Law Commission Sets Out Provisional Plans for Reforming Business Tenancy Law

Posted Tuesday 10th June 2025

The Law Commission has released a key update in its review of the Landlord and Tenant Act 1954, focusing on the security of tenure provisions for business tenants. The project, launched in summer 2024, aims to modernise the Act to reflect the changing nature of commercial leasing and support more flexible, efficient use of retail and office space, particularly on the high street.

What Is Security of Tenure?

Under Part II of the 1954 Act, most business tenants have a legal right to remain in their premises after the lease expires and to apply for a new lease. Landlords and tenants can agree to exclude these rights by following a formal “contracting-out” process before the lease begins.

Key Provisional Findings

Following a public consultation earlier this year, which received over 160 responses from landlords, tenants, and property professionals, the Commission has shared its initial conclusions:

• Current Contracting-Out System to Remain
  The Commission considered whether to replace the existing “contracting-out” model with a “contracting-in” system but concluded that the current approach is more practical and widely supported. While some organisations, including AREF and the BPF, favoured a change, the majority of consultees preferred to retain the current model to avoid unnecessary disruption.
• No Change to Excluded Tenancies
  The Commission found broad agreement that the types of tenancy currently excluded from the Act, such as agricultural and periodic tenancies, should remain outside its scope.
• Short-Term Leases: Threshold Likely to Rise
  At present, leases of six months or less are excluded from protection. The Commission is proposing to raise this threshold, possibly to two years, in response to calls for greater flexibility in the short-term letting market. Some stakeholders, particularly from the investment community, had suggested a higher minimum threshold of five years.

Next Steps

The Commission will now begin a second phase of consultation, focusing on the technical detail of potential reforms. This will include reviewing the process for contracting out of the Act and exploring changes to lease renewal procedures. Final recommendations will be published in a subsequent report.

Although some in the property industry were hoping for more radical reform, the Commission’s current direction suggests a more measured update, refining rather than replacing the existing legal framework.

Please contact Charlotte White if you require any more information or find out more about our real estate team and how we can help you.

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This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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