1954 Act Consultation – the “other terms” of the renewal lease

This is the fourth instalment of our deep dive into the Law Commission’s second consultation on the Landlord and Tenant Act 1954 (“1954 Act”) reform.

In 1954 Act lease renewals, the terms of the new tenancy to be determined are generally divided into three categories: (i) the rent, (ii) the length of the term, and (iii) all other terms of the lease.

In this post, we will be concentrating on the Law Commission’s approach to the “other terms” of the lease, which can be a particularly challenging area in negotiations and disputes during 1954 Act lease renewals. 

The “other terms” include a huge range of legal rights and obligations governing the fundamental relationship between landlord and tenant, covering, for example, the use of the premises, the provision of services and recovery of service charges, the rights for a landlord to access the premises or to carry out works, and the tenant’s repairing obligations. 

The Law Commission is concerned that the current approach of the courts risks being too uncertain, and petrifying terms through renewal leases that are dated and out of touch with market expectations.

The current law

If the parties cannot agree all of the other terms of the new lease, the 1954 Act gives the court discretion to determine them.

Guidance on how the court should do this currently derives from a combination of statute (section 35 of the 1954 Act) and, principally, the historic case of O’May v City of London Real Property.

The discretion is necessarily very wide and flexible, because the courts must be able to deal with the infinite number of combinations of potential clauses and factual scenarios that might become relevant. However, the court is directed to look at all of the terms of the current lease and “to all relevant circumstances”.

The general approach is to take the current lease terms as the starting point, with the burden of proof being put firmly on the party proposing a change to that existing position (whether that is the landlord or the tenant) to demonstrate why the change should be made. 

Any change to the existing terms should ensure “essential fairness” is retained, and it must be reasonable in the real-world circumstances that the parties are in. 

This might sound quite simple, but it requires thorough and detailed explanation and evidence, whether arguing for or against a change to the terms of the existing lease.  

In practice, parties usually resist a change from the existing wording if it would shift the balance of risk, obligations or costs from one party to another.

Difficulties with the current law

The principal concern is that the current legal framework is too insulated from changes in market practice.

During the course of a lease, market norms and industry practice may change from the time the parties originally negotiated the deal. For example, prior to the Covid-19 pandemic, clauses allowing suspension of rent payments during government-imposed pandemic closures were non-existent. Within a couple of years of the pandemic, these became commonplace in the open market, particularly in the retail and leisure sectors.

However, the guiding principles of the 1954 Act and case law have prevented such clauses being introduced into a renewal lease because that would shift the financial risk of an enforced lockdown from the tenant towards the landlord (see the case of Poundland Limited v Toplain Limited).

The position is similar in respect of environmental clauses. Many leases predate the current legislative backdrop of MEES. Including market standard “green” clauses may be a shift in the burden between landlord and tenant, for example restricting the tenant’s use to avoid negatively impacting EPC ratings.

Thus, there is a concern that section 35 of the 1954 Act and the O’May principles stifle attempts to keep renewal leases up to date with market conditions and newly developed standard practice.

What might be the solution?

The Law Commission has considered two alternative routes to address the perceived problem, but each approach raises further challenges in determining the other terms of the renewal tenancy:

1. A “market-based” approach – ensuring that the 1954 Act can allow the court determine the other terms of the renewal lease based on those typically agreed between landlords and tenants in the market:
   1. Advantages – the parties and the court would be focused on the market standard, ensuring renewal leases are kept up to date.
   2. Disadvantages – it would be an incredibly difficult exercise to determine the “market” position, as there could be a myriad of different variations of a particular clause.

-Extensive expert and witness evidence would be required, potentially making renewal proceedings longer and more complicated.

- A potentially complex set of rules and assumptions would be required to decide what “market” is for a particular disputed term – for example, considering the position of hypothetical parties, accounting for the knock-on effect that the “market” position of one clause might have on another, or where the parties have agreed a non-market position elsewhere in the lease.

2. A “guided” or “presumptive” approach – the parties and the court are directed (or even mandated) to have regard to one or more particular factors, or to presume that a particular type of term should be included:
   1. Advantages – the 1954 Act can be used to bring newer legal considerations to the fore through the renewal process, such as those surrounding MEES, because they may not have been relevant considerations at the date of the original lease.
   2. Disadvantages – the framework of the 1954 Act needs to stand the test of time – regulating the inclusion of more modern provisions could be piecemeal and require further regulation down the line as industry standards change. The risk is that the 1954 Act loses the flexibility it needs to deal with a range of circumstances.  There is also a risk of litigation around the application of guidance or presumptions.

The Law Commission’s conclusions

Despite considering these alternative approaches, the Law Commission has provisionally concluded that the current law on the determination of “other terms” should remain. 

However, the Law Commission has sought further views on this conclusion, and on approaches specifically towards environmental terms.

Ultimately, it may turn out that the aspects of the current law that are perceived as rigid and uncertain do in practice give sufficient flexibility and guidance as to how the parties and the courts should adopt changes to the “other terms” of the renewal lease.

In our next article, we will be exploring the proposals on rent-free periods and interim rent. 

Consultees are invited to respond by 16 September 2026.

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