Should part 2 of The Landlord and Tenant 1954 Act be recycled or discarded?

The Law Commission announced in March 2023 that it would be looking at the Landlord and Tenant Act 1954 (“the Act”).

The purpose Act was to protect tenants from the risks of paying rent that exceeded market levels and from being forced to leave their business premises. The background to the Act was the reduced availability of commercial property following the Second World War.

Given that the Act is now 70 years old and the changes that have occurred in the commercial property market during that time and particularly in recent years – as a result of the impact of Covid-19 and the introduction of the Minimum Energy Efficiency Standard (MEES) regulations – there is justification for at least a review of the Act.

However, the press release from the Law Commission and their remit suggests a wide-ranging review, so there is the possibility they propose fundamental changes to the Act.

The press release says “Those who rely on the Act report that it is inflexible, bureaucratic and out of date, causing extra cost and delay for both Landlords and Tenants …”.

The wide remit of the Law Commission is to:

• Modernise commercial leasehold legislation, with an emphasis on creating a legal framework that is widely used rather than opted out of
• Support the efficient use of space in highstreets and town centres
• Foster a productive and beneficial commercial lease relationship between Landlords and Tenants.

The breadth of the review has given rise, in legal circles in any event, to speculation as to what it is likely the Law Commission will propose, including doing away with security of tenure – meaning the right to renew a lease – for tenants.

The Law Commissions consultation paper was to be delivered by December 2023, however, this was delayed to “early January 2024” and now has been put back to autumn 2024. The delay may signal that the consultation paper will propose fundamental reforms, or may be due to the scale of the task facing the Commission.

We will have to wait until the autumn to find out what it is the Law Commission will be proposing but some of the reforms which may be proposed by the Law Commission, it has been speculated, could include:

• A simplified contracting out of the protection of the Act before a lease is granted
• Flexibility of lease terms
• Abolition of security of tenure for leases under 10 years in length.

Our view that it is very likely the Law Commission will propose simplifying the contracting-out procedure which has become unduly complicated, difficult to understand by laypeople, let alone solicitors, and it is cumbersome.

We would also add to the speculation by saying that one area that is ripe for reform is the forum for resolving what the new terms of the lease should be in situations where the landlord and tenant cannot agree them.

Currently, the forum for dealing with these disputes is the County Court. County Court Judgments are not binding and may go unreported, leading to an inconsistency in approaches between County Court Judges, which in turn causes uncertainty. This makes it difficult for legal advisors to advise clients as to the strength of their case when proposing a change to the existing lease.

One view is the Law Commission should consider whether another forum would be better placed to deal with such claims and it has been suggested the First-Tier Tribunal or an arbitration process as being a more appropriate forum.

Whatever the magnitude of the Commission’s proposals, it is likely to be some time before these reach the statute book. Therefore, those who rely on the Act should have sufficient time to become familiar with the changes. The last review of Part 2 of the Act arose from a Law Commission report in 1992, consultation took place in 2001 and the reforms only reached the statute book in 2003.

In the meantime, landlords and tenants and their professional advisors will have to continue with a 70-year-old Act which many view as having failed to move with the times, is still very much notice driven and does not encourage the parties to resolve disputes quickly and cheaply.