It is twenty years since the last review of the Landlord and Tenant Act 1954 - which governs many landlord and tenant relationships when it comes to commercial property, including shops, warehouses and offices. The Government has recently instigated a further review - with the Law Commission due to publish a consultation paper by the end of this year. The announcement has so far met with a generally positive response from the legal community, but are changes to the law governing commercial landlord and tenant relationships really a priority and could intervention here perhaps make matters worse?
Whilst there have been some calls for reform of the 1954 Act in recent years, these have been fairly muted. The recent announcement of the proposed consultation claims that the law needs to shift in order to meet changes arising from the rise of online retail, the 2008 financial crisis and recent pandemic. It suggests that a more modern framework for protecting business leases would "support the long-term resilience of high streets" including through reducing "the growing number of vacant properties on our high streets and the anti-social behaviour that comes with it". In our view, it is difficult to see that changing the current statutory protection available for business premises is really going to help with such challenges, but we obviously await details as to the new framework which might be put into place.
The announcement criticises the Act as "inflexible, bureaucratic and out of date". Whilst it may be almost 70 years old, we find that the Act is generally reasonably well understood by landlords and tenants and operates well for most of them. Since the last changes to the Act in 2003, it provides a flexible and cost-effective route to protect the ability of businesses to operate from their existing premises. The suggestion that costs and delay arising from the 1954 Act are preventing high streets from being occupied quickly does not match our experience; very often, it is simply the lease negotiations and subsequent fit-out works which can take a number of months and it is difficult to see that there is any way around these processes.
Equally, the Act has generally worked well to allow landlords to undertake their planned redevelopments - albeit not without satisfying some legal hurdles. Whilst there have been some complaints from landlords about the legal processes and inevitable delay involved, the recent government announcement does not appear to be focused on these issues. In any event, there are plenty of examples within case-law of the courts ensuring that the 1954 Act does not act as a barrier to redevelopment plans.
From our reading of the recent announcement, a key concern seems to be that many parties choose to opt out of the protection of the 1954 Act. This is often because the rents payable under such leases are lower than for protected tenancies, which is obviously attractive for businesses looking to reduce costs. Before seeking to adjust such commercial choices and relationships, we hope that the Government will think carefully. It is fair to say that the results of some of its legislation passed during recent years - often in haste - suggest that there should be real concern at the prospect of a redesigned 1954 Act process.
For example, the new Electronic Communications Code introduced at the end of 2017 has led to almost constant litigation whilst landowners and operators battle over interpreting its provisions. As well as the costs and delay resulting from these constant court battles, the changes introduced by the new Code which were designed to support operators in rolling out their electronic communications networks have caused significant stagnation in the market for telecoms sites. Whilst we hope it is unlikely that a similar scenario would arise from changes to the 1954 Act - or indeed the Government's desire to alter the terms of residential tenancies (see Leasehold and commonhold reform: what further indications have the Government given for 2023?) - the Government must take the time to consider seriously the potential implications of interfering in contractual relationships.
The Law Commission’s review will explore problems with the existing law with a view to developing a modern legal framework that is widely used rather than opted out of, and that helps businesses to grow and communities to thrive.