Law Commission provisionally backs retention of “contracting-out” model for security of tenure for business tenancies

The existing “contracting-out” model of security of tenure under the Landlord and Tenant Act 1954 is the right model, the Law Commission has provisionally concluded following a consultation.

The law reform advisory body’s consultation paper addressed several key issues, including the following.

1. Whether the current “contracting-out” model of security of tenure should be retained, or a different model be adopted.
2. What types of tenancy should benefit from security of tenure under the 1954 Act.
3. What duration of tenancy should benefit from security of tenure under the 1954 Act.

The consultation ran from 19 November 2024 to 19 February 2025. The Commission received more than160 consultation responses from a range of stakeholders, including landlords, tenants, professionals, and representative organisations.

The Commission has now issued an interim statement setting out its provisional conclusions on these questions.

This suggested that the arguments in favour of retaining the existing “contracting-out” model were “powerful”, and it received the broadest support among consultees.

“A significant number of consultees told us that the current model strikes the best balance between landlords and tenants. Notable numbers of consultees were also concerned that a change in model would cause unwarranted disruption to the commercial leasehold market,” the Commission noted.

On the second question, the consultation asked whether the existing list of excluded tenancies is appropriate.

Consultees generally favoured keeping the current law, and the Commission said it provisionally agreed.

In relation to the third question, the 1954 Act excludes tenancies of up to six months and the consultation asked whether this was appropriate.

“While views were mixed, there was support for increasing the six-month threshold to give greater flexibility in the short-term lettings market,” the Commission said.

It added that it had provisionally concluded that the six-month threshold should be increased, and, in its second consultation paper, expects to consult on increasing the threshold to 2 years.

This second consultation paper is intended to ensure the 1954 Act works for the modern commercial leasehold market.

It will focus on the technical detail of how the 1954 Act might be reformed, including potential reform to the contracting-out procedure.

The Commission’s final recommendations for reform will be set out in a report, following the second consultation.