Modernising security of tenure: The Law Commission’s follow up consultation paper

Around this time last year, we wrote about the Law Commission’s (the “Commission”) review of Part 2 of the Landlord and Tenant Act 1954 (the “Act”), which was conducted with a view to “modernising commercial leasehold legislation”. The full article can be found here Right to Renew: The Law Commission’s Statement.

On 16^th June 2026, the Commission published its second consultation paper: Business Tenancies: the right to renew – modernising security of tenure.

This second consultation follows the provisional conclusions of the first consultation, namely that the current contracting-out framework for security of tenure should be retained and that the duration threshold for excluding tenancies from the scope of the 1954 Act should be increased. Taking these conclusions as its starting point, the Commission has now set out consultation on the detail of how the 1954 Act should operate in practice.

The Commission set out the following provisional proposals:

• Qualifying criteria – excluding most periodic tenancies from the scope of the 1954 Act and increasing the duration threshold that determines which fixed-term tenancies fall outside its scope;
• Contracting out – simplifying the process;
• Terms of a renewal tenancy – reviewing the court’s approach to determining the terms of renewal tenancies and considering whether changes are needed to reflect environmental issues;
• Rent – changing the law to enable the court to grant a renewal tenancy on a turnover rent basis and improving the process for determining interim rent;
• Grounds of opposition – assessing whether the Ground F test should be updated to accommodate modern building methods and/or the Minimum Energy Efficiency Standards;
• Dispute Resolution process – considering whether lease renewal disputes should continue to be heard in the county courts or whether some cases should be transferred to the tribunal and/or the High Court, and whether Alternative Dispute Resolution should play a greater role.

Commercial Leasehold: overcoming barriers to transactions

The consultation on modernising security of tenure is being conducted alongside another consultation on commercial leasehold and overcoming barriers to transactions, both of which aim to develop a coherent and comprehensive package of reforms addressing key aspects of commercial leasehold law.

The consultation paper for this additional project was also published on 16 June 2026 and focuses on the following issues.

The right of first refusal under the Landlord and Tenant Act 1987, which in many cases requires a landlord intending to sell, grant a lease of, or otherwise dispose of its interest in a block of flats to a third party to first to offer that interest to the qualifying residential leaseholders. The Commission is seeking views as to whether the right of first refusal for residential leaseholders should apply where a commercial lease is granted in mixed-use premises. As set out by the Commission, it appears that the current law is causing unnecessary complexity, expense and delay to otherwise straightforward transactions.

The anti-avoidance regime under the Landlord and Tenant (Covenants) Act 1995 can create difficulties in commercial leasehold transactions, including assignments and guarantee arrangements between connected companies and within partnerships. The Commission is consulting on whether assignments and guarantees between group companies, partnerships and other closely connected parties should be allowed as the current regime appears to be hindering commercially sensible transactions.

Both consultations close on 16 September 2026. The Commission will then consider the responses, and a final report outlining the conclusion will be published in due course.

Need advice on security of tenure?

If you are a landlord or tenant and need advice on the legislation surrounding security of tenure, or need help effectively contracting out of a tenancy, get in touch with our Commercial Property solicitors.