A recent statement by the Law Commission, states that it will review part two of the Landlord & Tenant Act 1954? William Martin from our Commercial Lease Advisory team explains his thoughts on this possible reform...
What can we take from the flurry of comments made of the statement by the Law Commission that it will review part two of the Landlord & Tenant Act 1954 and in particular “security of tenure”? The Act arose to give businesses the right to stay in their premises by granting a new lease after an existing one had expired. It principally sought to assist parties (particularly 1950s retail) being denied new leases having established location-driven businesses. This applied notably to successful post-war independent traders such as fishmongers, greengrocers, butchers, etc. Which were serving communities in the long term.
Almost 70 years on, is an Act focused to tenants’ rights, and known by some surveyors as the “Tenant Act of 1954”, relevant today. I say, possibly not, as the Act is increasingly more “opted out from” than it is adopted. Surely there is a need to develop a modern legal framework which both landlords and tenants will want to opt into. Such a framework needs to address:
Encouraging landlords to grant shorter term leases with an element of security reserved not solely for ‘corporate’ occupiers taking leases of 10 years plus.
Incentivising parties towards net zero, i.e. both landlords and tenants working towards meeting clearly understood EPC requirements. How can you encourage a landlord of, for example, an office to upgrade that facility without equally financially encouraging tenants to take longer leases rather than simply agree short lease renewals with further successive rights of renewal. Or in the case of warehousing, allowing improved access to undertake upgrade works within renewals.
Compensation where redevelopment is truly needed to be possibly based on the level of investment made to a property or the increased trade related to location and performance of the tenant…some learning to be had from Compulsory Purchase experience and outcomes.
Modern occupiers such as delivery companies, trade counters, micro-breweries are just as likely to require the continuation of their site-specific trade as their 1950s forebears. Do we need a new framework/protocol for granting temporary lease extensions before a lease expiry of an “outside the Act” lease, which is prompt and lacking expense alike, which both parties might buy into?
The current and growing disparity between leases inside and outside the Act needs to be addressed. Short term insecure leases do not engender investment and can result in rental differentials of as much as 25%. Just as leases inside the Act can be a brake on development, leases outside the Act are arguably holding back business investment in ESG causes and improving productivity with positive wider economic benefits. Surely, reform must be on the agenda.