In Part 2 of our 1954 Act consultation series – Headlines, quick wins and delving into the detail we highlighted several of the Law Commission’s more detailed proposals for reform and flagged a number of consultation questions meriting closer examination. This article focuses on Questions 38 and 39, both of which relate to Ground (g) in section 30(1) of the Landlord and Tenant Act 1954 (the “1954 Act”) otherwise known as the landlord’s right to oppose renewal on the ground it wishes to occupy the premises itself.
Ground (g) reflects the principle that, while the 1954 Act provides important protection for business tenants, a landlord should, in appropriate circumstances, be entitled to recover its property where it genuinely wishes to occupy the premises itself for the purposes of a business (or as a residence). The ground is mandatory: if established, the court must refuse renewal and the tenant receives statutory compensation.
It is one of the seven grounds set out in section 30(1) of the 1954 Act which enable a landlord to oppose the grant of a new tenancy.
Ground (g) applies where:
“on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business carried on by him therein, or as his residence.”
Unlike some of the other statutory grounds, Ground (g) is not concerned with redevelopment, disposal or other non occupational uses of the property. It focuses on the landlord’s intended occupation and use of the premises for its own business purposes or as its residence.
Ground (g) is subject to an important qualification, often described as the “five year rule”.
In broad terms, the effect of the proviso is that a recent purchaser of the reversion cannot immediately displace the sitting tenant by asserting an intention to occupy. To rely on Ground (g), the landlord must either:
The five year rule therefore operates as a safeguard against opportunistic use of Ground (g) by landlords who acquire the reversion specifically to take advantage of the right to oppose renewal, while still allowing longer standing owners – and certain types of successor – to rely on the ground where they genuinely intend to occupy.
The Law Commission is not proposing wholesale reform of Ground (g). The Law Commission has been clear that it is approaching reform cautiously, with the aim of modernising the Act so that it is fit for purpose and works effectively for both landlords and tenants.
Instead, it seeks views on two focused issues which expose a broader policy question: how should the legislation balance a landlord’s legitimate desire to use its own property against the security of tenure afforded to business tenants?
In particular, the consultation asks:
Although these may appear to be narrow technical questions, the answers have potentially significant implications for landlords, tenants and advisers alike. Both questions reflect a common tension in the Act: the balance between landlord flexibility and tenant security
As with many aspects of the consultation, there is unlikely to be a single view across the market. Institutional investors, owner occupier landlords and family businesses may each approach these questions from different commercial perspectives, while tenants’ priorities will often depend upon the nature of their business and the extent to which its goodwill is tied to a particular location.
In this article we consider the competing arguments, explore how different stakeholders are likely to respond to Questions 38 and 39, and offer a view as to how the Law Commission should approach reform.
14.61 We provisionally propose that the rule in Nursey v Currie be abolished, so that proposed alterations to the holding before a landlord enters into occupation will not be a relevant consideration for the purpose of satisfying Groung G. Do consultees agree? Please explain why.
Consultation Question 38 essentially queries whether Ground (g) should continue to require a short timeframe between the end of the tenancy and the landlord’s occupation, or whether landlords should be afforded greater flexibility where occupation will follow after a period of preparatory works or other necessary delay.
The current position derives in part from Nursey v Currie, in which the court emphasised that the landlord’s intention must relate to occupation at or shortly after the termination of the tenancy. That approach provides tenants with a relatively clear, time linked safeguard, but it can sit uneasily with modern commercial realities.
From the landlord’s side, time may be needed to carry out refurbishment works, secure planning permission for a change of use, obtain regulatory approvals, install specialist equipment or relocate an existing business from alternative premises. None of these steps necessarily undermines the genuineness of the landlord’s intention to occupy. Indeed, they may demonstrate that the landlord has invested significant time and resources in bringing those plans to fruition.
Conversely, the current requirement for occupation to follow relatively promptly after the termination of the tenancy serves an important evidential purpose. The closer the proposed occupation is to the termination date, the easier it is for the court to assess whether the landlord’s stated intention is genuine, fixed and unconditional. Extending the period before occupation begins may make it more difficult to distinguish between a settled intention and a business aspiration that remains contingent on future events.
