Ives & Co Solicitors advises landlords, tenants, investors and business owners on commercial conveyancing matters, including commercial leases, lease renewals, lease assignments and business property transactions. With commercial leasehold law now under review, anyone involved in leasing or managing commercial premises should be aware of the proposed reforms and how they may affect future property decisions.
Quick answer: what is happening?
The Law Commission is consulting on reforms to commercial leasehold and business tenancy laws in England and Wales.
The review focuses on making the law clearer, more efficient and better suited to the modern commercial property market. The consultation looks at areas such as business lease renewals, contracting out, short-term tenancies, rent, dispute resolution and barriers that can delay commercial leasehold transactions.
The consultation is open until 16 September 2026.
Why is commercial leasehold law being reviewed?
Commercial leases are used by many businesses, including shops, offices, restaurants, warehouses, factories and high street premises.
However, the Law Commission has said that some parts of the current legal framework are outdated and can create problems for both landlords and tenants.
These problems may include:
✓ Delays in completing commercial property transactions
✓ Extra legal and administrative costs
✓ Confusion around lease renewal rights
✓ Difficulties with contracting out of the Landlord and Tenant Act 1954
✓ Barriers to getting empty commercial premises occupied quickly
✓ Uncertainty for landlords planning sales, redevelopment or new lettings
The aim of the proposed reform is to create a commercial leasehold system that works more effectively for today’s property market.
What is the Landlord and Tenant Act 1954?
The Landlord and Tenant Act 1954 gives many business tenants the right to renew their lease when it comes to an end. This is often called security of tenure.
In simple terms, security of tenure means that a qualifying business tenant may have the legal right to stay in the premises and request a new lease, unless specific legal grounds apply.
This can be important for tenants because it gives business continuity. For landlords, it can affect future plans for the property, including redevelopment, sale or reletting.
What does “contracting out” mean in a commercial lease?
Contracting out means the landlord and tenant agree that the tenant will not have the automatic right to renew the lease under the Landlord and Tenant Act 1954.
This must be done before the lease is granted and the correct legal procedure must be followed.
The Law Commission is considering whether this process should be simplified, as the current procedure can be technical, time-consuming and costly.
What changes are being considered?
The consultation covers several important areas of commercial leasehold law.
- Short-term business tenancies
The Law Commission has provisionally suggested increasing the threshold for excluding some fixed-term tenancy increasing from the 1954 Act from 6 months to 2 years.
This could be relevant for pop-up shops, temporary premises, trial leases and short-term commercial arrangements.
- Simplifying contracting out
The current contracting-out process can create delays before a business tenant can take occupation.
Reform could make the process more straightforward while still allowing landlords and tenants to agree whether renewal rights should apply.
- Lease renewal terms
The consultation looks at how the terms of a renewal lease are decided, including whether modern issues such as environmental obligations and building efficiency should be considered.
- Rent and turnover rent
The Law Commission is considering whether the court should be able to grant renewal leases with turnover rent. This may be relevant for retail, hospitality and other businesses where rent is linked to business performance.
- Dispute resolution
The consultation also considers whether lease renewal disputes should continue to be handled by the county courts, or whether some cases should be dealt with by tribunals, the High Court or alternative dispute resolution.
Commercial leasehold transactions are also under review
The Law Commission is also reviewing other areas of commercial leasehold law that can create unnecessary delay, cost or uncertainty.
This includes issues linked to:
✓ The Landlord and Tenant (Covenants) Act 1995
✓ Rights of first refusal under the Landlord and Tenant Act 1987
✓ Commercial units in mixed-use buildings
✓ Lease assignments
✓ Commercial leasehold sales and transfers
✓ Barriers to commercially sensible property transactions
The wider aim is to make commercial leasehold law clearer and easier to apply in practice.
Why does this matter for landlords?
Landlords should follow the consultation because future reforms could affect how commercial leases are structured and managed.
Key points for landlords include:
- Whether tenants will have renewal rights
- How contracting out may work in the future
- Whether short-term leases fall inside or outside the 1954 Act
- How redevelopment plans may be affected by tenant renewal rights
- Whether commercial lease transactions could become faster and less bureaucratic
Why does this matter for business tenants?
Business tenants should also pay close attention to the reforms, especially if they rely on their premises for long-term trading.
Key points for tenants include:
- Whether they will have the right to renew their lease
- Whether they are being asked to contract out of the 1954 Act
- How renewal rent may be decided
- Whether environmental lease terms could affect future obligations
- How disputes with landlords may be resolved
Frequently asked questions
Has commercial leasehold law changed yet? No. The Law Commission is currently consulting on possible reforms. The existing law still applies.
When does the consultation close? The consultation closes on 16 September 2026.
Does this affect all commercial leases? Not necessarily. The impact will depend on the type of lease, the length of the tenancy, whether the lease is protected by the Landlord and Tenant Act 1954, and whether the parties have contracted out.
What is the main purpose of the reform? The main purpose is to modernise commercial leasehold law, reduce unnecessary delay and cost, and make the system clearer for landlords and tenants.
Conclusion
The Law Commission’s consultation could lead to important changes in how commercial leases are granted, renewed and transferred in England and Wales.
For now, the existing rules remain in place. Landlords and business tenants should continue to take care when negotiating lease terms, contracting out, renewing leases or dealing with lease assignments.
The outcome of the consultation will be important for anyone involved in commercial property, especially those planning new leases, renewals, redevelopment, mixed-use transactions or commercial property investment.
