Security of tenure revisited: what the Law Commission’s proposals mean for landlords and tenants

The Law Commission’s ongoing review of Part II of the Landlord and Tenant Act 1954 represents the most significant examination of business tenancy law in more than two decades. The review could result in important changes to the way commercial leases are negotiated, renewed and managed across England and Wales.

Commercial landlords, tenants, developers, investors and lenders have an opportunity to influence the future direction of reform by participating in the consultation process. Responses to the second consultation must be submitted by 16 September 2026.

Why is the Act under review?

The security of tenure provisions of the Landlord and Tenant Act have formed the foundation of commercial leasing for more than 70 years. They give business tenants the statutory right to remain in occupation and apply for a renewal lease at the end of their contractual term, unless the lease has been contracted out of the Act or the landlord can establish one of the statutory grounds of opposition.

This second consultation paper seeks responses on whether the legislation remains fit for purpose in a modern, commercial property market, characterised by greater flexibility, shorter occupation periods, serviced offices, mixed-use developments, and evolving occupier requirements.

The first consultation – fundamental questions

The first consultation, which closed in February 2025, focused on the fundamental question of whether security of tenure should continue to exist and, if so, in what form.

The Law Commission considered four possible models:

1. Mandatory security of tenure - all qualifying business tenancies would benefit from security of tenure, with no ability for parties to contract out.
2. No security of tenure - the statutory right to renew would be abolished entirely, leaving lease renewals to market forces and contractual negotiation.
3. Contracting-in - the default position would be that tenants have no security of tenure unless the parties expressly elected to opt into the regime.
4. Contracting-out (current model) - security of tenure would apply by default unless the parties followed the statutory procedure to exclude it.

The consultation also sought views on the scope of the Act, including whether existing exclusions remain appropriate and whether the threshold for short-term tenancies should be reconsidered.

In its interim statement published in June 2025, the Law Commission indicated a provisional preference for retaining the current contracting-out model. It also concluded that the existing categories of excluded tenancy should largely remain unchanged, although it suggested that the current six-month threshold for short-term lettings may be increased, potentially to two years.

The current consultation and reform of the renewal process

Having provisionally decided to retain the existing framework, the Law Commission has now turned its attention to how the regime operates in practice.

The second consultation paper seeks views on commercially significant questions, including:

1. Whether the existing court-based lease renewal process remains appropriate, and what role mediation, arbitration and other forms of alternative dispute resolution should play.
2. How rent under renewal leases should be calculated (including express provision for considering turnover rents).
3. Whether the Act should exclude shorter leases (e.g. leases up to 2 years, rather than the current 6-month threshold).
4. Whether statutory compensation under the Act should remain calculated by reference to rateable value, or instead by reference to rent.
5. Dealing with the introduction of new terms into renewal leases that relate to energy efficiency and other environmental issues.
6. Whether the statutory notice procedures are unnecessarily complex; and
7. Amendments to the redevelopment grounds on which landlords can oppose renewal.

While these issues may appear procedural, any reforms could have a material impact on negotiating leverage, transaction timetables, asset management strategies and the costs associated with lease renewals and disputes.

Implications for landlords, tenants, investors and lenders

The Law Commission’s recommendations could shape the future of commercial leasing for many years to come. Although wholesale abolition of security of tenure now appears unlikely, changes to renewal procedures, opposition grounds, dispute resolution mechanisms and qualifying tenancy thresholds could affect the interests of landlords, tenants, investors and lenders alike.

For landlords, reforms may influence redevelopment strategies, portfolio management and exit planning.

For occupiers, they may affect business continuity and negotiating strength.

Investors and lenders will also have a strong interest in any changes that could impact asset value, income security or the marketability of property interests.

Next steps

With the consultation closing on 16 September 2026, interested parties should now take the opportunity to review the proposals and submit a response.

This is a rare opportunity to help shape policy and legislation that sits at the heart of the commercial property market.

A copy of the full consultation paper can be found here.

Responses can be submitted online here.

How Hamlins can help

Hamlins Real Estate and Real Estate Disputes teams are closely monitoring the Law Commission’s review and advising clients on the potential implications of the proposed reforms.

We are assisting landlords, tenants, investors, developers and lenders in understanding the consultation, assessing its potential impact on their property interests, and preparing consultation responses where appropriate.

If you would like to discuss the review of the Landlord and Tenant Act 1954, the consultation process, or the potential implications for your business or portfolio, please contact a member of our team.