In 2024 there was much speculation about what might be the proposed changes to the security of tenure regime in the wake of the then impending Law Commission consultation. Would the Law Commission propose a substantial revision of the types of tenancy affected? Would it seek to free those seeking changes to the existing lease from the strictures imposed by the principles espoused in O’May v City of London Real Property Co. Ltd in light of the increasingly fast pace of change in the sector precipitated in no small part by “green lease” considerations ? Will the ability to award turnover rents (or not) be dealt with? Will the (arguably) anachronistic compensation provisions be revised?
On 4 June 2025 the Law Commission released an “interim statement on direction of reform”. It seemingly indicates that the only matters now seriously being considered for reform are:
- How to streamline the process for contracting out of the Act; and,
- Whether the threshold duration of the tenancy at which security of tenure bites should be increased from 6 months to two years.
If it ain’t broke…!
That said, the English Devolution and Community Empowerment Bill has just entered its second reading at the House of Commons, sponsored by Angela Rayner (Ministry for Housing Communities and Local Government). Section 71 and Schedule 31 of the Bill bans upwards only rent reviews in new business leases in order to make the market “fairer”. The Bill also allows tenants to trigger rent reviews even if the lease only permits the landlord to do so, and applies to “put options”, whereby a landlord has an option to require a tenant to take a new lease.
There have also been a number of recent cases concerning the comfortingly familiar provisions of the 1954 Act:
- Spirit Pub Co (Managed) London Ltd v Pridewell Properties (London) Ltd [2025];
- MVL Properties(2017) Ltd v The Leadmill Ltd [2025]
- Kwik-Fit Properties Limited v Resham Limited [2024]
These cases have made it clear that the burden of proving the landlord’s intentions under ground (f) and (g) is a fairly high one. As is the burden on a tenant looking to depart from the terms of the existing lease on renwal. One must have something more than merely a desire for conformity with the rest of one’s commercial portfolio. The cases provide some useful guidance for landlords and tenants seeking to meet those burdens.
Green Leases
Much of the recent discussion around the need (or not) to reform the 1954 Act centred around its suitability for facilitating the change needed to the country’s commercial property stock, in meeting the governments climate targets.
The Government stated that it planned to publish the response to the Non-Domestic Private Rented Sector MEES consultation early in 2025. While early 2025 may now be behind us, a response is still expected this year, and indications are MEES for commercial real estate are likely to be raised to a B rating with a deadline of at least 2031 but not later than 2035. Certain buildings may be have a cost-effectiveness related exemption.
Landlords keen to, or under an obligation to, modify their portfolios to meet or exceed “green” regulatory requirements will be looking to incorporate flexibility in their leases to allow them to do so, and even to pass on some of the cost of doing so. And let’s not forget those tenants that are working hard to meet their own ESG targets and requirements.
There is a moving feast of options for those looking to incorporate sustainability commitments into commercial leasing (green lease clauses). Such matters come to the fore on the granting of new leases, and to a more nuanced degree during protected lease renewals. Where you or your clients may sit on the ‘light green/dark green’ scale of options will also be an important consideration during negotiation or renewal of a business lease.
Contact Susan Ryan and Sam Cook if you have any questions regarding leases.