In March 2023, the Department for Levelling Up, House and Communities announced that it had commissioned a Law Commission review of the Landlord and Tenant Act 1954 (“the LTA 1954”). The general mood music of the industry towards the current LTA 1954 appears to be that while most consider that the Act strikes a fair balance between landlords and tenants, it needs to be “quicker, clearer and simpler” to function effectively in an unpredictable economy. So, this begs the question, what might modernisation look like?
As it currently stands (subject to exceptions), only short-term leases of 6 months or less are automatically excluded from the almost all-encompassing ambit of the LTA 1954. Parties to a qualifying lease will otherwise need to “contract out” of the Act should the landlord wish to ensure that the Tenant does not have a statutory right to renew its tenancy at the end of the lease. One of the most fundamental and radical calls for modernisation of the Act has been that the current position should essentially be turned on its head. In other words, parties would be required to expressly opt into, rather than out of, the LTA 1954. Those who are proponents of this position usually point to the increasing numbers of leases which are contracted out of the Act. Arguably, this may be more harmonious with the current market, where tenants have greater bargaining power and flexibility to negotiate terms. However, it is best to remember that market conditions change far quicker than legislation does.
The LTA 1954 will need to have clearer provisions especially with regard to the renewal of leases and the terms of the new lease. Whilst it is accepted that new leases should allow for the modernisation of lease terms, how the terms are “modernised” in practice often causes delays. An example of this is regularly seen where a retail tenant seeks a change in rent mechanism in a market where it has become increasingly more difficult to defend a position which does not include an express right for tenants to renew their lease on the basis of turnover rents, especially given the unpredictability of the last few years.
Likewise, in light of an upcoming review of the Minimum Energy Efficiency Standards (MEEs) (see our previous blog on Energy Performance Certificate (EPC) regulation changes for more information), there can be significant delays in negotiating “modernised” energy provisions. Some commentators have suggested that the LTA 1954 will need to clarify whether the redevelopment ground (which allows landlords to regain possession from a tenant who wishes to stay at their end of a lease where the landlord has a bona fide intention to redevelop the site) should be broadened to include works to comply with energy efficiency standards. Similarly, how will the renewal terms of the lease be affected to enable the landlord to carry out any such required works or alternatively, protect the landlord from liability where they are unable to carry out such works?
At present, under the LTA 1954, landlords are required to serve a warning notice on a tenant, who then needs to make a simple declaration (which involves a 14-day cooling-off period) or statutory declaration (which must be sworn in front of an independent solicitor) confirming that they understand the implications of contracting out of the Act. The case law on this point demonstrates that parties or their representatives frequently fail to satisfy the notice requirements of the Act, meaning that landlords are subject to a protected lease when there was no original intention between the parties for this to be the case. Undoubtedly, the process could be streamlined by allowing notices to be served via email and accepting electronic signatures. Indeed, some have called for the requirement of notices to be scrapped altogether, and instead, suggesting that this should be dealt with on the face of the lease itself – perhaps by an alteration of the Land Registry prescribed clauses.
The considerations above are just some of the challenges which the Law Commission will have to grapple with during their review of the LTA 1954. While there are some fundamental aspects and more radical proposals to consider, at the very least, it is hoped that we can expect a more streamlined process in the future.