Paul Fairlamb, Commercial Chartered Surveyor with youngsRPS, looks at possible Reforms to the Landlord and Tenant Act and what this could mean for your commercial property
The Landlord and Tenant Act 1954 provides the legal framework between commercial landlords and tenants and aims to strike a fair balance between the two parties. Part 2 of the Act was updated in 2003 but the main body of the Act is almost 70 years old and there have been growing calls for it to be revisited to ensure that it is fit for the modern property world.
Government announced a review of the legislation back in December 2020, but the pandemic put pay to any real progress. On 27th March the government announced its intention to review the legislation with the Law Commission aiming to publish a consultation paper in December 2023.
Many point to the current Act being inflexible and bureaucratic causing additional delay and cost in granting new leases. Such bureaucracy and delay is particularly unhelpful in today’s market where landlords and tenants require a simplified process to bring unoccupied properties back into use quickly. So what changes might be considered?
Contracting Out
Part of the current Act gives a commercial tenant the automatic right to a new tenancy at the end of their existing tenancy except in specific situations, such as where a landlord has a clear intention to redevelop the property. This has however led to an increasing number of landlords contracting out of these provisions of the Act rather than using the Act.
Government may choose to try to firm up these provisions to prevent a tenant’s right to a new lease being taken away with the argument being that this would enable tenants to have more certainty which would in turn lead to them being more likely to invest in their business and the property.
The polar view of this is that Government may choose to make the contracting out process easier, to encourage landlords to let property in a less bureaucratic way. Currently, the contracting out process in most cases leads to formal notice having to be served on the tenant informing them that their right to a new lease will be removed and the tenant then needs to complete a statutory declaration confirming their understanding of these restrictions. This leads to greater complexity and cost for both landlord and tenant. There is an argument that removing the need for such a formal process will lead to a more efficient letting process.
Legal Process
Consideration might also be given to reducing the role of the court service in relation to disputes possibly by introducing a strong arbitration process maybe involving other technical experts. This would only be successful in reducing the time taken to resolve disputes if the service to replace it is appropriately resourced.
Environmental Considerations
Currently landlords could resist a lease renewal on the grounds of redevelopment however, there is no right to resist renewal due to environmental concerns. For instance, if a landlord wanted to carry out extensive alterations to a property to improve its environmental credentials it is unlikely to be able to do so unless such works could be considered as ‘development’ which may lead to complex and costly legal argument. Government places a significant emphasis on climate change targets and therefore consideration could be given to widening the redevelopment clause to include substantial works to significantly improve the energy performance of a building.
We will need to wait until December to see what the Law Commission proposes, but it is hoped that changes to the Act will lead to a simplified quicker and cheaper process for the granting of leases and lease renewals, which will be warmly welcomed by landlords, tenants, and surveyors.
