This proposes mandatory security of tenure with no scope to contract out was the norm. 

Pros 

• Increased tenant protection – Tenants often prefer protected tenancies, so they can renew their lease when the existing tenancy expires. Tenants who are currently in a weaker bargaining position if the landlord demands that the lease is contracted out would benefit from mandatory security of tenure. 
• Costs and time – Mandatory security of tenure is likely to reduce the costs and time spent when tenancies are granted, as there would be no room to negotiate contracting out. 

Cons 

• Already tried and tested – Mandatory security of tenure was in place between 1954 and 1970 and the Law Commission found that landlords saw it as a disincentive to offer short-term business tenancies. Landlords were reluctant to offer tenancies at all, so that premises were vacant as and when landlords were ready to carry out their plans. This could decrease the amount of space available to business tenants and reduce flexibility in the market. 
• Tenants disadvantaged – Tenants with a stronger bargaining power might still prefer the option of choosing to forgo their security of tenure in exchange for more advantageous lease terms, which would be lost under this model.
• Reduced landlord flexibility – Landlords would have fewer options at the end of the term, which may discourage lettings.  
• Market – Tenancies are often much shorter now than they have been, so introducing mandatory security of tenure would make the statutory renewal process more frequent, leading to parties incurring more cost. 

Model Two proposes the complete abolition of security of tenure. Tenants would no longer have a statutory right to a new tenancy when their tenancy came to an end, and if they wished to remain in the premises, they would have to request this from their landlord. This would put negotiations in the hands of market forces. 

Pros 

• Common place – Many stakeholders questioned by the Law Commission indicated that contracting out is commonplace. If there is no longer any appetite among landlords or tenants to enter into protected tenancies, it may be sensible to abolish this option altogether, saving the costs and time spent contracting out now. 
• Landlord flexibility – Landlords prefer the increased flexibility afforded by unprotected tenancies. This model would give certainty that the tenancy will end on the contractual expiry date and freedom to choose what happens to the premises next.
• Suitable lease terms – It is possible to negotiate contractual options to renew in the lease itself, which would be drafted to suit the individual needs of the parties. There would therefore be no need to rely on the 1954 Act procedure.

Cons

• Tenant power – Security of tenure provides protection to tenants, particularly those with limited negotiating power. A tenant would have to ask for the option to renew to be added as a term of the lease under this model, which requires bargaining power. 
• Less investment – Tenants may have less incentive to invest in their premises if there is no guarantee they will be able to stay. This may harm growth for some businesses. 
• Uncertainty – There could be a prolonged period of market uncertainty following a change this big. 

This model reverses the current position such that the default position would be no security of tenure unless the parties ‘contract in’. 

Pros

• More suitable – Given that contracting out is commonplace in the market, it may be more time and cost effective if ‘contracting in’ becomes the default position.
• Flexibility – Parties could still enter into protected tenancies if they chose to. This model may prove more resilient to market changes than models One and Two.
• Less risk for landlords – This model would remove the risk of inadvertently creating a protected tenancy. 

Cons 

• Reduced tenant protection – Tenants may feel they are in a weaker position than their landlord, as they would have to request security of tenure. There is also a risk that tenants may not be aware of their right to request a contracted in tenancy. Under the current law, tenants must be sent statutory information about their 1954 Act rights if the landlord wants to grant an unprotected tenancy. Without a similar process, there would be less opportunity to learn about contracting in under this model. 
• Usage – The contracting in model may not be widely used as tenants may find it difficult to persuade their landlords.
• Market – A move to contracting in would be a significant change in the market and it is difficult to predict the impact. 

This model preserves the current position that tenants have security of tenure unless the parties agreed to contract out. Consultees have the opportunity to suggest ways in which the process could be reformed to make it work better in a modern commercial leasehold market. 

Pros

• Well established – This model is currently well embedded into the commercial leasehold landscape, and the way that it interacts with the market is well known. This model would avoid the risk of any unexpected and undesirable shocks to the market 
• Tenant Protection – Many would argue that the contracting out model provides more protection for tenants. 

Cons 

• Less landlord protection – Landlords have limited ability to take back the premises under the 1954 Act as currently drafted, so without revisions there, they may prefer the complete freedom of Model Three (contracting in). 
• Lack of data – Although consultees have said that contracting out is the most common option in granting tenancies, there is no clear evidence to back this up, so it is difficult to evaluate. But if there is widespread contracting out, it may not be best market practice to continue the current system.