Commercial leasehold reform opens consultation

The Law Commission has opened a consultation on targeted reforms to commercial leasehold law, bringing business property transactions, lease assignments, guarantees, and rights of first refusal back onto the policy agenda.

The consultation, published on 16 June 2026, forms part of a wider review of commercial leasehold law in England and Wales. Its first sub-project focuses on two areas: issues with the Landlord and Tenant (Covenants) Act 1995, and rights of first refusal under the Landlord and Tenant Act 1987 where they affect commercial premises.

The Law Commission said it had heard that aspects of the law were causing significant practical problems for commercial leasehold transactions, creating barriers for businesses, preventing commercially sound deals, and imposing needless bureaucracy.

Responses are open until 16 September 2026. The Commission is seeking views from business tenants, landlords, representative groups, property professionals, legal practitioners, judges, academics, researchers, residential leaseholders, and representative bodies.

The review is considering reforms that would streamline commercial leasehold transactions, decrease bureaucracy, delay, and cost, reduce confusion about how the law applies, and align any changes with the Commission’s wider review of the Landlord and Tenant Act 1954 and security of tenure for business tenants.

One provisional proposal concerns the right of first refusal under the 1987 Act. The Law Commission has proposed that the grant of a lease of premises exclusively occupied or used for non-residential purposes should not trigger the right of first refusal, subject to a limited exception for areas shared by residential leaseholders that are ancillary to residential use.

The Commission said the proposal was designed to preserve core protection for residential leaseholders while preventing the right from applying to transactions unlikely to benefit them. The project is confined to the commercial leasehold context, with broader residential leasehold issues outside the consultation’s scope.

The second area concerns the 1995 Act. The Law Commission said it was aware that certain aspects of the legislation may be preventing commercially important and sensible arrangements. The consultation explores whether greater flexibility can be introduced without undermining the Act’s central objective.

Provisional proposals cover assignments and guarantees involving group companies, assignments and guarantees involving partnerships where the partners comprising the assignor and assignee are in substantially the same partnership, and assignments to guarantors.

The consultation runs alongside the Law Commission’s business tenancies project, which focuses on Part 2 of the Landlord and Tenant Act 1954 and the security of tenure regime for business tenants. A first consultation paper on that project was published in November 2024, followed by a second consultation paper on 16 June 2026.

Commercial property law sits behind ordinary operating decisions: opening a store, relocating a warehouse, taking office space, restructuring a group, or changing a property portfolio. Legal uncertainty can slow transactions, increase professional costs, complicate guarantees, and make landlords or tenants more cautious when deals depend on speed.

Those pressures have become more acute as the property market adjusts to hybrid working, changing retail footfall, higher borrowing costs, energy performance requirements, and weaker appetite for long, inflexible commitments. Businesses want premises that match their operating model; landlords and investors need certainty on value, liability, and control.

Leasehold reform has already been running across other parts of the market, including the proposed acceleration of the residential ground rent cap. The commercial review is separate, but both reforms reflect a broader attempt to simplify legal structures that have become costly, difficult, or poorly aligned with modern property use.

Any reform will need a careful balance. Tenants may benefit from clearer, faster, and cheaper transactions, while landlords will want to preserve enforceability, asset value, and the commercial certainty that underpins investment. Greater flexibility around group companies and partnerships could help legitimate restructurings, but poorly drafted reforms could shift risk in unexpected ways.

The consultation gives the market an opportunity to shape a practical settlement. Commercial leasehold law does not usually attract the public attention attached to residential reform, but it affects investment decisions, portfolio management, high street occupancy, supply chain premises, and the cost of doing business. If the review succeeds, its value will be felt in fewer stalled transactions and a clearer legal framework for commercial space.