The procedure
The landlord must serve a warning notice in the prescribed form before the tenant becomes contractually bound. If served at least fourteen days beforehand, the tenant signs a simple declaration; if less, a statutory declaration before an independent solicitor is required. The lease must then refer to both the notice and the declaration. Get the sequence wrong and the exclusion fails — the tenancy is protected after all.
What you are giving up
No right to a new lease, no Section 34 rent fixed by the court, no Section 37 compensation, and no holdover on the old terms. At expiry your negotiating position is whatever the landlord chooses to offer, which in a strong location can be a very large rent increase or nothing at all.
When to accept it, and what to ask for instead
Short-term, tactical or turnover-led occupations are often fine contracted out. Where you are investing in fit-out, building goodwill at a pitch, or trading from an irreplaceable location, resist it — or price it, by asking for a lower rent, a longer term, an option to renew at a defined rent, or a landlord's contribution reflecting the value you are handing back.
Common questions
What does contracting out of the 1954 Act mean?
The lease is excluded from Sections 24 to 28 of the Act, so the tenancy simply ends on the contractual expiry date with no statutory right to renew.
How do you opt out of the Landlord and Tenant Act 1954?
The landlord serves a prescribed-form warning notice before the tenant is bound, the tenant signs a simple or statutory declaration depending on timing, and the lease records both.
Is a contracted-out lease bad for a tenant?
Not always, but it is never free. It should be reflected in the rent, the term, the incentive package or an express renewal option.
Can a contracted-out tenant still stay after expiry?
Only by agreement. Continued occupation without a new lease can create a periodic tenancy in some circumstances, which is a risk for both sides and should not be relied on as a plan.
Can contracting out be invalid?
Yes. Defective notices, declarations signed out of sequence, or a lease that fails to refer to them can all leave the tenancy protected despite the parties' intention.
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Chris McGarrigle MRICS, chartered since 1989, acting for occupiers across England, Scotland, Northern Ireland and Ireland.
chris@mcgarrigle.comRelated guides
- Landlord and Tenant Act 1954 Lease RenewalPart II of the Landlord and Tenant Act 1954 explained for business tenants: security of tenure, Sections 25, 26 and 30, interim rent and compensation.
- Commercial Tenants' RightsWhat rights a commercial tenant has: security of tenure, renewal, repair limits, alterations, assignment, forfeiture and compensation.
- Commercial Lease RenewalHow commercial lease renewal works for business tenants: protected and contracted-out tenancies, notices, new rent, new terms and interim rent.