Business Tenancies: Why the Law Commission’s Proposed Reforms Matter

The Law Commission’s second consultation on reform of Part 2 of the Landlord and Tenant Act 1954 could lead to some of the most significant changes to business tenancy law for many years.

Published on 16 June 2026, Business Tenancies: the right to renew – modernising security of tenure moves beyond the fundamental question of whether business tenants should continue to enjoy security of tenure and considers how the statutory scheme should work in practice.

The good news for those who value the stability provided by the 1954 Act is that the Law Commission has provisionally concluded that its basic structure should remain.

But beneath that headline are proposals which could materially affect commercial landlords, tenants and the lawyers who advise them.

Security of tenure is staying

Part 2 of the 1954 Act gives qualifying business tenants a statutory right to remain in occupation when their contractual tenancy expires and, subject to the landlord establishing one of the statutory grounds of opposition, to obtain a new tenancy.

The Commission considered more fundamental alternatives during its first consultation, including mandatory security of tenure, abolition of security of tenure and a contracting-in regime.

It has provisionally rejected those alternatives.

The familiar contracting-out model is expected to remain. Landlords and tenants will therefore remain free to agree, before granting the tenancy, that statutory security of tenure will not apply.

That provides some welcome certainty.

Shorter tenancies could be treated differently

One important proposed change concerns the length of tenancy which falls within the Act.

At present, certain short tenancies of six months or less are excluded from security of tenure. The Commission has provisionally concluded that this threshold should be increased and is consulting upon the appropriate period.

That matters particularly in a commercial property market in which businesses increasingly seek flexible occupation rather than traditional long leases.

The challenge is to distinguish genuinely short-term occupation from arrangements which, in substance, provide a business with an established commercial home.

Contracting out could be simplified

The Commission is also examining the procedure by which landlords and tenants contract out of the 1954 Act.

The present warning notice and declaration procedure is familiar to property lawyers but can appear unnecessarily technical to commercial clients.

Simplification would be welcome if it removes unnecessary administration without undermining the important principle behind the existing procedure: a tenant should understand that it is giving up a potentially valuable statutory right before it becomes contractually committed.

That balance is particularly important for small businesses negotiating without specialist property advice.

What happens when landlord and tenant cannot agree?

Some of the most interesting proposals concern litigation.

At present, disputes under the 1954 Act are generally determined in the county court. The Commission is considering whether that remains the best forum.

Options include greater use of the High Court in appropriate cases, transferring cases to the Tribunal, or adopting a divided jurisdiction under which unopposed renewals are dealt with by the Tribunal while opposed renewals remain in the courts.

There are attractions in specialist determination, particularly where an unopposed renewal principally concerns rent or the terms of the new lease.

A divided jurisdiction could, however, create problems of its own. An opposed renewal can become unopposed if the landlord withdraws its opposition or fails to establish the statutory ground relied upon. Moving proceedings between court and Tribunal would not necessarily make the process quicker or cheaper.

A more structured litigation process

Less dramatic procedural reforms may prove equally important.

The Commission is considering a bespoke pre-action protocol for 1954 Act proceedings together with standard directions.

Earlier identification of the real issues and earlier exchange of information could be particularly valuable in opposed renewal proceedings.

Take a redevelopment case under Ground F. Considerable costs can be incurred investigating the landlord’s intention and ability to carry out the proposed works. Earlier disclosure of the redevelopment case, and earlier identification of precisely what the tenant disputes, could considerably narrow the eventual litigation.

The Commission is also considering whether a bespoke costs regime analogous to CPR Part 36 could encourage settlement.

That is an interesting proposition because conventional Part 36 offers do not always fit comfortably with litigation in which the court may be determining rent, term, break provisions and several other clauses of a new lease simultaneously.

A much greater role for ADR?

The consultation also reflects the increasingly important role of alternative dispute resolution within civil litigation.

The Commission asks whether either party should be able to require a business tenancy dispute to be referred to non-determinative ADR, such as mediation or early neutral evaluation, even where the other party does not wish to participate.

That would not compel either party to settle. If ADR failed, the right to judicial determination would remain.

Nevertheless, it would represent an important development.

Following Churchill v Merthyr Tydfil County Borough Council, compulsory participation in an appropriate non-court dispute resolution process is no longer regarded as inherently incompatible with access to justice. The question is increasingly not whether parties can be required to engage with ADR, but when doing so is proportionate and useful.

Business tenancy disputes are obvious candidates.

In an unopposed renewal, landlord and tenant may be negotiating the terms upon which they will continue their commercial relationship for years. Rent, term, break rights, repairing obligations and other provisions can often be negotiated together in a way which is difficult to reproduce through judicial determination of individual issues.

Early neutral evaluation may equally assist where the real obstacle to settlement is a substantial difference in the parties’ assessment of the likely legal or valuation outcome.

Why businesses should engage with the consultation

The 1954 Act is more than 70 years old, but the commercial property market it regulates has changed considerably.

Online retail, flexible working, shorter occupational arrangements, environmental obligations and changing town centres have altered what businesses require from commercial premises.

The challenge is therefore not simply to modernise old statutory language. It is to preserve the valuable certainty provided by security of tenure while making the system sufficiently flexible for the modern commercial property market.

That balance will affect institutional landlords and major retailers, but it will also affect the independent shop, small professional practice, family business and individual commercial landlord.

Those smaller participants may have rather different priorities.

The opportunity for reform

There is much to be said for retaining the basic architecture of the 1954 Act.

Its continued existence gives businesses a degree of security and provides landlords and tenants with a well-understood framework within which renewals can be negotiated.

But retaining the architecture does not require retaining every procedural feature developed over the past 70 years.

Simpler procedures, earlier exchange of information, specialist determination where appropriate, meaningful costs incentives and properly timed ADR could potentially make the system considerably more efficient without sacrificing either party’s substantive rights.

The Law Commission’s consultation closes on 16 September 2026.

For commercial landlords, business tenants, surveyors and property litigators, this is an important opportunity to influence not merely what the law says, but how business tenancy disputes will actually be resolved in the future.

Read the Law Commission’s Business tenancies: the right to renew project and consultation

This article discusses proposals which remain under consultation and which have not been enacted. It is general commentary and not legal advice on any particular case.

Related article: Why We Must Respond to the Business Tenancies Consultation