Commercial and residential property – what to expect in 2025

2025 is set to be a busy year in the commercial and residential property spheres, with a consultation on the law surrounding commercial lease renewals and transformation of the private rented sector via the highly anticipated Renters’ Rights Bill. These topics are likely to be hitting the headlines in the coming year and we have outlined why below.

Commercial Lease Renewals

The Landlord and Tenant Act 1954 (“the Act”) was introduced post-WWII to give commercial tenants security – i.e., the legal right to a new tenancy when their existing one ends – and it has governed commercial lease renewals ever since. 70 years later the Law Commission decided it may be time for a change.

The Act has received criticism for being too rigid and unsuitable where there are parties of unequal bargaining power. In addition, many believe it is not equipped to address modern commercial letting practices, which have changed due to the rise in internet shopping and lasting impact of the Covid-19 pandemic. In late 2024 the Law Commission launched a consultation, which outlines four possible options for reform:

• Abolishing security of tenure for tenants – considered a dramatic move
• Mandatory security of tenure
• Keep the current regime – i.e., allow tenants to opt out of security for tenure
• Allow tenants to opt in to security for tenure.

The consultation closes on 19 February 2025 and, once the responses are reviewed, the Law Commission will release a consultation paper outlining potential changes to the Act. Whilst the outcome of the consultation is uncertain, what is clear is that commercial lettings could look dramatically different in the not-too-distant future.

Renters’ Rights Bill (“the Bill”)

At the time of writing, the Bill was scheduled for its third reading in the House of Commons on 14 January 2025.

One of the key changes brought about by the Bill is the abolition of “no fault” evictions. Under the current law, provided they have complied with various pre-conditions, landlords can give tenants two months’ notice to vacate by serving what is called a “section 21 notice”.

The key here is that tenants do not need to have done anything wrong or breached the terms of their tenancy in any way for a landlord to be able to serve a section 21 notice; hence the phrase “no fault”.

Pursuant to the Bill “no fault” evictions will be abolished in their entirety. If a landlord wishes to seek possession of a property it must now rely on a ground of possession and serve what is called a “section 8 notice”. Grounds of possession include rent arrears, breach of terms of the tenancy and anti-social behaviour. The length of notice a landlord needs to give depends on the breach.

Whilst the section 8 notice process exists under the current regime it is less commonly used than the section 21 route.

Under the Bill the section 8 notice grounds have been expanded and notice periods lengthened, no doubt in an attempt to address the perceived imbalance under the existing regime, which is considered too landlord friendly, but still provide landlords with some flexibility.

Other changes introduced by the Bill include a private rented sector database which all landlords will be required to join, landlords can no longer unreasonably refuse requests to keep pets and extended protection for tenants to ensure higher standards of housing.

Many of these changes will no doubt be welcomed, particularly by tenants. There is currently a question mark over how they will work in practice with an overloaded court system and what impact, if any, the Bill will have on the private rental market.