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Spotlight on the Landlord and Tenant Act 1954

Posted on 20 April 2023

For almost 70 years, the Landlord and Tenant Act 1954 has granted certain business tenants the right to renew their lease subject to the landlord being able to oppose that renewal on certain grounds. Now the Act is under scrutiny from the Law Commission. Daniel Levy answers some key questions around whether the Act is still fit for purpose.

What are the main limitations of the 1954 Act?

There are two main limitations with the Act. Firstly, the practical issue that the court system was much quicker in 1954, and now resolving a contested renewal can take years. The second limitation relates to the market, which has completely changed in the 70 years since the 1954 Act was originally brought in. At that time, business premises were in short supply due to bomb damage, whereas now the Government is currently legislating to force landlords to rent out empty shop units. Therefore, the Act no longer makes commercial sense either.

What are the challenges around providing more flexibility within the Act?

The 1954 Act balances the tenant goodwill against landlords' rights to change the tenant mix. More flexibility for estate management means fewer rights for tenants. Most leases shorter than 10 years are contracted out of the 1954 Act, so you could therefore make it easier for landlords to regenerate a high street by taking all leases less than 10 years out of the Act's protection. That would give landlords greater flexibility to change tenant mix, but then deserving tenants would lose their rights. The Government has to decide where to strike the balance. The Law Commission should also look at the commercial tenancy market in Scotland, where broadly the 1954 Act does not apply. Does the absence of the Act make any difference to the market north of the border?

What might we see in the Law Commission's consultation expected in December?

The consultation asks how we can make the Act fit for purpose, so that people want to work within it rather than contract out of it. We've already mentioned the need to speed up the process. We also suggest changes in two key areas of detail.

Firstly, the Act doesn’t allow courts to order turnover rents on a renewal. Post-COVID-19, tenants are increasingly looking to move to turnover-based rents. Without agreement between the parties, the issue is usually decided by the lower courts, leading to inconsistency.

Secondly, the 1954 Act doesn’t work properly with the Minimum Energy Efficiency Standard (MEES) regulations. Under the 1954 Act, a landlord can oppose a tenancy renewal if it intends to demolish or reconstruct the premises (called "ground F"). As the Act currently stands, an intention to do an energy efficiency retrofit doesn’t generally qualify for ground F. The court should at least be given power to order renewal of the tenancy but requiring the tenant to give the landlord access to do these works.

What sort of timeframe are we looking at?

This will be a long-term process; the Law Commission's consultation paper won't be published before December 2023. We don't expect the Government to rush into any major decisions. It's clear all options are still on the table, from a complete overhaul of the Act to moderate tweaks, or even maintaining the status quo. In the interim, there are other more immediate concerns for the industry such as business rates.

Read Property Week's recent analysis of the industry's response to the consultation.

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