Part 3 of my series looking at different types of tenancy agreements.
There is sometimes a bit of confusion about company lets. There are differences between these and normal ASTs, but they happen when it is the TENANT which is a limited company.
If it is the LANDLORD which is the limited company then this does not make any difference.
A tenancy created with a company as landlord will be no different from the tenancy which would have been created if the landlord as a living person.
Why company lets are different
The Housing Act 1988 (and before that, the Rent Act 1977) sets up a special statutory code which applies to tenancies – but not all tenancies. Some types of tenancy are not included.
A tenancy granted to a company is excluded because of the definition of what an assured tenancy (which includes assured shorthold tenancies) in s1 of the act:
A tenancy under which a dwelling-house is let as a separate dwelling is for the purposes of this Act an assured tenancy if and so long as—
(a) the tenant or, as the case may be, each of the joint tenants is an individual …
It is the wording in red which is important.
By ‘individual’ the act means a living person. Because the act was passed to protect living people not companies. Although legally a company is a ‘person’ and can hold property in its own right, it is not actually alive!
How company lets differ from normal ASTs
Here are the main differences:
A company, not being, alive, cannot live in the property itself, and so a company let agreement normally specifies that occupants should be limited to directors and/or employees of the company.
If the company is renting the property in order to sublet it to other tenants as a business (for example on a rent to rent basis), then this is a commercial tenancy agreement rather than a residential one, and an ‘ordinary’ company let agreement will not be suitable.
We do not have one of these commercial agreements on Landlord Law yet, but if you are looking to rent to rent, I believe a document can by obtained via Property 118.
- Eviction procedures
LIke the resident landlord lets I discussed last time, company lets fall under the common law, and the special rules for eviction set out in the Housing Act will not apply.
Therefore do not serve section 21 or section 8 notices on your tenant company as they will be invalid. You need to use a notice to quit or (for rent arrears during the fixed term) the forfeiture procedure. I cover both of these in my DIY Eviction Kit on Landlord Law.
- Rent increase notices
The special notice procedure for increasing rent after the fixed term has ended under s13 of the Housing Act 1988 cannot be used for company lets. Most landlords will incorporate any new rent in a new tenancy agreement.
- Unfair terms
As a company cannot be a ‘consumer’ the Unfair Terms in Consumer Contracts Regulations will not apply to tenancy agreements.
Some tips when letting to a company:
- Always check to see it really is a company. You can do this free of charge at Companies House website.
- Try to take a guarantee from one or more of the directors. Bear in mind that company lets are sometimes set up if the intended occupier would not pass normal referencing
- Company lets can be lucrative but they can also be tricky. Be careful and make sure the company is not about to go under.
Next time I will be looking at letting to tenants with pets.
NB If you want to check what tenancy type is suitable for YOUR property visit my Which Tenancy Agreement Guide. All Landlord Law members can create unlimited tenancy agreements via our Document Generator service.