Could Mediation Become Part of the Statutory Business Lease Renewal Process?

The Law Commission is considering a potentially significant change to the way disputes over the renewal of commercial leases are resolved: giving mediation and other forms of Alternative Dispute Resolution a formal role within the statutory framework.

Its second consultation on reform of Part 2 of the Landlord and Tenant Act 1954, published on 16 June 2026, examines whether ADR should play a greater role in business tenancy disputes.

One of the most interesting possibilities is that one party could be entitled to require a dispute to be referred to non-determinative ADR, such as mediation or early neutral evaluation, even if the other party did not want to participate.

That would be an important development in the continuing movement towards greater use of mediation in civil and commercial disputes. These are consultation proposals only; they are not changes in the law.

Why business lease renewals are particularly suitable for mediation

The 1954 Act gives qualifying business tenants security of tenure and, subject to certain statutory grounds upon which a landlord may oppose renewal, a right to a new tenancy.

Where renewal is not opposed, disputes can nevertheless arise about the terms of the new lease, including:

• the new rent;
• the length of the tenancy;
• break clauses;
• repairing obligations;
• alterations;
• other lease provisions; and
• increasingly, environmental and energy-efficiency provisions.

These disputes are particularly suitable for mediation because the parties will often have an ongoing commercial relationship.

More importantly, the issues are capable of being negotiated together.

A court determining a lease renewal must decide the issues before it according to the statutory framework. Mediation gives landlord and tenant considerably greater flexibility.

A tenant might, for example, be prepared to accept a higher rent in return for a more favourable break clause. A landlord might accept greater flexibility over alterations in return for agreement on repairing obligations or the length of the new term.

Mediation allows the parties to negotiate the commercial package rather than simply asking a judge to determine individual disputed terms. That is the same flexibility we see across property and land disputes.

Could mediation effectively become compulsory?

The Law Commission is considering whether either party should be able to trigger non-determinative ADR.

That does not mean that parties could be compelled to settle.

If mediation did not produce agreement, the parties would retain their right to have their dispute determined judicially. What could change is the ability of one party simply to refuse to take part in ADR at all.

This follows a wider change in civil litigation following the Court of Appeal’s decision in Churchill v Merthyr Tydfil County Borough Council, which confirmed that courts can lawfully stay proceedings or order parties to engage in a non-court dispute resolution process where that is proportionate and does not impair the essence of the right to a judicial hearing.

The Law Commission’s proposals potentially go further by expressly building ADR into the statutory business tenancy regime.

Timing will be important

There is nevertheless a danger in treating mediation as simply another procedural requirement.

Compelling parties to attend a mediation before they understand the issues or, conversely, only after substantial trial costs have been incurred would risk turning ADR into a box-ticking exercise.

The optimum point is likely to be after sufficient information has been exchanged for each side properly to evaluate its position, but before the majority of litigation costs have been incurred.

A proposed bespoke pre-action protocol for 1954 Act disputes could assist considerably in achieving that.

Mediation or early neutral evaluation?

The Law Commission also refers to early neutral evaluation (“ENE”).

The two processes perform different functions.

ENE can be particularly effective where the obstacle to settlement is a significant difference between the parties’ assessment of the likely legal or valuation outcome. A neutral specialist can provide a non-binding assessment which may help narrow that difference.

Mediation goes further. The mediator does not decide which party is right but assists the parties in finding a commercially acceptable solution.

For a landlord and tenant who may continue their relationship for another five, ten or fifteen years, that distinction can be important.

A significant opportunity for commercial mediation

The Law Commission has not yet made final recommendations. Its consultation remains open until 16 September 2026.

Nevertheless, its proposals reflect an increasingly important principle in modern dispute resolution: access to justice does not necessarily mean that every dispute should proceed directly to a contested judicial determination.

Business tenancy renewals may be a particularly good example.

Where landlord and tenant are arguing about the terms upon which they will continue doing business together, a negotiated commercial solution may ultimately serve both parties better than one imposed upon them by a court.

The interesting question raised by the Law Commission is whether the law should now do more than simply encourage them to.

Further information about the consultation is available on the Law Commission’s Business Tenancies: the right to renew project page. The proposals described above are consultation proposals and do not represent the current law.