What Commercial Landlords and Tenants Need to Know in 2025

The commercial lease landscape in England and Wales is entering a period of significant change. The Landlord and Tenant Act 1954, which has governed business security of tenure for over 70 years, is undergoing a major review by the Law Commission. For commercial landlords and tenants, staying ahead of these reforms is no longer just good practice; it is essential for risk management, negotiation strategy and long-term planning.

The Law Commission’s work signals that key elements of the Act may evolve to reflect modern leasing practices. Understanding what may change and how quickly is critical for anyone involved in commercial property.

Key Reform Themes Emerging from the Law Commission Review

Consultation on the future of security of tenure

The first consultation, launched in November 2024, examined whether the current security of tenure framework still works for today’s commercial market.

Provisional conclusions (June 2025 interim statement)

The Commission has indicated that:

• The contracting-out model will remain in place.
• The list of excluded tenancies is likely to stay broadly the same.
• The current six-month minimum term threshold for a tenancy to qualify for protection may rise, potentially to two years.
• The scope and application of the Act continue to be under review, including which leases should benefit from protection and whether the current renewal process reflects modern leasing realities.

Full review of the Act’s scope

Areas under consideration include:

• Which business tenancies should have statutory protection.
• Whether short-term leases should fall outside the regime.
• Whether the renewal process remains suitable for contemporary commercial leasing practices.

These early signals suggest a shift in strategic considerations for both parties.

What These Reforms Mean Strategically

Lease Drafting and Contracting-Out Processes

If contracting out remains the default mechanism for excluding statutory renewal rights, accuracy and compliance will continue to be critical.

• Any mistakes in the warning notice or declaration process can invalidate a contracting-out arrangement.
• If the minimum-term threshold increases (e.g., to 2 years), shorter leases may automatically fall outside the Act, changing negotiation leverage and renewal expectations.

Negotiation Leverage and Renewal Strategy

Under the current regime, tenants maintain a statutory right to renew unless the lease is properly contracted out.

Possible reforms may influence:

• Whether landlords or tenants have greater leverage in renewal discussions.
• The timing and strategy around Section 25 notices (landlord notices) and Section 26 requests (tenant requests).
• How both parties approach lease-end negotiations, rent reviews, and redevelopment plans.

If renewal rights are modified, the balance of power could shift significantly.

Risk Management, Planning and Transitional Issues

Reform takes time. The existing law continues to govern all current leases, but pending changes may affect:

• How landlords structure lease terms going forward.
• How tenants plan for lease expiry and renewal.
• Whether historic precedents remain fit for purpose once reforms come into force.

Both parties should take stock now, rather than react after legislation is introduced.

Action Points for Landlords

• Audit standard lease templates to ensure contracting-out procedures are robust.
• Review existing leases that may be affected if the minimum-term threshold rises; some leases may gain or lose protection.
• Consider whether shorter or more flexible lease terms could become preferable under a revised regime.
• Plan redevelopment or strategic lease events early, as renewal rights may affect timing, possession strategies and negotiation leverage.

Action Points for Tenants

• Check whether your current lease is protected by the 1954 Act or formally contracted out.
• If your lease is shorter than two years, monitor reforms closely; your renewal rights may change.
• Get ahead of lease expiry: Section 25 and Section 26 notice procedures remain strict and errors are costly.
• Use the reform process as a strategic opportunity during renewal negotiations; uncertainty can strengthen a tenant’s bargaining position.

Looking Ahead

The Law Commission will publish a second, technical consultation, followed by its final recommendations. The Government will then decide whether and how to legislate.

If changes are implemented, they may reshape:

• Which leases qualify for security of tenure.
• How contracting-out works.
• The balance of power in renewal negotiations.
• Landlords’ ability to recover premises.

In the meantime, both landlords and tenants should:

• Stay informed.
• Review existing leases.
• Prepare strategies for a revised statutory landscape.

Proactive planning now will reduce risk later, long before reforms become law.