The Law Commission therefore asks whether the legislation should better accommodate legitimate commercial realities without weakening the protection afforded to business tenants, i.e. whether the law should recognise that genuine occupation may, in some circumstances, require a period of preparation before it can begin.
The consultation does not propose a specific statutory time limit but seeks views on whether some degree of flexibility should be introduced and, if so, how that flexibility might be defined without creating uncertainty or increasing the scope for disputes.
Question 38 is unlikely to produce a uniform response, and landlord and tenant stakeholders may take quite different positions:
The landlord view
Reform?
Landlords may argue the current approach is unnecessarily rigid and fails to reflect the practical realities of establishing or relocating a business.
Reasonable preparatory works, planning processes and fit out periods are often unavoidable and do not detract from a genuine intention to occupy.
Reform could simply recognise that occupation may not always be immediate, particularly where reasonable preparatory steps are required.
No reform?
There will be concern that increased flexibility inevitably introduces some uncertainty in what is already a highly fact sensitive area of law.
A more flexible test could invite closer scrutiny of occupation plans, especially where these depend on external factors such as planning permission, financing or wider business restructuring. Rather than simplifying the law, reform could inadvertently encourage more detailed examination of a landlord’s commercial decision making.
The tenant view
No reform?
Tenants are likely to emphasise that any relaxation of the existing requirements risks diluting one of the key safeguards underpinning security of tenure.
The requirement for relatively prompt occupation performs an important function: it provides an objective indicator that the landlord’s intention is genuine and committed, rather than contingent upon future events.
The question may not be whether some delay should be permitted, but how the law should distinguish between reasonable preparation and speculative future intentions.
Tenants will be wary of any change that appears to reduce the evidential burden on landlords.
The middle ground between the two positions may be that any reform should preserve that evidential burden but allow courts to recognise that genuine occupation often requires a period of preparation.
Where occupation is not intended to commence immediately, landlords should be expected to explain why that delay is necessary and to produce objective evidence demonstrating that preparations are genuinely underway. Depending on the circumstances, this might include planning permissions, building contracts, professional appointments, regulatory applications, business plans or evidence of operational relocation.
Such an approach would preserve the integrity of Ground (g) whilst recognising the practical realities of modern business occupation. It would also avoid creating an incentive for landlords to accelerate or artificially structure their occupation plans simply to satisfy an inflexible legal test. The court would still be required to scrutinise the landlord’s evidence and distinguish genuine business plans from aspirations that remain contingent or uncertain. In many cases, the outcome may be no different from the current law; the difference would simply be that landlords are not penalised because a genuine intention to occupy cannot be implemented overnight.
Ultimately, the policy underpinning Ground (g) is that a landlord should be entitled to recover its property where it genuinely intends to use it for its own business. The law should not frustrate that objective by imposing unnecessary practical constraints. Equally, any reform must ensure that the statutory protection afforded to business tenants remains real rather than illusory.
We consider that limited flexibility on timing under Ground (g), coupled with a robust evidential requirement, would modernise the 1954 Act without undermining tenant protection.
The focus should remain on the genuineness and firmness of the landlord’s intention, tested against contemporaneous evidence, rather than on a rigid requirement for immediate occupation.
14.62 We invite the views of consultees as to whether the potential for purchaser-landlords to benefit from a tenant's goodwill on successfully opposing renewal on Ground G is a problem that needs reform (bearing in mind the existence of the five-year rule). If so, how can the law be changed to address this problem?
Question 39 does not simply ask whether Ground (g) should be restricted where the landlord proposes to carry on a similar business. Instead, it poses a more specific question: whether the potential for purchaser landlords to benefit from a tenant’s goodwill when successfully opposing renewal on Ground (g) is a problem that requires reform – bearing in mind the existing five year rule – and, if so, how the law might be changed to address it.
