"The Act is over 70 years old and was last properly reviewed in the same year dial-up internet first became available in the UK"
- Ian Fletcher - British Property Federation
In its response to the Law Commission’s consultation on ‘business tenancies: the right to renew’ under the Landlord and Tenant Act 1954 (‘Act’), the BPF recommends moving from an ‘opt-out’ to ‘opt-in’ approach and excluding leases of five years or less from security of tenure.
This would streamline the leasing process, support the decarbonisation of buildings, make it easier to redevelop and repurpose space in town centres and reduce the burden on the courts.
It would also bring commercial leasing law more closely in line with market practice. A survey of BPF members with a combined AUM of £90bn, found that an estimated 65% of new commercial leases have been contracted out of the Act since 2020. This proportion rises to 80% for leases of five years or less.
The BPF highlights that the day-to-day burdens associated with the Act in its current form impact on wider economic and social policy objectives. Opting out is unnecessarily time-consuming, lease renewals can be costly, contentious and litigious and the process for gaining vacant possession of a building adds risk and cost to redevelopment activity. The current Act also makes it hard for property owners to introduce green clauses into leases and gain access to retrofit a property to improve its environmental sustainability.
The BPF would strongly oppose a move to mandatory security of tenure, an option mooted by the Law Commission’s consultation paper. This would severely limit property owners’ ability to do what they see as best for their property and make commercial property a much less attractive investment proposition. This could result in less flexibility for occupiers and lower property values.
Reforming the Act offers an opportunity to make sure that commercial leasing legislation better supports the Government’s economic growth agenda.
The benefits of switching to an opt-in model include increased investment into the sector by reducing the barriers and risks associated with redevelopment and asset/place management, a more straightforward process for agreeing new tenancies for the majority of leases and improving the appeal of commercial property for overseas investors by bringing England and Wales more closely in line with commercial leasing in other countries.
“The Act is over 70 years old and was last properly reviewed in the same year dial-up internet first became available in the UK, " stated Ian Fletcher, Director, British Property Federation, "We need reform to streamline commercial leasing, reduce burdens on the courts and support economic growth by de-risking redevelopment and sustainable retrofit.
“Automatic security of tenure was a product of a long-lease environment, but leases are shorter and more flexible than they were 20 years ago. It is time for the law to catch up with the market.
