The Law Commission of England and Wales is to review this year the Landlord and Tenant Act 1954, which grants business tenants security of tenure when their leases expire, and allows them to renew.
The review is commissioned by the Department for Levelling Up, Housing and Communities (DLUHC), and forming part of Government’s new Anti-Social Behaviour Action Plan.
Critics of the Act say that it is overly complex, bureaucratic, and anachronistic, causes unnecessary cost and delay to landlords and tenants, and hinders especially crucial post-Covid shop lettings.
The intention is to make the legislation more suitable for today’s commercial market, and accord with the Government’s levelling up and environmental objectives.
This is what Dehenna Davison, Parliamentary-Under Secretary for Levelling Up, is quoted as saying.
“For too long commercial tenants and landlords alike have been held back by a legislative framework that is outdated and out of sync with the realities of the sector today.
“With this review of the legislation, we hope to remove the barriers that inhibit growth by modernising the legal framework and making sure it is fit for today’s market, supporting the efficient use of space and fostering a productive, beneficial leasing relationship between landlords and tenants.
“In achieving these goals this review will help to create a leasing framework that supports the Government’s priorities of growing the economy and aiding the regeneration of our town centres. The review will also help to make leasing clearer and more easily accessible to small businesses and community groups, reducing the growing number of vacant properties on our high streets and the anti-social behaviour that comes with it.”
The consultation paper should be published in December, and these are the areas of interest.
Security of tenure
The Act does not apply to leases that are for less than 6 months.
To encourage longer leases being granted, that stipulation may be removed.
Contracting out
The process for contracting out of the security of tenure provisions of the Act (i.e. preventing the tenant holding over after lease expiry, and renewing) was simplified in 2004,
Currently, landlords must serve a warning notice on a tenant, which must then make either a simple declaration, or statutory declaration witnessed by an independent solicitor, that it understands the rights being surrendered.
A lease that is intended to be contracted out will be protected if a mistake is made in the process.
Plus, there can be an unnecessary legal expense for tenants.
So, an online procedure could be introduced which allows e-mail notices and electronic signatures, and requires a simple rather than a statutory declaration.
The notice process may be discarded altogether, and replaced by a warning notice and tenant confirmation on a completed lease.
The Law Commission could also explore whether the notice and declaration process is needed for agreements to surrender a protected lease.
Statutory compensation
Currently, protected tenants are entitled to receive statutory compensation when a landlord successfully opposes renewal on one of the no-fault grounds; most commonly redevelopment.
The Law Commission may consider whether statutory compensation should still be payable at all and, if so, calculated by reference to the annual rent or turnover/profit.
Currently, statutory compensation is once or twice rateable value, depending on how long the outgoing tenant has occupied.
That may be outdated, but at least is easy/uncontentious to calculate.
Disputes
Landlords’ opposition to renewal, or disagreements about new lease terms are heard by County Court judges, and the Court process is slow, and expensive.
An alternative option is a compulsory pre-action process, requiring meetings between experts at an early stage to encourage landlord and tenant to agree out of court.
And/or the Law Commission could consider whether at least more straightforward 1954 Act claims should be heard in the First-tier Tribunal, which addresses specialised property issues, or decided by arbitration.
