Friday, 19 June 2026
The Law Commission has launched a consultation proposing reforms to key aspects of commercial leasehold law in England and Wales, aiming to reduce obstacles that frequently complicate and delay property transactions. The proposals form part of a broader review of commercial landlord and tenant legislation and sit alongside the ongoing consultation on reforming the Landlord and Tenant Act 1954.
The latest consultation, Commercial Leasehold: Overcoming Barriers to Transactions, focuses on modernising provisions within the Landlord and Tenant Act 1987 and the Landlord and Tenant (Covenants) Act 1995. Responses to both consultations are being accepted until 16 September 2026.
Clarifying the Right of First Refusal
One of the principal areas under review concerns the right of first refusal under the Landlord and Tenant Act 1987. Under current rules, landlords intending to sell all or part of their interest in a building containing qualifying residential leaseholders are often required to offer that interest to those leaseholders before selling to a third party.
While designed to protect residential occupiers, the legislation has created uncertainty in mixed-use developments that combine residential and commercial space. Questions frequently arise as to whether commercial lease transactions trigger the statutory process, creating delays and increasing legal complexity.
To address this, the Law Commission proposes that granting a lease of premises used exclusively for commercial purposes should generally fall outside the right of first refusal regime. A limited exception would remain for areas shared with residential occupiers where those areas are directly connected to residential use.
According to the Commission, the proposed change would maintain protections for residential leaseholders while removing unnecessary procedural requirements from commercial transactions that offer little practical benefit to those residents.
Greater Flexibility for Assignments and Guarantees
The consultation also examines certain anti-avoidance provisions contained in the Landlord and Tenant (Covenants) Act 1995.
The legislation was originally introduced to ensure that landlords and tenants would generally be released from future liabilities once a lease had been assigned. However, some of the rules designed to prevent parties from circumventing the legislation have created practical difficulties for modern commercial leasing arrangements.
The Law Commission is therefore seeking views on measures that could introduce greater flexibility while preserving the core objectives of the Act.
Among the options under consideration are changes that would facilitate assignments and guarantee arrangements between companies within the same corporate group. The proposals also address transactions involving partnerships where the partners of the outgoing and incoming tenant remain substantially the same.
Another significant proposal would allow so-called “repeat guarantees” in certain circumstances. This would enable a guarantor that supported an outgoing tenant to continue acting as guarantor for the incoming tenant where the commercial relationship remains closely connected.
The consultation additionally explores whether restrictions on assignments to guarantors should be relaxed in some cases.
Focus on Transaction Efficiency
The review reflects growing concern within the property sector that some leasehold rules, while originally introduced to provide protection and certainty, no longer align with the realities of modern commercial property ownership and investment structures.
If implemented, the reforms could simplify a range of transactions involving mixed-use developments, corporate restructurings and lease assignments, helping to reduce legal uncertainty and shorten transaction timetables.
The Law Commission’s wider review of commercial leasehold legislation is expected to play an important role in shaping the future framework governing commercial property transactions across England and Wales, with stakeholders from the real estate, investment and legal sectors expected to contribute to the consultation process over the coming months.
Source: CMS
