Contracting out – but not as we know it…

The Law Commission is paying some welcome attention to landlord and tenant law, trying to streamline some of the processes and traps that can delay transactions while the parties rack up additional costs.  Last week, we got some more detail on how contracting out might change, as part of the latest consultation paper on the 1954 Act.

Following an earlier consultation, the Law Commission has concluded that business tenancies should continue to have security of tenure, unless the landlord and tenant agree to contract out.  That currently requires a paper trail of landlord’s notice and tenant’s declaration, which in most cases is a statutory declaration made in front of an independent solicitor.  The Law Commission is now proposing to make that process much simpler.  The landlord’s notice and tenant’s declaration would be included in the lease, using prescribed forms of wording.  These will have to be “prominently displayed”, which will require some changes to the format of leases but any inconvenience that causes will be far outweighed by the time saved producing notices and declarations and making sure notices are correctly served and declarations properly made.

The other key change proposed to this aspect of the 1954 Act is to take more short business tenancies out of the scope of security of tenure altogether.  Currently, a tenancy granted for more than 6 months will have security of tenure unless the parties contract out, which adds a disproportionate admin burden to short lettings.  The Law Commission is consulting on whether the minimum length of tenancy to get security of tenure should be increased to either one or two years.  Either should make short lettings easier and quicker, particularly as there are currently rules to stop landlords avoiding the contracting out process by granting a series of 6-month tenancies.

At 500 plus pages and with more than 70 questions, there is a lot more to think about in this consultation and we will be looking at different aspects over the coming weeks.

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