Under Ground (g), the landlord must show a genuine intention to occupy, but it must also satisfy the ownership requirements in the proviso to section 30(1)(g – i.e. the five-year rule as explained above, which is designed to stop a purchaser acquiring the reversion and immediately displacing the tenant by asserting an intention to occupy.
The Law Commission’s concern in Question 39 is that, notwithstanding this safeguard, purchaser landlords may still be able – after satisfying the five year requirement – to recover possession on Ground (g) and then benefit from goodwill built up by the tenant’s occupation of the premises.
There have always been instances of both landlords and occupiers acquiring freehold or headlease reversions of trading premises:
These examples raise two related questions:
1. Is it problematic, as a matter of policy, if a purchaser landlord can ultimately use Ground (g) to recover possession and then trade from the premises in a way that benefits from the tenant’s established goodwill?
2. If it is problematic, is the existing five year rule an adequate safeguard, or should the law be changed to address this scenario more directly?
From a landlord perspective, the existing combination of Ground (g) and the five year rule may already represent a calibrated balance between ownership rights and tenant protection. Landlords may argue that:
On that reasoning, further restrictions targeted at purchaser landlords could be seen as undermining the value of reversionary interests and distorting the market for investment property.
In some sectors, particularly high demand urban centres and specialist locations, prospective occupiers are already planning on a five year horizon to secure scarce sites. Where supply is tight and properties rarely come to market, an investor or owner occupier may deliberately acquire the reversion well before it intends to trade from the premises, accepting that it must hold the interest for at least five years before Ground (g) becomes available. From their perspective, the five year rule offers a fair and predictable framework: the sitting tenant enjoys statutory protection for a significant period, while the incoming owner has a clear path to eventual occupation if it is prepared to commit capital and wait. Here there is a clear argument that, although the current tenant ultimately loses out when Ground (g) is successfully invoked, that is a consequence of operating in high value, supply constrained markets, where long term site assembly and strategic planning are intrinsic features of property ownership rather than a flaw in the legislation itself.
Landlords may also emphasise the practical difficulties of distinguishing between “purchaser landlords” acting opportunistically and longer term owners whose interest has changed hands as part of ordinary corporate transactions which inevitably could lead to uncertainty.
Tenants are likely to approach Question 39 from a completely different vantage point, focusing on the perceived unfairness of scenarios in which a purchaser landlord ultimately takes over its business – or operates a substantially similar business – at a site where it has built up the goodwill.
Tenant concerns are likely to include:
All of this has to be considered alongside the fact that security of tenure under the 1954 Act protects occupation, not the economic value of goodwill itself. Even if the reversion is sold, the tenant remains protected until a statutory ground is made out and, if the landlord succeeds under Ground (g), the tenant will receive statutory compensation. The challenge for the Law Commission is therefore going to be identifying a principled basis for additional protection in the specific case of purchaser landlords seeking to benefit from goodwill, without unduly restricting legitimate investment and ownership strategies.
Landlords may not actively seek change in this area. We expect there will be an understanding that a landlord should not be able to buy the reversion and move into occupation straight away, as that would cut across the fundamental purpose of the 1954 Act. The five year rule prevents this, and in our view most landlords would regard that safeguard as providing a fair and reasonable level of protection for sitting tenants.
Tenants may have a different view, particularly those operating in key locations who may have already lost sites under Ground (g).
If the Law Commission does conclude that the potential for purchaser landlords to benefit from tenant generated goodwill under Ground (g) is a problem, several possible reform options could be considered. Each carries its own advantages and difficulties:
1. Refining the five year rule
The ownership requirement could be tightened so that certain categories of purchaser – for example, those who acquired with a disclosed intention to take over the business, or to operate a substantially similar business – face a longer qualifying period, or are excluded from relying on Ground (g) altogether.
Alternatively, the rule could be adjusted to take account of changes in control (for example corporate acquisitions) where the economic owner of the reversion has effectively changed, even if legal title has not.
