Security of tenure reform: keeping the model, changing the mechanics

Abolition of security of tenure may be off the table, but the real debate is just beginning.

The Law Commission ’s second consultation paper, published yesterday, is where reform gets practical. It asks how Part 2 of the Landlord and Tenant Act 1954 should work in the real world: who gets protection, how it will be excluded, what terms apply on renewal, when landlords can recover possession, what tenants should be paid if renewal is refused, and where disputes should be fought.

Technical? Yes. Marginal? No. The 1954 Act remains part of the bedrock of the commercial leasehold market, and reform could affect every business tenancy in England and Wales.  

The big questions

• Short-term lettings: where to draw the line? The Law Commission is consulting on whether new fixed-term tenancies should only be protected if granted for more than two years or more than one year, and provisionally proposes that all new periodic tenancies (express or implied) should sit outside the regime. 
   
• Contracting out: simpler, or just different? The headline practical proposal is to move the contracting out process into the lease itself, replacing separate warning notices and statutory declarations with prescribed wording and a tenant declaration in the lease.
   
• Renewal terms, rent, redevelopment, and sustainability: modernising the old tests? The consultation considers whether the regime should better accommodate turnover rents and other alternative rental models; whether interim rent should be simplified, including by using one fixed valuation date or retaining two valuation dates but simplifying the assessment; whether environmental matters, including MEES, should count expressly when renewal terms are settled; whether Ground F should accommodate modern construction methods such as refurbishment and retrofitting; and whether Ground G should allow landlords to alter premises before occupation. 
   
• Compensation and dispute resolution: where do disputes go, and what should tenants be paid? The consultation puts compensation and forum firmly on the table: including whether compensation should be based on rent rather than rateable value; whether the 14-year higher-rate threshold should become stepped bands; and whether disputes should stay in the county court, move to the High Court or tribunal, be split between forums, or make greater use of ADR.    

What next?

The proposals sensibly focus on reducing traps and friction in a regime the market knows, but the jury is out on whether they strike the right balance between landlord flexibility and tenant protection.

If that balance matters to your portfolio, pipeline or renewal strategy, now is the time to say so. Responses are due by 16 September 2026, after which the Law Commission will publish final recommendations for the Government to consider.