1954 Act Consultation – Simplifying the Contracting Out Procedure

In the second instalment of our deep dive into the Law Commission’s second consultation on the Landlord and Tenant Act 1954 (“1954 Act”) reform, we consider the Commission’s proposals to simplify the contracting out procedure. 

Following the first consultation, the Law Commission concluded that the existing “model” of contracting out of security of tenure is the right one. In its second consultation, the Law Commission is inviting consultees to express their view on how the procedure of contracting out may be simplified to make it function more efficiently and effectively. 

The current procedure  

Under the current procedure, before entering into the lease, the landlord serves a prescribed notice on the tenant warning it of the consequences of excluding security of tenure. The tenant must respond by making a prescribed declaration that it accepts and understands the consequences. 

If the lease is to be completed more than 14 days after service of the warning notice, the tenant can make a simple declaration, whereby it simply signs the prescribed form. 

If the notice is served less than 14 days’ notice is given before completion, the tenant has to make a statutory declaration instead, which must be sworn in front of a completely independent solicitor at the cost of £5.00. 

Details of the contracting out process must be recorded in the lease. 

Problems with the current procedure 

The Law Commission has identified a number of issues with the current statutory procedure, which include: 

1. The statutory declaration route has become routine practice.  This was not the government’s intention; they expected that the inconvenience of obtaining a statutory declaration would encourage landlords to give at least 14 days’ notice. Using the statutory declaration route means tenants have less time to consider the consequences of contracting out and have to incur the expenses and additional administration of obtaining a statutory declaration.
2. The process does not protect tenants effectively. Even when the simple declaration route is followed, arguably it is too late in the process as most tenants will have agreed to give up security of tenure at heads of terms stage.
3. The current procedure is too bureaucratic, causing delay and costs for landlords and tenants. Both routes of contracting out require multiple steps which could be simplified and streamlined.
4. Risk of mistakes. The bureaucratic procedure can result in mistakes which can invalidate the contracting out procedure, creating unintended consequences, particularly for landlords.
5. Difficulties with common commercial arrangements. The procedure can cause issues with other common arrangements such as agreements for lease and options to renew. For example, where parties enter into an agreement for lease, the contracting out procedure must be followed before the parties become contractually bound, which can sometimes be overlooked.

Proposals for reform 

The Law Commission identifies several key features to ensure that the contracting out process functions effectively: 

1. Tenant protection: it should protect tenants from inadvertently or ill-advisedly giving up their right to a new tenancy.
2. Certainty: it should provide both landlords and tenants with certainty that the tenancy has been properly contracted out.
3. Efficiency: the procedure should be as streamlined as possible and not cause undue delay, cost or bureaucracy for either party.
4. Universality: so far as possible, the contracting out procedure should apply universally to all leases so that they all follow the same process.

It therefore seeks views on two alternate options: 

Option 1: An Improved warning notice procedure 

The current contracting out procedure is retained but with improvements. Proposed improvements include serving earlier warning notices, for example, 14 or 28 days before entering into the new tenancy and removing statutory declarations so that the simple declaration procedure is followed regardless of when the warning notice was served. However, the Law Commission has concluded that even if steps are taken to improve the current procedure, the fundamental problems will still remain. The procedure would remain a relatively complex and multi-step process, creating undue delay and costs. 

Option 2: Contracting out within the lease 

The contracting out agreement would be in the lease itself, rather than in a separate document. Under the proposal, a lease would be validly contracted out if it contains the following:

1. a prescribed warning notice indicating that the parties agree the lease is contracted out and explaining to the tenant (in similar terms to the warning notice) the implications of doing so; and
2. a prescribed declaration signed by the tenant on executing the lease, confirming that they have read and understood the terms of the prescribed notice. 

For the process to be valid, the prescribed warning and declaration would be contained in the lease. This would mean that it is all included in one document, making it easier to be sure that a lease has been validly contracted out. This would remove the costly and cumbersome requirement for statutory declarations to be sworn before an independent solicitor and reduce undue delay and costs. It would also simplify the procedure so that there is less risk of the contracting out process being invalid. 

The “Van Staden trap” 

There is a technical trap which can arise when a fixed-term tenancy which was intended to be contracted out actually has protection if the definition of the term includes “any period of holding over or extension”.  The Law Commission proposes two solutions. One option is that even where tenancies include such wording, they will remain contracted out. An alternative would be to treat tenancies without a fixed term as automatically contracted out. The consultation invites views on whether it should be possible to contract out all written tenancies within the scope of the 1954 Act, not just fixed-term tenancies. 

Unauthorised subleases 

The consultation also recognises problems where an unauthorised sub-lease (granted in breach of the headlease), can in any event obtain 1954 Act protection.  This causes problems for the superior landlord, particularly where the intermediate tenant falls out of the picture. While the Law Commission is not provisionally proposing changes to the law, it invites views on whether and how the issue should be addressed. 

In our next article, we will be exploring the proposals related to the potential removal of the process to validate an agreement to surrender a protected tenancy, or to at least streamline the process. 

Consultees are invited to respond by 16 September 2026. 

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