Business tenancies: the right to renew

Ensuring Part 2 of the Landlord and Tenant Act 1954 works for the modern commercial leasehold market. On 16 June 2026, we published our second consultation paper.

Background (Back to top)

All businesses – from cafes and shops in town centres, to companies occupying offices, warehouses and factories – need suitable premises to operate from. Many of these businesses occupy their premises under tenancies, rather than owning the freehold.

Part 2 of the Landlord and Tenant Act 1954 gives business tenants the right to renew their tenancies when they would otherwise come to an end. This enables businesses to remain in their premises. This legal right to a new tenancy is often referred to as “security of tenure”.

Most business tenants automatically have the right to renew under the Act unless, before any lease is granted, they agree with their landlord that the right to renew should not apply. In order to do that – by a process known as “contracting out” – various formalities must be followed.

Security of tenure for business tenants was introduced by Part 2 of the 1954 Act following the Second World War. The legal framework is, therefore, over 70 years old. While the Act has been updated in the past to improve its flexibility and reduce the burdens on landlords and tenants associated with its operation, it is now around 20 years since the last significant updates were made.

Problem (Back to top)

Since the Act was last reviewed, the world around us has changed and so has the commercial leasehold market. The rise of the internet has led to a dramatic increase in online retail and services, and landlords and tenants have been impacted by world events including the financial crisis of 2008 and the Covid-19 pandemic. Government priorities have also evolved during this time; for example, there is now an increased focus on the environmental sustainability of commercial properties.

We have heard that the Act is not working well for landlords or tenants. Those affected by the Act report that aspects of the law are burdensome, unclear and out-of-date. There is concern that parts of the Act are standing in the way of modern commercial practices. This is causing unnecessary cost and delay for both landlords and tenants, and preventing commercial space from being occupied quickly and efficiently.

Often, landlords and tenants entering into business tenancies decide to contract out of the Act, meaning that tenants do not have the right to renew that the Act would otherwise give them.

Project (Back to top)

This project was referred to the Law Commission by the then Department for Levelling Up, Housing and Communities in March 2023. It originally formed part of the then Government’s Anti-Social Behaviour Action Plan.

Terms of reference

Our Terms of Reference require the Law Commission to conduct a wide review of Part 2 of the Landlord and Tenant Act 1954 with a view to modernising commercial leasehold legislation, with an emphasis on:

creating 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
supporting 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
fostering a productive and beneficial commercial leasing relationship between landlords and tenants

See our full Terms of Reference, including aspects of the law that are specifically out of scope.

First consultation paper

Our first consultation paper was published on 19 November 2024 and the consultation period ended on 19 February 2025. In that consultation, we asked key questions about possible options to reform Part 2 of the Landlord and Tenant Act 1954. In particular, we considered the pros and cons of the current “contracting-out” model of security of tenure and considered 3 alternative models:

mandatory security of tenure
abolition of security of tenure
contracting-in model

We also sought views on whether or not the types of business tenancy which can benefit from security of tenure – the Act’s scope – are the right ones.

In addition to the questions in our first consultation paper, we also conducted a short survey to help us understand the impact of the 1954 Act on the current commercial leasehold market.

We have now analysed responses to our first consultation paper and our survey.

We have published an interim statement setting out our provisional conclusions in relation to the issues raised in the first consultation. We have provisionally concluded that:

1. There should be no change to the model of security of tenure. The existing contracting-out model should remain.

2. The threshold for excluding tenancies from the scope of the Act based on the tenancy’s duration should be increased from 6 months. In our second consultation paper, we expect to consult on increasing the threshold to 2 years.

3. Otherwise, there should be no change to the Act’s scope.

A compilation of the responses we received to our first consultation paper is available below.

Second consultation paper

On June 16 2026 we published our second consultation paper in our Business Tenancies project, Business Tenancies: the right to renew – modernising security of tenure. The consultation paper (together with a summary) and further details on how to respond are available below.

This second consultation builds on our first consultation paper, published in November 2024 , in which we considered whether major structural reform of the Landlord and Tenant Act 1954 (“1954 Act”) was needed. In June 2025, we published an interim statement explaining our provisional conclusions that the current contracting-out model for security of tenure should remain, and that the threshold for excluding tenancies from the scope of the 1954 Act based on the tenancy’s duration should be increased.

This second consultation paper takes those conclusions as its starting point and considers the detail of how the 1954 Act should operate in practice. In this paper, we are consulting on provisional proposals and questions aimed at modernising the 1954 Act so that it is clear, efficient and works effectively for landlords and tenants.

This consultation runs alongside a consultation on our Commercial Leasehold project – Commercial Leasehold: overcoming barriers to transactions, which considers issues arising under the Landlord and Tenant Act 1987 and the Landlord and Tenant (Covenants) Act 1995. The consultation paper for that project was published on 16 June 2026. All documents relating to that project, including the consultation paper and its summary, are available on the commercial leasehold project page.

Both projects share the objective of improving commercial leasehold law and are being progressed in tandem with a view to us providing a coherent package of reforms across key aspects of commercial leasehold law.

Our provisional proposals

Across 13 chapters, we ask 67 questions. We are keen for consultees to respond to all of the questions in the consultation paper, or as many as they are able.

We are consulting, and making provisional proposals, on a wide range of issues across the 1954 Act regime including:

Qualifying criteria – excluding the majority of periodic tenancies from the scope of the 1954 Act and increasing the duration threshold (which sets the length of fixed-term tenancies which are excluded from scope).
Contracting out – simplifying the contracting-out process.
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 and whether it should change to take into account modern building methods and/or the Minimum Energy Efficiency Standards or “MEES” regime.
Dispute Resolution process – 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 Alternative Dispute Resolution could have a greater role in resolving disputes.

Consultation

The consultation is open until 16 September 2026, following which we will consider responses. We will later publish a final report setting out the conclusions we reach.

We invite views on our provisional proposals and the other questions that we raise. We are also keen to receive evidence on the financial, practical and other impacts of our provisional proposals.

We would like to hear from as many stakeholders as possible, including business tenants, landlords, representative bodies, property professionals, legal practitioners, judges, academics and members of the public.

Consultation events

We will shortly be publishing here details of our consultation events, which will take place before the consultation period ends on 16 September 2026. At these events we will explain about more about our work on this project and the Commercial Leasehold project we refer to above.

Next steps (Back to top)

Following the close of the consultation period on 16 September 2026, we will analyse responses and publish a final report setting out our conclusions and recommendations in due course.

Documents (Back to top)

Contact (Back to top)

Email: businesstenancies@lawcommission.gov.uk

Cookies on Law Commission

Table of contents