Most residential lettings are to people, real people who are alive and who physically live in the property. However sometimes lettings are made to a limited company. If this happens there are a number of important differences and a few things to watch out for.
Things to watch out for with company lets
Firstly, lets to companies are not assured shorthold tenancies (ASTs).
The reason for this is that the act which set up the protective code which governs ASTs, the Housing Act 1988, specifically states that its provisions apply only to ‘individuals’ i.e. not to artificial beings such as companies.
Companies are businesses (so the argument goes) and do not need the protection that the act gives.
What this means is that ‘company lets’ (as they are called) are governed by the underlying ‘common law‘, the legal rules which regulated tenancies before the Rent Act and Housing Acts came along to change them.
The main practical effect of this is that:
- you should not use the standard AST agreements found in shops and on the internet, but a tenancy agreement designed for company lets (we provide one at Landlord Law)
- You don’t use section 8 or 21 possession notices. The correct form of notice is an old style Notice to Quit
- The procedure and paperwork for evicting tenants is different
Then you need to consider why these people want to rent via a company let.
There are a number of reasons. For example:
- It may be tax related.
- It may be so that they can provide accommodation for a number of staff and directors on a short term basis.
- Or it could be to provide accommodation for an employee or director who would not pass normal referencing.
You should therefore be careful with company lets. Although they can be lucrative, bear in mind that you do not really have any control over who the company places in the property once let (technically you can take steps to repossess for breach of contract but practically this is difficult to do during the fixed term, for anything other than rent arrears).
You therefore need to take steps to protect your position, before the property is let.
I would suggest :
- Doing a search against the company at Companies House. If your property is an expensive one, consider buying a more detailed report and (in particular) checking the last few years’ accounts
- Taking a guarantee from at least one director, preferably two
- Checking carefully the references of the guarantors and getting credit checks done
- Asking for details of the person(s) who will be living in the property and checking them also
- Either letting for no longer than six months at a time, or ensuring that (for longer lets, eg a year) the tenancy agreement has a break clause.
You should also take a tenant/damage deposit. The good news here is that as this is not an AST you do not need to protect it in a tenancy deposit scheme, as the tenancy deposit regulations only apply to ASTs.
If you are careful, as with all tenants, you should, hopefully, have a good letting experience.
property inventory services says
January 10, 2012 at 11:33 AMIf I do not have control over who the company rents to then do I have any guarantee on the rent over a period of time..
Tessa Shepperson says
January 10, 2012 at 12:16 PMIt is the company which is liable to pay your rent, not their sub tenant. The sub tenant / occupier pays the company and the company pays you.
But the company is liable to you for the rent whether or not the sub tenant / occupier pays them.
Chris B says
January 12, 2012 at 3:24 PMEven where a ‘company let’ is used the property owner may find himself in the position of having become a landlord to the company’s tenant (under an AST) at the end of the lease to the company via the provisions of s18 of the Housing Act 1988.
Section 18 says:-
(1)If at any time—
(a)a dwelling-house is for the time being lawfully let on an assured tenancy, and,
(b)the landlord under the assured tenancy is himself a tenant under a superior tenancy; and,
(c)the superior tenancy comes to an end,then, subject to subsection (2) below, the assured tenancy shall continue in existence as a tenancy held of the person whose interest would, apart from the continuance of the assured tenancy, entitle him to actual possession of the dwelling-house at that time.
It is certainly not the end of the world if the propertyowner does find himself in the position of being the landlord to someone who was originally granted an AST by the company that the propertyowner leased the house to.
In such circumstances where the company’s own lease has expired/lapsed/been brought to an end through the service of an effective notice to quit then getting the tenant out will be a job for the propertyowner (the company will no longer have an interest in the property that would enable them to make a claim for possession). The propertyowner may well be able to get proceedings under way against the occupier on the basis of a s21 notice that was served by the company at a time when it was the occupier’s landlord but given how easy it is for a dog’s breakfast to be made of a s21 notice once an AST has become a statutory periodic tenancy, the propertyowner needs to be utterly sure that the s21 notice is valid or else he’ll have to serve his own notice and wait a while (two months or more) before starting proceedings. If the occupier was paying a commercial rent to the company then the situation is not so bad in that after the company ceases to be the landlord then the rent should be paid to the propertyowner. However, if the rent in the AST agreement was just some nominal sum then a claim will no doubt have to be brought against the company for all losses caused by the company’s failure to give the property back with vacant possession.
Tessa Shepperson says
January 12, 2012 at 4:07 PMTrue.
Ian says
January 15, 2012 at 9:03 PMI hope everyone knows how easy it is to set up a company; I can create a limited company for under £50 that has no problems on its credit rating files. Credit checking a small company is not easy. Given how easy it is to create a new company, it may be hard to being any actions for damages against a lot of companies.
I have a property let to a company, it is used by one of the staff for a few weeks each month while he is working in Cambridge/London – it must be getting close to 3 years and so far no problem.
However next time, I would be very likely to ask for a uk home owning guarantor for a company let – we just got a larger than normal deposit but a guarantor would have been better. I don’t know what you do if all the companies directors are based outside of the UK.