Business tenancy renewals: modernising the 1954 Act without rewriting the rules

The proposals are aimed at simplifying a system that many landlords, tenants and property professionals regard as cumbersome, outdated and a source of unnecessary cost and delay. Key reforms include:

• Raising the threshold for protected tenancies: The current six-month threshold would be increased so that shorter occupational arrangements fall outside the Act. The Commission is consulting on whether protection should apply only to leases granted for more than one year or more than two years.
• Simplifying contracting out: The Commission proposes replacing the current warning notice and declaration procedure with a simpler mechanism incorporated into the lease documentation itself. This should reduce administrative burden and remove a procedural trap which can invalidate the exclusion of security of tenure if not followed precisely.
• Renewal lease terms and sustainability provisions: The Commission proposes retaining the existing approach established in O'May v City of London Real Property Co Ltd when determining disputed renewal terms. However, it is consulting on whether sustainability provisions and other environmental obligations should be treated differently. This reflects the increasing prevalence of ESG-related lease clauses and seeks to address concerns that the current renewal framework may not adequately accommodate evolving market standards.
• Redevelopment opposition ground (ground (f): The Commission is seeking views on whether the categories of works capable of supporting a landlord's intention to redevelop should be expanded. The aim is to ensure that genuine refurbishment, upgrading and sustainability-driven improvement projects can proceed where appropriate, whilst maintaining meaningful protection for tenants seeking renewal rights.

For those hoping for a fundamental rethink of the 1954 Act, the consultation may appear relatively modest. The Commission is not proposing to revisit the core policy of security of tenure or alter the balance of interests between landlords and tenants. Instead, its focus is on removing procedural complexity and updating the regime to reflect modern leasing practices.

That approach is likely to find support across much of the market. The City of London Law Society's recent response broadly endorses many of the Commission's proposals, reflecting a wider view that the statutory framework remains fit for purpose but would benefit from simplification.

While the reforms are unlikely to transform the renewal process, they could remove a number of recurring technical pitfalls and points of friction. In particular, proposals relating to contracting out, short-term lettings, ESG provisions and redevelopment may have a meaningful impact on how landlords and tenants structure and negotiate occupational leases in future. If enacted, the changes should improve certainty while allowing parties to focus more on commercial objectives and less on procedural requirements.

The Law Commission's consultation on Business Tenancy Renewals is one of two current consultations examining issues affecting commercial real estate. You can find out more about the other consultation: Commercial Leasehold: overcoming barriers to transactions here.