Is the current concept of security of tenure outdated in today’s commercial landscape?

Running a business comes with many risks.  Under current legislation, eviction at the end of a lease term does not have to be one of them.  Part 2 of the Landlord and Tenant Act 1954 protects business tenants’ rights to renew their tenancies at the end of each term.  This protection is known as security of tenure.

This statutory protection for business owners may seem reasonable and uncontroversial.  It allows owners to run their businesses secure in the knowledge that they will not be unexpectedly faced with the cost and inconvenience of relocating.

However, it has been suggested that the way in which security of tenure operates may no longer be fit for purpose.  Various problems have been identified with the current legislation and the Law Commission has been asked to conduct a review of the law in this area.

A key problem is that this legislation is nearly 70 years old.  Whilst it has been amended and adapted over time, the fact remains that the commercial landscape has drastically changed since the 1954 Act was originally drafted.  Covid-19 alone, and the resulting growth of flexible working, has had a huge impact on the commercial lease market.  Maintaining a physical presence is no longer as important to many businesses, who are increasingly content for their employees to work from home.

It could be argued that legislation which adds to the complexity, cost and time of entering into commercial leases is an unnecessary burden in this challenging market.  The fact that many leases have been contracted out of security of tenure may be an indication of the aversion with which landlords regard the 1954 Act.  The result of this is that many business tenants cannot even rely on the protection which the Act supposedly offers.

Further the process for contracting out of security of tenure is cumbersome and complicated.  It is easy for an unwary landlord to find themselves inadvertently bound by the 1954 Act due to simple oversights or mistakes.  This poses a particular risk when freeholds are sold subject to existing tenancies.  Tenants, meanwhile, face an extra barrier of paperwork and potential legal costs before they can enter into tenancies.

The Law Commission will consequently be aiming to produce a consultation paper focussed on modernising the law surrounding security of tenure, making it more efficient and less likely to be opted out of.  This consultation paper is due in Autumn 2024.

In conclusion, there are likely to be changes on the horizon for security of tenure, which business landlords and tenants will want to keep a close eye on as it could mark a welcome improvement to the current position for both.