Law Commission consultations – commercial leases

On 16 June 2026 the Law Commission launched two new consultations affecting commercial leases. The two consultations cover (i) security of tenure and (ii) targeted reforms to the Landlord & Tenant Act 1987 and the Landlord & Tenant (Covenants) Act 1995. We look at these in more detail below.

Business Tenancies: the right to renew – modernising security of tenure

This is the Law Commission's second consultation on potential reforms to the Landlord and Tenant Act 1954 and the security of tenure regime for commercial property. Following the first consultation in November 2026, the Law Commission's key provisional conclusions were:

• the existing "contracting-out" model should be retained. The Law Commission concluded that the current approach of giving tenants security of tenure by default, subject to the ability to contract out, is the right model for the modern commercial leasehold market;
• the categories of tenancy that can benefit from security of tenure should remain unchanged; and
• the Landlord & Tenant Act 1954 (the 1954 Act) currently excludes tenancies of up to six months and this threshold should be increased.

The second consultation is building on the first and takes the above conclusions as its starting point. The aim is to modernise the 1954 Act. The second consultation paper sits across 13 chapters and has 67 questions.

In short, some of the key proposals include:

• A new contracting out process: In a departure from current practice, the contracting out procedure would be dealt with in the lease itself, which would contain a prescribed warning notice and prescribed declaration. Views are sought on how this might be displayed prominently within the lease. Where contracts such as agreements for lease, options to renew and guarantees are involved, prescribed wording would be included in the agreement explaining that any future tenancy would be contracted out. The Law Commission is also looking at the process for surrenders and agreements to surrender.

• Currently, fixed term tenancies of up to six months do not benefit from the security of tenure regime. To give greater flexibility to the short-term lettings market, the Law Commission is asking for views on whether for new fixed term tenancies (where the landlord and tenant have no pre-existing contractual relationship in respect of the property) a tenancy should only benefit from security of tenure if granted for either:

  • more than one year (prior occupation would be disregarded), or
  • more than two years (prior occupation would be taken into account).

• Periodic tenancies: Save for some situations relating to protected tenancies, it is proposed new and renewal periodic tenancies would be excluded from protection.

• The consultation proposes that where an existing tenant already has a protected tenancy and is granted a renewal tenancy (whether it is fixed-term or periodic, and regardless of its length) that the renewal tenancy should also be protected.

• The "Thomas van Staden trap": All written tenancies would be capable of being contracted out, not just those granted for a fixed term. This is designed to address the "Thomas van Staden trap" which will result in the contracting out procedure failing completely and a protected tenancy being granted if a lease is not granted for a fixed term.

• Lease renewals: The rent payable under a renewal tenancy (and during the continuation tenancy) is also considered as part of the consultation. The consultation asks whether protected tenants should benefit from the equivalent of a 'rent-free fit-out period' on renewal, and how the law could be clarified to achieve that outcome. It also asks whether, and how, the court should make decisions about the inclusion of turnover rents (and other alternative rental models) in renewal tenancies. Interim rents and relevant valuation dates are also considered.

  In relation to 'other terms of the renewal tenancy' (so terms other than the rent, the duration and the premises to be let), the provisional conclusion is the current law should be retained save that views are sought on whether the court should be expressly guided to treat environmental matters as a 'relevant circumstance' when deciding on the terms of a renewal tenancy - and whether this should be narrow in scope and limited to MEES or cover wider environmental and sustainability concerns.

• Other points: The consultation also considers grounds of opposition including whether Ground F (redevelopment) should be reformed to ensure modern construction methods such as refurbishment and retrofitting are clearly covered and whether MEES should be specifically referred to. Ground G occupation by the landlord is also considered. Compensation for tenants when a protected tenancy ends, dispute resolution (including which court of tribunal should handle 1954 Act disputes and the role of alternative dispute resolution), the registration gap and procedural issues relating to the process for claiming or opposing a lease renewal are also looked at.

The consultation is open until 16 September 2026.

Commercial leasehold: overcoming barriers to transactions

The Law Commission is looking at various aspects of commercial leasehold law. On 16 June 2026 it launched a consultation entitled, Commercial Leasehold: overcoming barriers to transactions.

This consultation focuses on 'provisional proposals for targeted reforms to aspects of the Landlord and Tenant Act 1987 ("1987 Act") and the Landlord and Tenant (Covenants) Act 1995 ("1995 Act")'.

In relation to the 1987 Act the Law Commission are provisionally proposing that:

the grant of a lease of premises that is exclusively occupied or used for non-residential purposes should not trigger the right of first refusal. This is subject to a limited exception for areas shared by residential leaseholders which are ancillary to their residential use.

The Law Commission notes that its proposal is limited to the grant of leases that are exclusively non-residential, stating [i]t is designed to preserve the core protection that the right of first refusal affords residential leaseholders, while preventing it from applying to transactions that are unlikely to be of benefit to them'.

In relation to the 1995 Act the Law Commission notes that 'certain aspects of the 1995 Act may be preventing commercially important and sensible arrangements'. The Law Commission is considering:

• assignments and guarantees involving group companies
• assignments and guarantees involving partnerships where the partners comprising the assignor and assignee are in substantially the same partnership
• assignments to guarantors.

The consultation is again open until 16 September 2026.

A second sub-project is described as 'a scoping project, focusing on the law governing the maintenance, repair and upgrading of leased commercial buildings'. As part of the scoping work the Law Commission sets out it will consider 'the law relating to dilapidations, service charges, and the interaction between environmental frameworks and commercial leasehold law'. Perhaps unsurprisingly given the scope of the above consultations, timings for this project will be confirmed in 'due course'.