Business Tenancies: The Right to Renew

Do you operate your business from a property you lease? If so, now is your chance to get involved in what will undoubtedly have a big impact on the commercial leasehold market moving forward.

How do business tenancies currently function?

There are around 50 million businesses in the United Kingdom and the vast majority operate from a leased property. The current system stems from the Landlord and Tenant Act 1954 which gives tenants security of tenure in other words, the right to renew the tenancy at the end of the term and remain in the property. In these circumstances, the landlord only has limited grounds to contest the renewal. This process benefits commercial tenants as it provides stability and continuity for both the business and clients, tenants can undertake improvement works to the property and see the benefits, and the system provides great legal protection to stay in situ.

However, in modern practice, most landlords will impose that the right to renew should not apply to the lease and contract out of security of tenure. Therefore, leaving the tenant with minimum security or protection. The commercial world has changed dramatically from 1954 to the modern day, leaving us to ask: is the current system for commercial leasehold renewals fit for purpose?

Assessing the current model

The Law Commission has established a consultation process to consider this position, aimed at assessing the current 1954 model of contracting out, proposing alternative options such as mandatory security of tenure and a contracting in process, as well as which types of business should benefit from security of tenure.

The first report was published on 19 November 2024. Visit page 10 on this link to review the models proposed.

The associated costs of commercial leases are ever-increasing and the ability to have security of where you operate from can only benefit any business. The Law Commission seeks the experiences and input of all types of businesses and holds a series of events in person and online. The consultation period runs for 3 months and will end on 19 February 2025. You can review the first report and provide your comments using this link.

Any further questions?

If you have any queries on any of the issues highlighted above or about commercial leaseholds in general, do not hesitate to contact our Andrew Dickinson on 

AndrewDickinson@chadlaw.co.uk or 

0113 225 8830