Law Commission Consultation Paper 2: Modernising security of tenure
The Law Commission’s second consultation on business tenancies is an important moment for landlords, occupiers and property professionals. Part II of the Landlord and Tenant Act 1954 underpins the right of many business tenants to renew their leases, but the commercial property market has changed significantly since the legislation was first introduced. This consultation is therefore more than a technical legal review; it is an opportunity to help shape a framework that better reflects how commercial property is owned, occupied and managed today.
For our clients, the consultation raises practical questions about lease strategy, flexibility, risk, cost and future-proofing property portfolios. Below, we summarise the key points, explain why they matter, and highlight where landlords, tenants and advisers may wish to engage before the consultation closes.
What has the Law Commission provisionally concluded?
- The current security of tenure model should remain, including the existing contracting-out process.
- The Act’s duration-based exclusion threshold should increase from six months, with the second consultation expected to consider a two-year threshold.
- No further changes should be made to the Act’s scope.
The consultation period runs until 16 September 2026. This gives landlords, tenants, representative bodies, advisers and other interested parties a direct opportunity to influence the future operation of security of tenure in England and Wales.
Clients who may be affected should review the proposals carefully and consider whether to respond, particularly where the reforms could influence renewal strategy, short-term lettings, contracting out, rental structures or redevelopment plans.
Link to Consultation Questions
The Law Commission will consider the responses before publishing its final report and recommendations. While it will ultimately be for Government to decide whether and how to implement any reforms, this consultation is a meaningful chance for the market to explain what works, what does not, and where the current regime creates unnecessary cost, delay or uncertainty.
That matters because lease renewal rights affect real commercial decisions: whether a business can remain in its premises, how quickly space can be re-let or redeveloped, how risk is priced, and how much certainty both parties have when negotiating new terms.
It has been around 20 years since the last significant changes were made to the Act, and more than 70 years since security of tenure was introduced following the Second World War.
In that time, the market has been reshaped by online retail and services, changing occupational requirements, economic shocks, the Covid-19 pandemic, and a stronger focus on the environmental performance of commercial buildings.
The result is a market that needs both protection and flexibility. Security of tenure remains important for many occupiers, but the processes around it must also support efficient transactions, modern leasing models and investment in better, more sustainable space.
The second consultation is detailed, with 67 questions across 13 chapters. The proposals touch on a wide range of issues that could affect how leases are structured, renewed, opposed or disputed, including:
- Qualifying criteria – excluding most periodic tenancies from the 1954 Act and raising the duration threshold for fixed-term tenancies that fall outside its scope.
- Contracting out – streamlining the process for excluding security of tenure.
- Terms of a renewal tenancy – reviewing how courts determine renewal terms and whether environmental considerations should be addressed.
- Rent – enabling courts to grant renewal tenancies with turnover rents and improving the interim rent process.
- Grounds of opposition – reviewing the Ground F test and whether it should reflect modern building methods and the Minimum Energy Efficiency Standards (MEES) regime.
- Dispute resolution process – considering whether lease renewal disputes should stay in the county courts, move to the tribunal or High Court, and make greater use of Alternative Dispute Resolution.
From a practical perspective, these proposals could affect both day-to-day transactions and longer-term asset strategy. Landlords may need to consider how reforms influence redevelopment plans, template leases, contracting-out processes and management of short-term occupation. Tenants may need to assess how any changes could affect renewal protection, negotiating leverage, continuity of occupation and future costs.
Why clients should engage now
The consultation provides an opportunity to move beyond reacting to reform and instead help shape it. Clients with significant leasehold portfolios, development pipelines, retail or leisure interests, office holdings, logistics assets or short-term occupational arrangements should consider whether the proposals reflect the realities of their market. Early engagement may also help businesses prepare for possible changes to documentation, negotiation strategy and renewal planning.
Useful links and further reading:
First Consultation & Summary of Consultation Paper
Responses to the first consultation paper
Summary of Consultation Paper 2
This may not be a reform process that changes overnight, but it is one that could influence lease negotiations and renewal strategy for years to come. For businesses that rely on commercial premises, and for landlords managing income, redevelopment and asset performance, now is the time to understand the proposals and consider whether to respond.
If you would like to understand how the consultation could affect your lease arrangements, renewal strategy or wider property portfolio, please contact a member of Fisher German’s Lease Advisory team based in our London, Birmingham, Knutsford or Doncaster offices.