We look below at the Commission’s provisional proposals and the information it seeks before it makes its final recommendations to Parliament. These include changes to simplify the contracting-out procedure, options to promote environmental considerations and suggestions for encouraging alternative dispute resolution.
The key takeaways
● The Landlord and Tenant Act 1954 (LTA 1954) gives business tenants “security of tenure”, the statutory right to continue to occupy, and obtain a new tenancy, when their existing tenancy would otherwise end, unless the landlord successfully opposes renewal on certain statutory grounds.
● The parties can agree to “contract out” of the security of tenure provisions by strictly following a set procedure.
● Some aspects of the law are thought to be burdensome, unclear and standing in the way of modern commercial practices.
● The Law Commission has been tasked with reviewing the LTA 1954 with a view to modernising it.
● The Commission published its first consultation in 2024 which looked at the bigger picture of whether security of tenure is still needed at all. It concluded that it is, but that it could operate more efficiently.
● Its second consultation, published in June 2026, invites views on the detail of how the LTA 1954 could be improved, including the contracting-out procedure, having regard to environmental considerations, and encouraging alternative ways to resolve disputes.
● The second consultation closes on 16 September 2026.
● The consultation is important because the Commission’s final recommendations could reshape the future of commercial landlord and tenant law.
What does the Landlord and Tenant Act 1954 do?
Part 2 of the LTA 1954 gives “security of tenure” to tenants occupying business premises, subject to certain exceptions.
Security of tenure gives the tenant the right to remain in occupation until the lease is brought to an end by one of the methods set out in the LTA 1954.
The landlord or a tenant of a fixed-term lease can serve a notice bringing the current lease to an end. They can indicate in the notice whether they wish to enter into a new lease.
Where the tenant wants a new lease, and the landlord agrees in principle, this is called an “unopposed” lease renewal claim. If the parties cannot agree the terms of the new lease, the court will determine them in accordance with provisions set out in the LTA 1954.
Where the landlord does not wish to grant a new lease, it can oppose renewal on one or more of seven statutory grounds, for example where it intends to redevelop (Ground (f)) or occupy for its own business use (Ground (g)).
The default position is that business tenants will have security of tenure. The landlord and tenant can, however, “contract out” of the security of tenure provisions if they want. Where this happens, the parties must follow a set “contracting out” procedure designed to ensure the tenant understands the statutory protections it will be giving up.
What was the first consultation paper about?
The Law Commission launched its consultation into possible options for reforming Part 2 of the LTA 1954 in November 2024. It decided to take the consultation in two stages.
In its first consultation paper, the Commission focussed on the ‘big picture’ of the LTA 1954 - whether business tenants should have security of tenure at all and, if so, how it should operate. It considered the pros and cons of the “contracting out” procedure and posed three possible alternative models.
We looked at the first consultation paper in our previous article Law Commission launches consultation options to reform the LTA 1954 and in our podcast The Property Litigation Bites Podcast – The LTA 1954 consultation: what it means for commercial landlords and tenants (which is still well worth a listen!).
We questioned at the time whether the first paper was necessary given that there did not appear to be any clamour to either abolish or return to mandatory security of tenure, and that the Commission could have focussed from the start on ways to refine and improve the current system.
However, the Commission’s rationale for wanting a sound evidence base to give its eventual proposals greater legitimacy, was understandable.
What did the Law Commission’s interim statement say?
In June 2025, the Commission published an “Interim Statement” in which it provisionally concluded that there should not be any change to the model of security of tenure, but that the contracting out procedure could potentially be reformed.
The Commission also considered that the period of time before a fixed-term tenancy acquires security of tenure should be increased from six months, to give greater flexibility in the short-term lettings market.
What is the second consultation paper about?
The Commission published its second consultation paper in June 2026.
It is a monster, running to some 524 pages. Whereas the first paper looked at the big picture, the second is about the detail.
The stated aim of the second paper is a lofty one, namely “to fix the most important problems which are affecting users of the 1954 Act today”.
The second consultation paper looks at, and seeks views on, the following:
- Types of tenancy that have security
The Commission proposes that the majority of periodic tenancies should not have security of tenure (reversing the current position), increasing the length of time before new fixed-term tenancies acquire security from six months to either one or two years, and that it should be possible to “contract out” any renewal tenancy, even if the current lease has security.
- New streamlined contracting-out process
It is proposed that the contracting-out process would be simplified so that, rather than having to give separate warning notices and declarations before the new lease is completed, information about the rights the tenant will be giving up would be included within the lease itself.
The procedure for agreements for future leases, contractual options to renew, agreements to surrender and other agreements would similarly be simplified.
- Other terms of the renewal tenancy
Although sceptical about the ability to improve the law here, the Commission has invited views on whether amendments could be made requiring the court to have regard to energy, environmental and sustainability concerns when determining the terms of the new tenancy.
- The new rent
The Commission seeks views on whether the court’s power to allow rent-free discounts should be clarified given several conflicting County Court decisions, and whether it should be able to order that the new rent be partly or wholly calculated by reference to the tenant’s turnover.
- Interim rent
Interim rent is the rent that either party can apply for once the renewal or termination process has started, for the period until the process concludes. Depending on the market, interim rent can be above or below the amount the tenant is currently paying.
