Although the Law Commission has proposed changes in some areas of commercial leasehold law, in other areas it is more cautious about making changes.

Published: 23 July 2026
Authors: Michael Callaghan

Introduction

The Law Commission’s consultation on the Landlord and Tenant Act 1954 (1954 Act), which underpins the law for business tenancies, proposes several significant changes to the 1954 Act. We have focused on a number of these in other articles in this series.  However, where changes would overlap with other areas of law, the Law Commission has taken a more conservative and cautious approach to law reform.

Registration gap

The registration gap arises where a property is transferred, but the buyer is not yet registered at HM Land Registry.  Legal title remains with the seller, while the buyer holds the beneficial interest.  During this period, notices must be served by or on the legal owner, not by or on the new owner.  The issue affects both landlords who sell their title and tenants who assign their leases.

The Law Commission’s preferred option is to maintain the current law to ensure that the treatment of the registration gap under the 1954 Act is broadly consistent with other statutory and common law notice requirements.  It believes that the difficulties that the registration gap creates, and the way in which those issues are managed by the parties or their representatives, are generally well understood.

Notably, the Law Commission says that there are questions about establishing the grounds for possession where the legal landlord serves a notice opposing the renewal of a tenancy on redevelopment or occupation grounds but the new owner is the person who will redevelop or occupy. However, it does not explore these further or suggest solutions to these questions.  This is a missed opportunity to clarify the law.

Occupation by linked parties

For a tenant to benefit from the protection of the 1954 Act, it must be in occupation of premises for the purposes of a business.  In modern structures the “tenant entity” may differ from the “occupying entity”.  Although there are existing statutory relaxations applying to group companies and trusts, they do not benefit public sector bodies or other arrangements.  The Law Commission does not propose immediate reform.  Instead, it specifically asks whether occupation by “government bodies” should be treated like group companies and trusts. In effect this would mean that occupation by one government body should constitute occupation of the tenant in circumstances where the tenant is a different government body.

Occupation requirement

Some business tenants may not be able to benefit from the protection of the 1954 Act where their businesses consist of granting rights of occupation of the premises to others as they are not then in occupation of the premises themselves.  Typical examples include business tenants that run mobile home sites, and operators of serviced apartments and serviced offices. Similar difficulties might also arise for companies that operate a franchise business model, where the franchisor owns a business tenancy of premises that are occupied by the franchisee.

The Law Commission is cautious about reforming the “occupation” rule and widening it to “using the premises” for the purposes of a business.  Such an approach would, it believes, risk unravelling a key principle underpinning the 1954 Act.  It is therefore asking for further evidence about the extent to which the “occupation” rule causes difficulties in practice that should be addressed through reform.

Contractual break clauses

If a landlord has a contractual break clause in a protected tenancy, it must not only comply with the contractual obligations in the lease but also comply with the statutory requirements of the 1954 Act to oppose the grant of a new tenancy.  It has been suggested that where the parties have agreed to the inclusion of a contractual break clause within a protected tenancy, the landlord should be able to exercise the break without having to oppose the grant of a renewal tenancy under the 1954 Act.

The Law Commission considers that the current law is right.  Allowing landlords to terminate a protected tenancy simply by exercising a contractual break clause would risk substantially undermining the protection offered to tenants under the 1954 Act.

Large-scale and complex redevelopments

Where a landlord plans a large-scale or complex redevelopment, a landlord may not be able to satisfy the redevelopment ground to regain occupation.  Where extensive works are planned to a wider property, the impact of that work specifically on the tenant’s premises may be relatively minor, or non-existent.  However, there could be potentially significant risks or logistical difficulties in undertaking wider redevelopment works with the tenant in situ that might make redevelopment of the wider property prohibitively costly, difficult or dangerous.

The Law Commission has considered whether the redevelopment ground should be amended, or a new ground of opposition created, to enable a court to consider a landlord’s wider works.  However, it has concluded that this expansion would represent a significant change to the 1954 Act and should not be implemented.  It believes that although there are challenges that are caused by the 1954 Act, there is no evidence those challenges hold back large-scale and complex developments.  Nevertheless, it invites consultees’ views regarding any specific challenges that are encountered in large-scale or complex developments, and about any amendments to the 1954 Act that are required to resolve them.

The interaction between MEES and the 1954 Act

The Law Commission discusses the obligations in the MEES Regime (in particular, the duty not to let, or continue to let, “sub-standard” property) and the security of tenure regime under the 1954 Act (which obliges landlords to re-let a property to existing business tenants).  Which regime takes priority?

The Law Commission notes that there is a temporary exemption to “postpone” compliance with MEES by six months on the grant of a renewal tenancy pursuant to the 1954 Act and that the consent exemption may also apply.  It therefore considers that, in principle, these exemptions mean that the 1954 Act does not itself present compliance issues with the MEES regime.

However, the Law Commission acknowledges that there is a lack of clarity about how the exemptions operate in practice.  For example, it is unclear whether a negotiated renewal of a protected tenancy, concluded without the service of a section 25 or section 26 notice (or issuing court proceedings), constitutes a “renewal pursuant to the 1954 Act” for the purposes of the temporary exemption under the MEES regime.  However, to the extent that this is an issue with the MEES regime, it is outside the scope of the Law Commission’s consideration of the 1954 Act.

The Law Commission asks for evidence of any practical difficulties in relation to the “conflict” between MEES and the 1954 Act.

What next?

As ever, it is important to remember that this is, for now, only a consultation. Any views provided in response will form the basis of recommendations by the Law Commission. It will then be for government to choose how to implement (or not) those recommendations in order to reform the landscape for commercial landlord and tenant relationships.