Northern Ireland and the future of security of tenure

Answer

The term ‘security of tenure’ is often used to describe the legal right to renew a business tenancy. The Landlord and Tenant Act 1954 (the 1954 Act) provides the framework for the security of business tenancies in England and Wales. It enables business tenants to renew their tenancies in circumstances where they’d otherwise come to an end. However, notably the legislation in England and Wales also permits landlords and tenants to opt out of the security of tenure protections provided by the 1954 Act.

In Northern Ireland, business tenancies are governed by the business tenancies (Northern Ireland) Order 1996 (the 1996 Order). Under the 1996 Order, any business tenancy for a fixed term of longer than nine months (or where there’s no fixed term, continuous occupation of more than 18 months) obtains security of tenure and the tenant is automatically granted the right to a new tenancy. There’s no option for landlords and tenants to opt out of the 1996 Order.

The Law Commission is currently reviewing the 1954 Act and, in light of this, it’d appear timely to discuss and compare the Northern Irish equivalent legislation, the 1996 Order.

The law in England and Wales

Business tenants in England and Wales enjoy security of tenure under the 1954 Act. This legislation ensures that tenants have the right to renew their lease when it expires, providing a level of stability and continuity for their business operations. However, landlords can oppose the renewal on a limited number of grounds, such as if they intend to occupy the premises themselves or if the tenant has a history of poor conduct.

Despite these protections, it’s common practice for landlords and tenants to mutually agree to ‘contract out’ of the security of tenure provisions. This means that the tenant waives their right to automatic renewal. In such cases, tenants must vacate the premises at the end of their term unless a new lease is offered by the landlord. This is often agreed for leases that are shorter in duration or that have lower rental values. This flexibility can be advantageous for both parties, allowing landlords to regain control of their property more easily and tenants to negotiate terms that better suit their business needs.

Potential reforms

The Law Commission is currently conducting a broad review of Part II of the 1954 Act. Considering that the framework for security of tenure was introduced following the Second World War, the aim of the review is to modernise the legislation.

The commercial leasehold market has changed substantially since the legislation was last updated 20 years ago. Therefore, there’s a view that security of tenure legislation needs to be updated and redesigned to boost the market and “revitalise high streets and town centres” (as was announced by the government when tasking the Law Commission with the review of the 1954 Act).

As has been mentioned, it’s common practice for the provisions of the 1954 Act, which offer security of tenure, to be ‘contracted out’. This is an indication that the 1954 Act isn’t meeting the modern needs of landlords and tenants and the Law Commission has highlighted its desire to create “a legal framework that is widely used rather than opted out of, without limiting the rights of parties to reach their own agreements”. It also has a view to “fostering a productive and beneficial commercial leasing relationship between landlords and tenants”. 

The Law Commission's consultation is a two-stage process. The first consultation paper was published in November 2024 and posed questions as to the 1954 Act’s foundations and laid out four various models for security of tenure in England and Wales:

• no security of tenure;
• mandatory security of tenure (any exclusions, for example where a tenant is in default, would be considered in the second stage of consultation);
• a contracting out regime (ie, the current regime); and
• a contracting in regime.

The consultation also explored which types of tenancies should be covered by the 1954 Act. Nearly all business tenancies are encompassed, with exceptions being agricultural tenancies and those granted for six months or fewer. The consultation queried whether additional exclusions should be introduced, perhaps based on intended use, rental income or location.

The first consultation closed on 19 February 2025 and the second consultation paper is set to be more detailed and technical, recommending a model for security of tenure. It will also ask consultees how this model should function in the market.

Northern Ireland’s stance

Business tenancies in Northern Ireland are governed by the 1996 Order. This legislation provides a framework for the relationship between landlords and tenants of commercial properties. A tenant who enjoys a business tenancy has the right to remain at the premises after the end of the contractual term and has a statutory right to a renewal lease. This is beneficial from a commercial perspective, whereby a tenant can continue its business operations without the threat of eviction when the term of its lease expires, offering greater stability and security.

However, unlike in England and Wales, the landlord and tenant can’t contract out of security of tenure. The regime in Northern Ireland is therefore reflective of a model proposed by the Law Commission in its review of the 1954 Act – mandatory security of tenure.

In order for a business tenancy to be considered established under Northern Irish legislation, several conditions must be met:

• The property must be occupied by the tenant (or a group company or subsidiary) for business purposes.
• There must be a periodic or fixed-term tenancy. For a fixed-term tenancy to be protected, the term must exceed nine months. Where a tenant has been in occupation together with any predecessor (in carrying on the business) for a period of 18 months, the tenancy is also considered protected.
• The tenant must physically occupy the premises.

Landlords have limited scope to oppose a new tenancy, there are nine statutory grounds to do so:

• the tenant hasn’t fulfilled its obligations in respect of the state of repair and maintenance of the property;
• the tenant has persistently delayed payment of rent that is due;
• there have been other substantial breaches by the tenant in accordance with the lease;
• the landlord has offered and is willing to provide suitable, alternative accommodation for the tenant on reasonable terms in accordance with the current tenancy;
• in the case of the current tenancy being a subletting of part of the property, the landlord may oppose a renewed tenancy if it requires possession in order to let or dispose of the property as a whole;
• the landlord intents to demolish the building or carry out substantial construction works;
• the landlord intends to occupy the premises for a reasonable period in order to:
  •  carry out their own business; or
  • use it as their own residence;
• in the case of the landlord being a company, a person who possesses a controlling interest intents to occupy the premises in order to:
  • carry out their own business; or
  • use it as their own residence; and
• in the event that the premises is an estate acquired by a public authority, there’s a reasonable necessity for the public authority to possess the premises to carry out its functions.

The Lands Tribunal review all such applications relating to an opposition by a landlord against a new tenancy. The Lands Tribunal also review applications by a tenant for the grant of a new tenancy.

Concerns were raised to the Northern Ireland Law Commission as to the difficulties created by the mandatory security of tenure policy. Some viewed it as limiting various types of transactions such as those of public private partnerships (these partnerships are collaborations between government entities and the private sector). A report was published in 2011 to address the issues raised, recommending a balance between ‘market freedom and market regulation’. In particular, it was queried whether the removal of mandatory security of tenure would have a negative impact on tenants in smaller enterprise sectors. If tenants lack bargaining power, it could prevent mutually beneficial agreements between landlords and tenants and leave tenants exposed to lack of stability with no security of tenure.

Reform of the legislation is yet to be seen, and a further review could be beneficial, particularly following the publication of the Law Commissions second consultation paper relating to the 1954 Act.

To conclude

In summary, adopting security of tenure policies similar to those in England and Wales could offer significant benefits for Northern Ireland. In any reform, it would be important to ensure there’s sufficient flexibility incorporated for the benefit of both landlords and tenants. The ability to contract out may better reflect the current needs of the commercial leasehold market in Northern Ireland and the current approach may be seen to restrict market growth.

The ongoing review by the Law Commission makes this a particularly opportune moment to consider such changes. Given the concerns raised with the contracting out regime in England and Wales, it doesn’t appear to be a particularly straightforward policy swap for Northern Ireland to pursue in the current climate. However, the recommendations of the Law Commission will be of particular interest in answering this question and it’ll be of interest to follow the review in the coming months.  

Heather Roberts is a trainee solicitor at DWF Group Limited.