The Commission proposes to either do away with the current process in favour of having one valuation date from which the new rent would commence, or retain the existing provisions but simplify the basis for assessment.
- Grounds for opposing a new lease
The Commission seeks views on whether the existing categories of works to consider when the landlord opposes renewal on the ‘redevelopment’ ground (demolition, reconstruction, substantial construction) should be expanded to allow for other works, such as major refurbishment or retrofitting, and to refer to the minimum energy standards regime.
The Commission provisionally proposes amending the ‘own occupation’ ground, so that the landlord can rely on it even where it proposes to carry out alterations before it goes back into occupation.
- Compensation when renewal opposed and lease not renewed
Currently, when a landlord opposes renewal on one of the no-fault grounds (for example, where it wishes to redevelop), the tenant is entitled to compensation based on either x1 or x2 the rateable value of the premises, depending on how long it has been in occupation.
The Commission seeks views on whether compensation should still be based on rateable value; whether there should be more than two, or different, multipliers; or, if the current system is retained, whether the point at which the higher multiplier kicks-in should be more or less than 14-years as now.
- Forum for deciding LTA 1954 cases
Most LTA 1954 claims are brought in the County Court. The Commission asks whether this should remain the case or if consultees would prefer: (i) greater use of the High Court for high value/complex claims, (ii) that all claims should be brought in the First-tier Tribunal, or (iii) that opposed claims should be heard by the court but unopposed claims should be decided by the Tribunal.
The Commission also asks whether standard case management directions should be introduced, and whether a new dedicated formal settlement offer should be created for LTA 1954 claims.
- New Pre-Action Protocol
The Commission asks whether a bespoke pre-action protocol should be created for lease renewals, along the lines of the Dilapidations Protocol.
- Alternative dispute resolution
Views are sought on whether the parties to a lease renewal claim should have the right to refer the dispute to a non-determinative form of alternative dispute resolution (ADR), such as mediation, and if so whether this should apply only to unopposed claims, opposed claims or both.
In addition, the Commission asks whether the LTA 1954 should itself be amended to include provisions that promote ADR, for example by including express wording within prescribed notices.
- Registration gap
Currently, notices and proceedings under the LTA 1954 have to be served on and by the legal owners. Delays at the Land Registry in registering new landlords and tenants following a transfer or assignment can present real problems in practice, because there is a period – the “registration gap” – when the old owner technically retains control over the process even though it no longer has any real interest in the outcome.
The Commission does not consider that there is any straightforward solution to this and considers that, whilst imperfect, the current law at least affords certainty. However, it invites views on possible options for reform, for example giving the new owner the ability to serve LTA 1954 notices during the registration gap.
- Changes to the procedure
The Commission proposes to amend the law to confirm that landlords can serve a notice to start the LTA 1954 process even though the tenant may not be in occupation of the premises at the time.
It also seeks views on whether certain tenants such as periodic tenants that currently cannot serve a notice formally requesting a new lease, should be able to do so, and whether the period of notice a tenant should give when it wishes to terminate the tenancy altogether should be capped.
Our views on the Law Commission’s provisional proposals
Many of the Law Commission’s key proposals are sensible.
We fully support the proposals to simplify the contracting-out process, and to clarify the courts’ powers concerning rent-free discounts and turnover rents.
We are delighted to see that a dedicated pre-action protocol is on the agenda. As suggested in our earlier article, this could be implemented even before the Commission publishes its final recommendations.
We broadly agree to increasing the length of time before fixed-term tenancies acquire security of tenure, to one year, and a stepped compensation multiplier when the landlord opposes renewal. The Commission’s proposals to do with LTA 1954 notices are all also generally sensible, and it is clearly right to look at options for promoting environmental and energy efficiency considerations.
Delays in the County Courts and at the Land Registry are caused by under-resourcing, not LTA 1954 procedure; reform will not address this. However, if properly funded and staffed, we would favour routine LTA 1954 cases being heard by specialist property judges in the Tribunal, but with the ability to bring high value and/or complex claims in the High Court. New landlords and tenants could be allowed to serve notices before being registered as legal owners, although they can already avoid the registration gap problem by including appropriate provisions in their sale/purchase contracts.
We are in favour of template directions, but do not believe that a new formal type of offer, or mechanism for referring a case to ADR, should be introduced primarily due to the risk of unwanted satellite litigation.
We disagree, however, with the Commission’s proposals concerning periodic tenancies and interim rent.
Denying security of tenure to all periodic tenancies runs counter to the principle that most tenants should have protection unless the parties specifically apply their minds and agree otherwise. We would instead favour only excluding implied periodic tenancies that might otherwise arise following the expiry of a contracted-out lease – those tenants expressly gave up their rights and there is no reason why they should gain new rights simply because the landlord has allowed them to remain in occupation.
As for interim rent, whilst the current system is not perfect, it is well understood and caters for significant movements in the market. The alternative options the Commission has proposed would not in our view improve the law.
Our overriding view, however, is that this is a once in a generation opportunity for our commercial clients, professional contacts and peers to have a say on reforms that may help modernise and improve the LTA 1954.
The opportunity should be seized by responding to the consultation by 16 September 2026.
