Business tenancy renewal rights: What the Law Commission's latest proposals mean for you

On 16 June 2026, the Law Commission published its second consultation paper on reforming Part 2 of the Landlord and Tenant Act 1954. This legislation has for over 70 years given qualifying business tenants the right to remain in their premises and seek a new lease when their lease expires. The consultation, open until 16 September 2026, proposes changes to modernise how that right operates. Anyone with an interest in commercial property should pay close attention.

What is being proposed?

The 1954 Act gives most business tenants "security of tenure": when a qualifying lease ends, the tenant can remain and request a new lease. Landlords and tenants can agree at the outset of a lease to "contract out", meaning the tenant gives up the renewal right. However, once a tenant has security of tenure, a landlord can only refuse on limited statutory grounds, such as persistent rent arrears, a firm intention to redevelop, or wanting to occupy the premises itself.

Following the first consultation, the Law Commission has confirmed that 'contracting out' should remain.

The second consultation focuses on making the system clearer and more efficient. Key proposals include:

• Raising the short-lease threshold: Currently, fixed-term tenancies of six months or less fall outside of the Act. The proposal is to raise this to two years, so tenants on shorter leases would no longer automatically enjoy renewal rights. This will cover periodic tenancies which have historically been a problem where a tenant remains in occupation on undocumented terms, for example after the expiry of a contracted out lease.
• Simplifying contracting out: The current process for excluding renewal rights is widely regarded as cumbersome. The consultation explores ways to streamline it by the removal of the requirement to serve notices or for the tenant to give a statutory declaration.
• Turnover rents on renewal: Courts currently have restricted powers to grant certain types of rents in renewal tenancies. The consultation asks whether courts should have power to grant renewal leases with turnover-based rent (rent linked to the tenant's sales), which are increasingly common in retail.
• Expansion of Ground F: the consultation considers whether the test in Ground F (landlord's right to redevelop) should take into account the minimum energy efficiency standards regime.
• Changing the litigation forum: A proposal to move renewal disputes from congested county courts to a tribunal or the High Court and with a greater emphasis on alternative dispute resolution, potentially affecting cost, speed and expertise in contested renewals.

Why does this matter in practice?

These proposals have significant commercial implications across the property sector.

For landlords and investors: A higher threshold could offer welcome flexibility. A landlord letting space to a pop-up shop or 'meanwhile use' on an 18-month lease would no longer face the risk of that tenant claiming renewal rights. However, landlords with longer tenancies should continue to plan around renewal claims and ensure contracting-out procedures are properly followed and occupational documents remain appropriate and fit for purpose.

For tenants: A tenant investing in fitting out premises and building goodwill will want to understand whether their lease is protected. If the threshold rises, tenants on shorter leases may lose renewal rights. It is more important than ever to take advice before signing and to understand the distinction between a protected and an unprotected tenancy, as well as the risks associated with undocumented occupation.

For developers: Anyone planning a redevelopment must consider how renewal rights, opposition grounds, compensation risk and litigation timing interact. Consideration of the MEES regime may be welcome particularly now the government have published its direction of travel for private-rented property - see our VWV article on the government's recent announcement here. But a change in forum could affect both cost and speed of obtaining possession.

Key risks and opportunities

None of these proposals are yet law. The Law Commission will publish a final report after the consultation closes, and any change would require an Act of Parliament. However, reform has been under discussion for many years, and these proposals carry real momentum.

Property managers and agents should ensure that the status of every business tenancy under the Act is checked early. Getting this wrong can be costly: granting a lease that is inadvertently protected, or failing to serve notices correctly, can expose landlords to unwanted renewal claims or compensation liability.

Important points

• The Law Commission proposes significant reforms to business tenancy renewal rights under the Landlord and Tenant Act 1954.
• The short-lease threshold may rise from six months to two years, removing renewal protection from many shorter tenancies.
• The contracting-out process may be simplified, and courts may gain power to order turnover rents on renewal.
• Lease renewal disputes may move to a specialist tribunal or the High Court.
• No changes are yet in force. The consultation closes on 16 September 2026. Details of how to partake in the consultation can be found here: Business tenancies: the right to renew – Law Commission.
• Landlords, tenants and developers should review lease strategies and contracting-out procedures now.

How we can help

If you hold, occupy or manage commercial property, now is the time to review your position. Whether you are negotiating new leases, planning a redevelopment or responding to a renewal claim, understanding how these proposals might affect you is essential. 

Daniel Hall is a Partner at VWV.