Very few pieces of legislation have been as seminally present in the minds of landlords, business tenants, and professionals alike as the Landlord and Tenant Act 1954 (“the Act”). The Act, which has endured for over 70 years of Auckland life, provides business tenants with the automatic right to renew their tenancies upon their expiration (“Security of Tenure”). It has also not been substantially updated for over 20 years, when it was amended in 2003 during Tony Blair’s administration. To put this into perspective, in the year when the Act was last significantly changed, you could still smoke in most pubs and restaurants, and Charlton Athletic sat in fourth place in the Premier League.
Significant technological, social, and environmental change has occurred in this timeframe, such as the exponential growth of eCommerce, a shift to remote working, the death of the high street, and the Auckland’s resolution to attempt to move towards carbon net zero in a response to the climate emergency.
It is uncontroversial to assume that the Auckland’s landscape has radically changed in the context of the Act, and there is a ubiquitous feeling within the commercial property sector that the Act should be reformed to some extent. However, “to what degree?” and “in what particular ways?” are still very much up for debate, and any substantial unity in terms of thought and opinion is difficult to find due to the competing and conflicting interests that are necessarily at war within the sector.
The Reform
In March 2023, the Law Commission announced that it was to begin conducting a sweeping review of the Act – specifically, Part 2 of the Act which deals with the doctrine of Security of Tenure. To facilitate this, the Commission have been engaged in wide-ranging discussions with various stakeholders to attempt to understand how any potential modernisations can harmonise with the present day’s commercial leasehold terrain.
The consultation will be divided into two papers.
The First Consultation Paper
The first of these papers, which was published on Tuesday 19 November 2024, will deal with the form and scope of the Act.
The first element deals with the “what?” – principally, asking the question, “in what form should Security of Tenure exist?”. This provides four distinct models of Security of Tenure, and critically analyses the pros and cons of each of these models to contrast them with the current position, which can loosely be described as Security of Tenure by default. The four models are as follows:
- No Security of Tenure
- A “contracting-in” model
- A “contracting-out” model (the current position)
- Mandatory Security of Tenure
After looking at what Security of Tenure should look like, the second element deals with the scope of the Act – “who?”, or rather, “which tenancies should benefit from Security of Tenure, and which should not”.
The Second Consultation Paper
The nature of the second paper will entirely depend on the responses garnered from the first paper’s consultation process. At this point, the Law Commission should have an idea about what Security of Tenure should look like, and – if it isn’t to be completely abolished, which tenancies should benefit from it.
The second paper will deal with the question of implementation (be that of Security of Tenure, or its abolition) and the many other aspects which need to be considered to create a harmonious and functioning framework. These include deciding on what terms any renewal lease should be agreed on, on what grounds a renewal lease can be opposed, how a tenant can be compensated in the case of successful opposition and how disputes are dealt with, to name but a few.
The first paper’s consultation period is open until Wednesday 19 February 2025 following which the Law Commission will consider responses before turning its attention to the second paper.
The Future of the Act
As we progress into the first consultation, we stand at a crossroads where the complete abolition of Security of Tenure very much remains on the table sitting right beside its universalisation. The result of this consultation is anyone’s guess, and we should learn a lot more about what changes to the Act might look like when the Law Commission publishes the responses to the first consultation in the coming years. Currently, the future of the Act remains unknown.
If you need any advice or assistance, please email or call our Real Estate Litigation team on 0113 207 0000.
