Commercial leases: how local authorities can shape the future of the 1954 Act

Overview

On 16 June 2026, the Law Commission published its second consultation paper aimed at reforming security of tenure and tenant rights to renew business tenancies under the Landlord and Tenant Act 1954 (“1954 Act”).

The proposed changes will impact local authorities in their roles as commercial landlords, but it could also affect high street regeneration and development.

The consultation is open for feedback and represents an important window for stakeholders to influence the Law Commission by highlighting any existing concerns with the process and proposing reforms to shape the future of the market.

This article explores the current operation of the 1954 Act, outlines the proposed reforms, and assesses their practical benefits and risks for local authorities.

Understanding the 1954 Act

The 1954 Act is an important piece of legislation that gives commercial tenants the statutory right to renew their business tenancy when their lease expires and prevents landlords from evicting a business tenant at the end of a lease term without proving strict grounds. This protects business owners from losing their local goodwill if they were forced to relocate.

Key workings of the 1954 Act

• Automatic continuation: A protected commercial lease does not automatically end on its expiry date and continues on the same terms until officially terminated or renewed.
• Right of renewal: Tenants can request a new lease on essentially the same terms, updated for reasonable modernisation and adjusted to current open-market rent.
• Refusal: A landlord can only refuse a lease renewal by proving statutory grounds in court, such as substantial tenant breaches, landlord redevelopment or landlord occupation for their own business use.
• Contracting out:Landlords and tenants can mutually agree to exclude security of tenure protection before signing a lease. For a lease to be "outside the 1954 Act," the landlord must serve a formal warning notice, and the tenant must sign a declaration agreeing to waive their 1954 Act rights.

The Law Commission is not looking to eliminate the current model; the market is instead being asked to help shape changes that will affect real deals and make the procedures easier to use.

The proposed reforms and what they mean for local authorities

The key proposals within the second consultation are aimed at modernising, simplifying and reducing costs of the lease renewal system. We set out below the key reforms suggested and how they might impact local authorities.

• Contracting out: Integrate this process within the lease / tenancy agreement itself instead of the current multi-step process involving separate warning notices and statutory declarations.

  As landlords, this will save local authorities legal fees and administrative hours per year across their portfolios

• Narrowing the scope: All new and renewed periodic tenancies would be automatically excluded from the 1954 Act's protection instead of being automatically protected. In addition, the minimum threshold for leases falling outside of the Act may also be increased to either one or two years instead of the existing six-month period.

  This will allow local authorities to use short-term leases or licences to fill vacant space without the risk of tenants gaining a legal right to stay. This will provide councils with more flexibility to deal with shorter term agreements to reduce empty space.

• Updating lease terms: Make it easier to integrate modern green lease clauses and turnover rent models over traditional open-market flat rates to reflect modern retail demands.

  Moving away from traditional open-market flat rates means that councils will share economic risk with small, local businesses. While this prevents sudden shop closures, it can make financial forecasting difficult and could affect property being used as a consistent income stream. It will help those local authorities with climate declarations to integrate binding environmental targets directly into renewal leases.

• Landlord opposition: Expand the ‘Ground F’ landlord redevelopment to enable a renewal lease to be blocked so the Landlord can carry out energy-efficiency works. This supports the UK's net-zero targets.

  Expanding the ‘Ground F’ opposition will help local authorities meet their net zero requirements.

• Tenant compensation: When a tenant is forced out through no fault of their own i.e. redevelopment, they would receive statutory compensation based on the actual rent paid as opposed to being based on rateable value.

  This will change the financial considerations for properties with low rateable values but high market rents as the compensation for removing a tenant will likely increase.

• Dispute resolution: Move away from slow and expensive county court trials by exploring the First-tier Tribunal or Alternative Dispute Resolution.

  This should reduce council legal spending while also resolving disputes quickly, potentially assisting to keep public infrastructure projects on schedule.

Have your say

Local authorities (and any other property stakeholders) have until 16 September 2026 to submit their perspectives here. 

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