‘Inside or outside the Act?’ This question may finally be on the way out…but will it make a difference?

The Act was introduced after the Second World War to prevent tenants being turned out of their premises and losing their business or goodwill when their lease ended.  Continuity of trade was considered paramount at the time and tenants were given the right to acquire a new lease after the existing lease ended.  There were specific grounds under which a landlord could oppose the grant of a new lease: such as where they intended to redevelop or occupy the property themselves.

With very few exceptions, the Act applies to all business premises unless its effect is expressly excluded.  Exclusion from the Act requires a formal process (historically requiring a court order) but now simply service of a notice and the tenant making a declaration (usually a statutory declaration made in front of another solicitor).  The same process applies to agreements for surrender and to a guarantor’s obligations to take a new lease.  The Act generally worked when standard lease terms were 25 years and leases were rarely excluded from the Act.

As lease terms have become progressively shorter, exclusion of the Act is now commonplace as landlords and tenants seek more flexibility due to rapid changes in technology and tenants’ and investors’ real estate needs have altered. Online shopping and social media have made it easier to find retailers if they do move meaning goodwill built up in physical premises is less of an issue…if you move it’s now easier for people to find you or simply order from you.

The Department for Levelling Up, Housing and Communities (DLUHC) has formed the view that the Act is ‘inflexible, bureaucratic and out of date, causing extra cost and delay for both landlords and tenants… and’ has commissioned a review by the Law Commission with a consultation paper to be published next month.

Changing legislation that is regularly opted out of and which has been the subject of disputes over the years is a sensible move.  However, I don’t agree with DLUHC that this will lead to premises opening quicker as in practice the exclusion procedure takes a day or two; the truth is the delay is often due to transactions becoming more intricate because of complex land holdings and the structure of various asset classes which in turn lead to protracted negotiations and longer transaction times.

Is the Act still necessary today or should the focus be on removing other barriers to retailers taking physical space such as reforming the business rates system or making our high streets accessible and attractive places to be?