The Law Commission and property law

It has been a busy year for the Law Commission (the “Commission”) as it continues to consult upon and investigate a number of key areas, affecting both commercial and residential property law.

This brief bulletin summarises the three main areas currently receiving attention from the Commission: 1. Part II of the Landlord and Tenant Act 1954 2. The Landlord and Tenant (Covenants) Act 1995 and 3. The Landlord and Tenant Act 1987 (Tenant’s Rights of First Refusal).

Landlord and Tenant Act 1954

Part II of Landlord and Tenant Act 1954

This is the biggest and most significant of the three reviews. The Commission is undertaking a comprehensive review of Part II of the 1954 Act, which deals with security of tenure for business tenants.

First consultation – November 2024

The first consultation was published on 19 November 2024 and closed on 19 February 2025.

The Commission initially considered whether the entire model of security of tenure for business tenants needed fundamental change.

It considered a number of possibilities:

  1. retaining the existing contracting-out model;
  2. mandatory security of tenure;
  3. abolition of security of tenure; and
  4. a contracting-in model.

The Commission also considered which types of business tenancy should benefit from protection.

Why was this necessary?

The 1954 Act dates back to the post-war period and the commercial property market has changed dramatically since then. The Commission identified a number of issues:

  • the legislation is decades old;
  • the way businesses occupy premises has changed;
  • commercial lease structures have evolved;
  • the modern market includes different types of businesses and occupation arrangements;
  • the legislation has not had a major structural review for around 20 years; and
  • some aspects of the existing process are regarded as cumbersome or unclear.

The Government’s broader objective is also to make it easier for businesses to occupy commercial premises and support economic growth, particularly in high streets and town centres.

June 2025

Following the first consultation, the Commission published an interim statement on 4 June 2025. It received more than 160 responses. Importantly, the Commission provisionally decided not to replace the existing contracting-out model. Its provisional conclusion was that the existing system strikes the correct balance between landlords and tenants and that changing the fundamental model could cause significant disruption to the commercial lease market. The Commission did, however, conclude provisionally that the six-month threshold for excluding certain short tenancies from the Act should increase, with the second consultation proposing two years.

Second 1954 Act consultation – June 2026

This is the consultation that has recently ended. It was published on 16 June 2026 and closed on 16 September 2026. Rather than asking whether the entire security-of-tenure model should be abolished or replaced (this being the subject matter of the First Consultation), the Commission was concentrating on how to modernise and improve the existing system.

Qualifying tenancies

The Commission proposes changes to which tenancies fall within the Act, including:

  • increasing the duration threshold for fixed-term tenancies;
  • potentially excluding the majority of periodic tenancies.

Contracting out

The Commission was also considering how to simplify the contracting-out process. This is important because contracting out is now a routine part of commercial leasing, but the statutory procedure can be technical.

Renewal terms

The Commission is examining how the court determines the terms of a renewal lease.

It is also considering whether the law needs to deal better with environmental matters.

Rent

The Commission considered:

  • Whether courts should be able to grant renewal leases containing turnover rents;
  • Improvements to the interim rent process; and
  • Rent free periods to account for fit outs – often claimed on renewals due to the open market test set by s.34 of the 1954 Act.

Grounds of Opposition – Ground F

One of the most significant areas also considered was: S.30 (1) (f) Ground F (the landlord’s ability to oppose renewal where it intends to demolish or reconstruct the premises).

The Commission is considering whether the test should be updated to take account of:

  • modern construction methods; and/or
  • the Minimum Energy Efficiency Standards (MEES) regime.

Dispute Resolution

The Commission is also questioning whether lease renewal disputes should continue to be dealt with through the County Court, or whether some disputes should instead go to:

  • the First-tier Tribunal;
  • the High Court; and/or
  • alternative dispute resolution (non-mandatory).

The Commission is presently considering the further responses received.

Landlord and Tenant Covenants Act 1995 (“The 1995 Act”)

What is the Law Commission consulting on?

The 1995 Act governs the relationship between landlords and tenants in relation to lease covenants, particularly what happens to the parties’ obligations when a lease is assigned.

The Commission is looking at whether some of its rules are unnecessarily restricting modern commercial transactions.

Its central concern is that the Act’s anti-avoidance provisions, while intended to prevent parties circumventing the statutory regime, can sometimes prevent arrangements which are commercially sensible.

The current consultation proposes greater flexibility in three particular areas:

  • Assignments and guarantees involving group companies;
  • Assignments and guarantees involving partnerships, where the partners of the assignor and assignee are substantially the same; and
  • Assignments to guarantors.

Why are they consulting?

The basic issue is that the 1995 Act was designed to solve the old problem of privity of contract and to establish a fairer system for liability following assignment.

However, the commercial property market has developed considerably since 1995. Corporate groups, restructuring arrangements and sophisticated guarantee structures are now commonplace.

The Commission has therefore identified circumstances where the Act’s anti-avoidance rules can operate more rigidly than intended, making transactions harder or more expensive.

The objective is therefore not to remove the protection of the 1995 Act, but to introduce flexibility where the existing rules are getting in the way of legitimate commercial arrangements.

Key date: 16 September 2026 – the consultation closed and the Commission’s findings and report will be published in due course.

Landlord and Tenant Act 1987 (“The 1987 Act”)

The Law Commission is looking specifically at the right of first refusal regime under the 1987 Act and, in particular, how it applies to mixed-use premises.

What is the problem?

The 1987 Act gives qualifying residential tenants’ rights of first refusal when a landlord proposes certain disposals of its interest. The difficulty identified by the Commission is that these rights can create confusion, delay and bureaucracy in commercial property transactions, particularly where a development contains both residential and commercial units.

The particular proposal being considered is whether the grant of leases of commercial units in mixed-use premises should be excluded from the residential tenants’ right of first refusal.

The Commission is considering whether the current legislation inadvertently catches transactions involving commercial parts of mixed-use developments which should be capable of proceeding without triggering the statutory right of first refusal for residential qualifying leaseholders.

Why are they consulting?

The Commission says that aspects of the 1987 Act are creating:

  • unnecessary confusion;
  • bureaucracy;
  • delay;
  • costs; and
  • obstacles to commercial transactions.

This fits into the wider objective of making commercial leasehold transactions quicker and more predictable.

There is an important balancing exercise here, because the Commission is conscious that the legislation provides important protections for residential leaseholders.

The consultation closed on 16 September 2026.

 

The content of this article is intended to provide a general guide to the subject matter.

If you have any questions about the topics raised in this article, please feel free to contact Adam Vidler, or a member of the Dispute Resolution team.