'54 Reform - Security of tenure for commercial tenants remains largely intact

On 4 June 2025, following its first consultation on the future of security of tenure for business tenants under the Landlord and Tenant Act 1954 ("1954 Act"), the Law Commission issued an interim statement giving an indication of the direction of reform.

The Commission provisionally concluded that:

• the existing “contracting-out” model for security of tenure should be retained, although probably in a modified form; and
• there should be no change to the existing list of tenancies which do not benefit from security; and
• the 6 month minimum threshold for protection should be increased, possibly up to 2 years.

Key issues addressed in the first consultation and provisional conclusions

Model of security of tenure: The consultation asked whether business tenants should still have security of tenure at all and, if so, whether it should remain a "contracted-out" (opt-out) model or should be optional (opt-in). The Commission provisionally concluded that the existing “contracting-out” model will be retained. This model received broad support from consultees, who considered it strikes the best balance between landlords and tenants and avoids causing unwarranted disruption to the commercial leasehold market.

Types of tenancy: The consultation explored whether the current list of tenancies excluded from the 1954 Act, such as agricultural tenancies, is appropriate. The Commission's provisional conclusion is to keep the current law, as there was limited appetite for amending it.

Duration of tenancy: The 1954 Act currently excludes tenancies of up to 6 months and the consultation asked whether this is appropriate. The Commission provisionally concluded that the 6 month threshold should be increased and expects to consult on increasing it to 2 years. Whilst views were mixed, there was support for increasing the minimum threshold to give greater flexibility in the short-term lettings market.

What's next?

These provisional conclusions will form the basis of the Commission's second consultation paper, which will focus on the technical details of how the 1954 Act might be reformed, and is expected to include:

• potential changes to the "contracting-out" procedure and lease renewal process;
• the forum in which disputes are heard and whether there are alternatives for dispute resolution;
• the grounds on which a renewal lease can be opposed by a landlord and the compensation payable in some cases when the opposition is successful;
• the terms (including rent) of renewal leases; and
• any issues caused to the parties by the "registration gap".

The final recommendations for reform will be presented in a report following the second consultation. The report will make recommendations for reform, but, of course, only Parliament can change the law. It will therefore be some time before landlords and tenants will feel the impact of the consultation and if the Commission's interim statement is anything to go by, then it appears that any reforms to the 1954 Act will be adjustments to the existing scheme rather than a complete overhaul.

Final thoughts

The provisional conclusions reached by the Commission, that very little should change, are not altogether surprising given that in the first consultation paper it highlighted it would look for significant evidence to justify departing from the existing "contracting-out" model before recommending doing so.

This general reluctance for change is understandable. It avoids the complexities of dealing with what happens to tenancies that are currently within the 1954 Act or vice versa and associated transitional provisions, whilst also retaining the ability for landlords and tenants to rely on the existing framework which has been thoroughly tested through extensive caselaw, particularly around the terms which can or should be included when negotiating renewal leases, as well as on the grounds of opposition. That said, caselaw continues to evolve, and these areas may be considered in the second consultation.

Timings for the publication of the second consultation paper are yet to be confirmed. We will keep an eye on this and updates will be reported in due course.