On 16 June 2026, the Law Commission published 'Business tenancies: the right to renew – consultation paper 2: Modernising security of tenure'. This paper is the latest publication released by the Law Commission in a long-term project to review and ultimately reform the commercial leasehold regime, as currently regulated by Part 2 of the Landlord and Tenant Act 1954.
In this article, we examine the history of this legislation which is now in its 72nd year and the drivers for reform. We also recap the steps that have been taken by the Law Commission to date and the key takeaways of the latest consultation paper.
The premises from which a commercial tenant operates is integral to the stability and ultimately the profitability of their business. This, however, is a relatively modern notion. In post-war Britain, landlords had complete control over their commercial properties and leases operated largely on freedom of contract without any statutory protection for tenants. Without any statutory security of tenure, tenants were at the mercy of their landlords and this caused a great deal of uncertainty and instability.
It was against this backdrop that the Landlord and Tenant Act 1954 was conceived. The legislation is comprised of two parts - Part 1 focusing on the security of tenure for residential tenants, and Part 2 addressing the security of tenure for business professional and other tenants. Part 2 introduced the following key reforms:
Statutory security of tenure for tenants - i.e. the right to remain in occupation after their lease expires
The right to a new lease (renewal)
Limited statutory grounds on which landlords can oppose the grant of a new lease
These reforms were transformative and continue to provide the bedrock of the modern commercial leasehold market as we know it today. However, the legal framework of Part 2 is over 70 years old and the commercial leasehold market has evolved with a shift towards e-commerce and an increased focus on the environmental sustainability of premises.
There has been growing recognition across the sector that aspects of the law are “burdensome, unclear and out of date …causing unnecessary cost and delay for both landlords and tenants and preventing commercial space from being occupied quickly and efficiently”. This prompted the government to refer the task of reviewing the legislation to the Law Commission, which on 12 July 2024 published its terms of reference for a wide scale review of Part 2 of the Landlord and Tenant Act 1954.
12 July 2024 - terms of reference: these identified three key objectives:
To create a legal framework that is widely used rather than opted out of, without limiting the rights of parties to reach their own agreements, by making sure legislation is clear, easy to use, and beneficial to landlords and tenants.
To support the efficient use of space in high streets and town centres, now and in future, by making sure current legislation is fit for today’s commercial market, taking into account other legislative frameworks and wider government priorities, such as the ‘net zero’ and ‘levelling up’ agendas.
To foster a productive and beneficial commercial leasing relationship between landlords and tenants.
19 November 2024 - first consultation paper: the first consultation paper set out a number of options to reform the Landlord and Tenant Act 1954. It considered the pros and cons of the current contracting out model and proposed these three alternative models:
Mandatory security of tenure
Abolition of security of tenure
Contracting-in model
The first consultation period closed on 19 February 2025.
4 June 2025 - interim statement: the interim statement set out the following provisional conclusions following the Law Commission’s review of the responses received to the first consultation paper:
There should be no change to the model of security of tenure. The existing contracting-out model should remain.
The threshold for excluding tenancies from the scope of the Landlord and Tenant Act 1954 based on the tenancy’s duration should be increased from six months.
Otherwise, there should be no change to the scope of the regime.
16 June 2026 - second consultation paper: this most recent publication is comprised of 13 chapters and consists of a total of 67 questions on a wide range of issues across the Landlord and Tenant 1954 regime including:
Qualifying criteria - excluding the majority of periodic tenancies from the scope of the legislation and increasing the duration threshold, which sets the length of fixed-term tenancies which are excluded from scope, from six months to two years.
Contracting out - simplifying the contracting-out process so that it takes place entirely within the lease itself.
Terms of a renewal tenancy - considering how the terms of a renewal tenancy are determined by the court, and whether changes should be made to address environmental matters.
Rent - changing the law to ensure that the court can grant a renewal tenancy with a turnover rent and improving the interim rent process.
Grounds of opposition - reviewing the test in ground F, the redevelopment ground, and whether it should change to take into account modern building methods and/or the Minimum Energy Efficiency Standards.
Dispute resolution process (ADR) - exploring whether lease renewal disputes should remain in the county courts or whether some or all cases should be decided in the tribunal and/or High Court, and considering whether ADR could have a greater role in resolving disputes.
The second consultation period closes on 16 September 2026.
The Law Commission’s ongoing review of the Landlord and Tenant Act 1954 reflects a thoughtful, incremental approach to reform, seeking to modernise the regime without undermining the core principle of security of tenure that is key to maintaining market stability. Critically, the decision to retain the existing contracting-out model signals a preference for continuity, while focusing reform efforts on improving clarity, efficiency and accessibility.
The second consultation paper shifts attention from structural overhaul to targeted modernisation, including proposals to simplify procedures, update qualifying criteria and better reflect contemporary leasing practices such as turnover rents and environmental considerations. Proposed changes to areas such as excluding most periodic tenancies and extending the minimum lease term threshold, suggest a narrowing of the scope to better reflect modern leasing patterns.
This latest consultation paper also highlights a broader policy objective of supporting more efficient use of commercial space, particularly in high streets and town centres, while fostering stronger landlord-tenant relationships.
The Law Commission’s project to modernise the Landlord and Tenant Act 1954 is nearing completion. With 67 detailed questions now posed to stakeholders, the next phase will depend heavily on industry engagement ahead of the consultation closing on 16 September 2026. Those with an interest in the future direction of the commercial leasehold market should take the opportunity now to have their say. Consultees are invited to submit their responses via the online response form.
For further information or advice, please contact our property disputes and real estate teams.
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