The difficulty would lie in drafting a rule that captures genuinely problematic cases without catching routine investment activity or creating complex factual disputes about the purchaser’s intentions at the time of acquisition. Many occupiers are diversifying their portfolios to include investment portfolios and differentiating between the types of purchase may be almost impossible. Inevitably any well-advised purchaser will ensure that the audit trail shows an investment rationale for the purchase with a “change of mind” when the purchaser landlord wishes to occupy itself and the tenant would have to prove this was not genuine.
2. Targeted restriction on purchaser landlords where there is a business “takeover”
The legislation could prevent purchaser landlords from relying on Ground (g) in cases where they intend to carry on, or take over, the same or substantially the same business as the tenant, and where they acquired the reversion after the tenant’s business had become established.
This would directly address concerns about landlords using Ground (g) as part of a strategy to appropriate tenant goodwill, but defining “substantially the same” business and identifying when a business has become “established” would not be straightforward. Such a restriction could generate disputes and may inadvertently discourage beneficial transactions where tenants themselves wish to acquire reversions.
3. Enhanced compensation where a purchaser landlord benefits from tenant goodwill
Instead of restricting Ground (g), the Act could provide for enhanced compensation where:
- the landlord acquired the reversion within a defined period; and
- the landlord intends to occupy and carry on the same or a substantially similar business to that operated by the tenant.
This approach would acknowledge the tenant’s loss of goodwill associated with the premises, without preventing the purchaser landlord from taking possession if Ground (g) is otherwise made out.
Again, the trigger conditions would need careful definition, and the method of assessing enhanced compensation could be complex (complex valuation exercises to quantify “loss of goodwill associated with the premises”, which is notoriously fact sensitive and could produce wide ranges of expert evidence). However, it may still be more workable than policing purchaser intentions at acquisition.
Landlords are likely to resist any proposal to introduce enhanced statutory compensation in this way. Introducing this “super compensation” layer whenever a purchaser landlord intends to run the same or a similar business could, in effect, create a new class of protected business or location linked goodwill, going beyond the historic focus of the Act on occupation rather than business value. Increasing the compensation payment therefore does risk preventing perfectly legitimate acquisitions in high value markets.
In our view, the examples of purchaser landlords and tenants acquiring reversionary interests to secure sites or take over businesses illustrate broader commercial dynamics rather than a defect in Ground (g). The five year rule already provides an important safeguard by limiting the ability of very recent purchasers to rely on Ground (g) and the existing compensation regime recognises that tenants suffer a loss when security of tenure is overridden.
We are therefore cautious about fundamentally restricting Ground (g) in relation to purchaser landlords, particularly on the basis that they may benefit from tenant generated goodwill. The definitional and evidential challenges – especially around purchaser intention at acquisition and similarity of business – are significant and could give rise to uncertainty and litigation.
However, some tenants may well feel that exploring adjustments to compensation in clearly defined cases where a purchaser landlord proposes to take over or operate substantially the same business from the premises is warranted. That approach could address concerns about appropriation of goodwill, while preserving the underlying structure of Ground (g) and the policy balance between ownership rights and tenant protection but would need to be weighed up against the potential detrimental effect on the market.
The Law Commission’s proposals on Ground (g) are unlikely to produce universal agreement. Questions 38 and 39 raise issues that go to the heart of the landlord and tenant relationship in commercial property transactions. Neither is straightforward. Landlords and tenants will continue to approach the issues from different perspectives, and there may be no perfect solution. However, a measured reform which recognises commercial reality while preserving meaningful safeguards has the potential to modernise the operation of the Act without altering its fundamental purpose.
As the consultation progresses, Ground (g) is likely to remain an important area to watch. The eventual reforms will provide a useful indication of how the law seeks to balance the competing interests of ownership, investment and security in the next generation of business tenancies.
Responses may be submitted online here, by email, or by post to: Business Tenancies Team, Law Commission, 1st Floor, 52 Queen Anne's Gate, London, SW1H 9AG by 16th September 2026. We are happy to assist any organisations with their responses.
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