launch a second consultation looking at more detailed aspects of reform.”

The consultation runs until 19 February 2025, with more information on the Law Commission’s website with stakeholders able to respond through an Online Survey, email, or post. The Commission particularly wants to hear from businesses of all sizes about their experiences with the current system – its costs, benefits, and challenges. To facilitate this, they’ve launched both a formal consultation and a detailed survey about market experiences.

For property professionals, this review offers a rare opportunity to influence the future of commercial property law. For business owners and landlords alike, it’s a chance to help create a system that works better for everyone in the modern commercial world.

The outcome could reshape commercial property relationships for decades to come. Whether you’re a landlord, tenant, or advisor, now is the time to make your voice heard.

Full details of the consultation and how to respond can be found on the Law Commission’s website.